Question

Problem 5.4A Preparing a worksheet and financial statements, journalizing adjusting entries, and posting to ledger accounts. LO 5-1, 5-2, 5-3, 5-4, 5-5 Paula Judge owns Judge Creative Designs. The trial balance of the firm for January 31, 2019, the first month of operations, is shown below. End-of-the-month adjustments must account for the following items: Supplies were purchased on January 1, 2019; inventory of supplies on January 31, 2019, is $1,600. The prepaid advertising contract was signed on January 1, 2019, and covers a four-month period. Rent of $2,100 expired during the month. Depreciation is computed using the straight-line method. The equipment has an estimated useful life of 10 years with no salvage value. Required: Complete the worksheet for the month. Prepare an income statement, statement of owner’s equity, and balance sheet. No additional investments were made by the owner during the month. Journalize and post the adjusting entries. Analyze: If the adjusting entries had not been made for the month, would net income be overstated or understated?

Answer 1

Answer:

Since so much information is missing, i looked for similar questions.

Adjusting entries should be:

Dr Supplies expense 6,950

    Cr Supplies 6,950

Dr Advertising expense 2,500

    Cr Prepaid advertising 2,500

Dr Rent expense 2,100

    Cr Prepaid rent 2,100

Dr Depreciation expense 220

    Cr Accumulated depreciation, equipment 220

The adjusted trial balance:

                                                    debit                credit

Cash                                            35,900

Accounts receivables                 13,000

Supplies                                        1,600

Prepaid advertising                     7,500

Prepaid rent                                19,500

Equipment                                  26,400

Accumulated dep.                                                       220

Accounts payable                                                    15,950

Paula Judge, capital                                                60,400

Paula Judge, drawings                7,400

Fees income                                                            58,200

Advertising expense                    2,500

Depreciation expense                    220

Rent expense                                2,100

Salaries expense                         10,100

Supplies expense                        6,950

Utilities expense                           1,600                                

Totals                                          $134,770            $134,770

Judge Creative Designs

Income Statement

For the month ended January 31, 2019

Revenues                                             $58,200

Operating expenses:

• Advertising expense $2,500
• Depreciation expense $220
• Rent expense $2,100
• Salaries expense $10,100
• Supplies expense $6,950
• Utilities expense $1,600            $23,470

Net income                                           $34,730

Judge Creative Designs

Statement of Owner's Equity

For the month ended January 31, 2019

Paula Judge, capital beginning balance    $60,400

Net income                                                   $34,730

Subtotal                                                         $95,130

Drawings                                                       ($7,400)

Paula Judge, capital January 31, 2019        $87,730

Judge Creative Designs

Balance Sheet

For the month ended January 31, 2019

Assets:

Cash $35,900

Accounts receivables $13,000

Supplies $1,600

Prepaid advertising $7,500

Prepaid rent $19,500

Equipment, net $26,180

Total assets                                        $103,680

Liabilities:

Accounts payable $15,950

Equity:

Paula Judge, capital $87,730

Total liabilities and equity                  $103,680

If the adjusting entries had not been made, net income would have been overstated.