Kevin Steven opened a small tax-preparation service. Steven Tax Service’s trial balance at the end of its second year of operation is as follows.

The following information is also available:
a. Office supplies on hand, December 31, 2014, $227
b. Insurance still unexpired, $120
c. Estimated depreciation of office equipment, $770
d. Telephone expense for December, $19; the bill was received but not recorded.
e. The services for all unearned tax fees had been performed by the end of the year.

1. Open T accounts for the accounts in the trial balance plus the following: Office Supplies Expense; Insurance Expense; and Depreciation Expense—Office Equipment. Record the balances shown in the trial balance.
2. Determine the adjusting entries and post them directly to the T accounts.
3. Prepare an adjusted trial balance, an income statement, a statement of owner’s equity, and a balance sheet. The owner made no investments during the period.
4. Why is it not necessary to show the effects of the above transactions on the statement of cashflows?

  • CreatedMarch 26, 2014
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