Refer to Exercise 2-36 of Chapter 2. Start from the trial balance and the posted T-accounts that Steve Ruiz, Certified Public Accountant, Professional Corporation (P.C.), prepared for his accounting practice at January 18. A professional corporation is not subject to income tax. Later in January, the business completed these transactions:

Jan 21 Received $2,400 in advance for tax work to be performed over the next 30 days.

21 Hired a secretary to be paid on the 15th day of each month.

26 Paid $400 for the supplies purchased on January 5.

28 Collected $1,500 from the client on January 18.

31 Declared and paid dividends of $1,200.

Requirements

1. Journalize the transactions of January 21 through 31.

2. Post the January 21 to 31 transactions to the T-accounts, keying all items by date.

3. Prepare a trial balance at January 31.

4. At January 31, Ruiz gathers the following information for the adjusting entries:

a. Accrued service revenue, $2,000

b. Earned $800 of the service revenue collected in advance on January 21

c. Supplies on hand, $200

d. Depreciation expense equipment, $65; furniture, $78

e. Accrued expense for secretary’s salary, $500

Make these adjustments in the adjustments columns and complete the adjusted trial balance at January 31.

5. Journalize and post the adjusting entries. Denote each adjusting amount as Adj and an account balance as Bal.

6. Prepare the income statement and statement of retained earnings of Steve Ruiz, Certified Public Accountant, P.C., for the month ended January 31 and the classified balance sheet at that date.

7. Journalize and post the closing entries at January 31. Denote each closing amount as Clo and an account balance as Bal.

8. Compute the net working capital, current ratio, and the debt ratio of Steve Ruiz, Certified Public Accountant, P.C., and evaluate these values as indicative of a strong or weak financial position.