During August, the following transactions were completed:

1. Purchased equipment, paying $5,000 cash and signing a 2-year note payable for $25,000. The equipment has a 5-year useful life. The note has a 6% interest rate which is payable on the first day of each following month.
2. Owner invested $60,000 cash in the company.
3. Paid $3,600 cash for a 6-month insurance policy effective August 1.
4. Paid three months’ rent for office space for $3,000 per month.
5. Paid $3,500 for supplies.
6. Collected $1,500 cash on account from a customer that was billed in the previous month (July).
7. Performed services for a customer who had paid $1,150 in advance last month (July).
8. Paid $500 cash for a utility bill.
9. Paid salaries of weeks in August for $10,000.
10. Performed services worth $30,000 on account and billed customers.
11. Received a bill for $2,500 for advertising services received during August. The amount is not due until 15th of next month.

Instructions:

1) Journalize above transactions.

2) Journalize the following adjustments  

• Insurance expired during the common month.
• Adjustment of prepaid rent.
• Supplies used, $1,000.
• Equipment depreciation, $500 per month.
• Accrual of interest on note payable.
• Bad debts expense is considered to be 2% of outstanding balance of accounts receivable. The company uses the allowance method. The company started the year with an accounts receivable balance of $1,000 and allowance for doubtful accounts balance of $100.

3) Journalize closing entries  

Answer rating: 100% (QA)

Complete solution is given below Ans 1 Account Titles Debit Credit 1 Equipment 30000 Cash 5000 Notes ... View the full answer