8. Net income: $23,500
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✔ 8. Net income: $23,500

For the past several years, Shane Banovich has operated a part-time consulting business from his home. As of October 1, 2012, Shane decided to move to rented quarters and to operate the business as a professional corporation, which was to be known as Epic Consulting, P.C., on a full-time basis. Epic Consulting entered into the following transactions during October:

Oct. 1. The following assets were received from Shane Banovich in exchange for capital stock: cash, $12,000; accounts receivable, $6,000; supplies, $1,500; and office equipment, $9,000. There were no liabilities received.

  1. Paid three months’ rent on a lease rental contract, $4,800.
  2. Paid the premiums on property and casualty insurance policies, $3,000.
  3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $4,000.
  4. Purchased additional office equipment on account from Office Station Co., $2,000.
  5. Received cash from clients on account, $3,500.
  6. Paid cash for a newspaper advertisement, $400.
  7. Paid Office Station Co. for part of the debt incurred on October 5, $1,000.
  8. Recorded services provided on account for the period October 1–12, $6,000.
  9. Paid part-time receptionist for two weeks’ salary, $1,000.

Record the following transactions on Page 2 of the journal.

  1. Recorded cash from cash clients for fees earned during the period October 1–17, $7,500.
  2. Paid cash for supplies, $750.
  3. Recorded services provided on account for the period October 13–20, $5,200.
  4. Recorded cash from cash clients for fees earned for the period October 17–24, $3,700.
  5. Received cash from clients on account, $5,500.
  6. Paid part-time receptionist for two weeks’ salary, $1,000. 29. Paid telephone bill for October, $250.
  7. Paid electricity bill for October, $300.
  8. Recorded cash from cash clients for fees earned for the period October 25–31, $2,800.
  9. Recorded services provided on account for the remainder of October, $3,000.
  10. Paid dividends of $8,000.

Instructions

  1. Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.)

11 Cash

12 Accounts Receivable

14 Supplies

15 Prepaid Rent

16 Prepaid Insurance

18 Office Equipment

19 Accumulated Depreciation

21 Accounts Payable

22 Salaries Payable

23 Unearned Fees

31 Capital Stock

32 Retained Earnings

33 Dividends

41 Fees Earned

51 Salary Expense

52 Rent Expense

53 Supplies Expense

54 Depreciation Expense

55 Insurance Expense

59 Miscellaneous Expense

  1. Post the journal to a ledger of four-column accounts.
  2. Prepare an unadjusted trial balance.
  3. At the end of October, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6).
  4. Insurance expired during October is $250.
  5. Supplies on hand on October 31 are $700.
  6. Depreciation of office equipment for October is $300.
  7. Accrued receptionist salary on October 31 is $250.
  8. Rent expired during October is $1,600.
  9. Unearned fees on October 31 are $1,800.
  10. Optional: Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet) and complete the spreadsheet.
  11. Journalize and post the adjusting entries. Record the adjusting entries on Page 3 of the journal.
  12. Prepare an adjusted trial balance.
  13. Prepare an income statement, a retained earnings statement, and a balance sheet.
  14. Prepare and post the closing entries. (Income Summary is account #34 in the chart of accounts.) Record the closing entries on Page 4 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry.
  15. Prepare a post-closing trial balance.
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