Refer to Exercise 2-39 of Chapter 2. Start from the trial balance and the posted T-accounts that Barbara Miracle, Certified Public Accountant, Professional Corporation (PC), prepared for her accounting practice at August 18. A professional corporation is not subject to income tax. Later in August, the business completed these transactions:
Aug 21 Received $2,700 in advance for tax work to be performed over the next 30 days.
22 Hired a secretary to be paid on the 15th day of each month.
26 Paid $800 for the supplies purchased on August 5.
28 Collected $1,900 from the client on August 18.
31 Declared and paid dividends of $1,400.
Requirements
1. Journalize the transactions of August 21 through 31.
2. Post the August 21 to 31 transactions to the T-accounts, keying all items by date.
3. Prepare an Excel spreadsheet showing the unadjusted trial balance at August 31.
4. At August 31, Miracle gathers the following information for the adjusting entries:
a. Accrued service revenue, $1,800.
b. Earned $900 of the service revenue collected in advance on August 21.
c. Supplies on hand, $400.
d. Depreciation expense equipment, $45; furniture, $75.
e. Accrued expense for secretary's salary, $600.
Refer to the Excel spreadsheet you prepared in Requirement 3. Make these adjustments in the adjustments columns and complete the adjusted trial balance at August 31.
5. Journalize and post the adjusting entries. Denote each adjusting amount as Adj and an account balance as Bal.
6. Prepare the single-step income statement and statement of retained earnings of Barbara Miracle, Certified Public Accountant, PC, for the month ended August 31 and the classified balance sheet at that date.
7. Journalize and post the closing entries at August 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 Barbara Miracle, Certified Public Accountant, PC, and evaluate these values as indicative of a strong or weak financial position.