The following accounting events apply to Lees Designs for the year 2013: Asset Source Transactions 1. Began
Question:
The following accounting events apply to Lee’s Designs for the year 2013:
Asset Source Transactions
1. Began operations by acquiring $80,000 of cash from the issue of common stock.
2. Performed services and collected cash of $4,000.
3. Collected $24,000 of cash in advance for services to be provided over the next 12 months.
4. Provided $48,000 of services on account.
5. Purchased supplies of $6,000 on account.
Asset Exchange Transactions
6. Purchased $16,000 of land for cash.
7. Collected $28,000 of cash from accounts receivable.
8. Purchased $2,520 of supplies with cash.
9. Paid $9,600 for one year’s rent in advance.
Asset Use Transactions
10. Paid $16,000 cash for salaries of employees.
11. Paid a cash dividend of $8,000 to the stockholders.
12. Paid off $2,520 of the accounts payable with cash.
Claims Exchange Transactions
13. Placed an advertisement in the local newspaper for $3,200 on account.
14. Incurred utility expense of $2,400 on account.
Adjusting Entries
15. Recognized $17,600 of revenue for performing services. The collection of cash for these services occurred in a prior transaction. (See Event 3.)
16. Recorded $6,000 of accrued salary expense at the end of 2013.
17. Recorded supplies expense. Had $2,400 of supplies on hand at the end of the accounting period.
18. Recognized four months’ of expense for prepaid rent that had been used up during the accounting period.
19. Recognized $600 of accrued interest revenue.
Required
a. Record each of the preceding events in T-accounts.
b. Prepare a before-closing trial balance.
c. Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (+), decreases (–), or does not affect (NA) each element of the financial statements. Also, in the Cash Flow column, use the letters OA to designate operating activity, IA for investing activity, and FA for financing activity.
The first event is recorded as anexample.
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Step by Step Answer:
a Lees Designs TAccounts Cash Accounts Payable Common Stock 1 80000 6 16000 12 2520 5 6000 1 80000 2 4000 8 2520 13 3200 Bal 80000 3 24000 9 9600 14 2...View the full answer
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward
