Do Example 4 (reproduced below) from the Days 1-2 notes. I have posted the solution for this Example on Blackboard, in case you are unsure about any part of the process.

Example 4

The Balance Sheet of JSRS Inc. for the year ended March 31, 2019 is given below:

Assets
Cash		$30,000
Accounts Receivable		$38,000
Prepaid Rent		$6,000
Inventory		$40,000
Property, Plant & Equipment (PP&E)
Cost	$120,000
Accumulated Depreciation	($20,000)	$100,000
Total Assets		$214,000
Liabilities & Equity
Accounts Payable		$20,000
Unearned Revenues		$10,000
Income Tax Payable		$12,000
Stockholders’ Equity
Contributed Capital	$150,000
Retained Earnings	$22,000	$172,000
Total Liabilities & Equity		$214,000

During the year ended March 31, 2020 the company had the following transactions:

1.      Bought inventory on credit for $200,000.

2.      Sold inventory for cash $60,000.  The cost of the inventory sold was $40,000.

3.      Sold inventory on credit $240,000.  The cost of the inventory sold was $160,000.

4.      Paid salaries of $30,000.

5.      On January 1, 2020 the company borrowed $100,000 from a bank.  The interest rate on the loan was 10% a year.  Interest is payable semi-annually on June 30 and December 31.

6.      The company delivered goods to a customer who had paid $10,000 in advance in March 2019.  The cost of the goods delivered was $6,000.  The company has no remaining obligation to this customer.

7.      Received $220,000 from customers who had previously purchased on credit.

8.      Paid $190,000 to suppliers for prior credit purchases.

9.      Received $15,000 in advance from a customer on March 1, 2020.  The company is scheduled to deliver goods to this customer on May 15, 2020.

10.    Paid rent of $24,000 on September 1, 2019.  The rent is for the 12-month period beginning on September 1, 2019.

11.    The company paid $12,000 to the IRS for income taxes that were due for the previous year.

12.    The company declared a dividend of $10,000 on March 29, 2020.  The dividend will be paid on April 15, 2020.

Required:

Step 1:  Open “T” accounts and bring down balances from the previous year.

Step 2:  Prepare journal entries for all explicit transactions.

Step 3:  Post all journal entries to ledger accounts.

Step 4:  Extract all ledger balances and prepare a trial balance.

 

Additional information for previous example:

1.      PP&E represents a building that that was purchased on April 1, 2017 for $120,000.  The building has a 10-year useful life and has an estimated residual (salvage) value of $20,000.  The Company uses the straight-line method of depreciation for accounting purposes.

2.      The prepaid rent of $6,000 on March 31, 2019 relates to rent paid in advance for the six months from April 2019 to September 2019.

3.      The company has still not paid salary of $4,000 that employees earned for the month of March 2020.  This amount will be paid in the first week of April.

4.      Income taxes are assessed at 40% of income.  The company has not prepaid any taxes for the current year.

Required

 

Step 5:  Prepare adjusting journal entries and post to trial balance worksheet.  You don’t have to post these adjusting entries to ledger accounts.

Step 6:  Prepare an adjusted trial balance.

Step 7:

•        Prepare financial statements.

•        Revenue and expense items from the adjusted trial balance are used to prepare the income statement.

•        Net income (or loss) from the income statement is then transferred to retained earnings.

•        Asset, Liabilities and Equity accounts are then taken from the adjusted trial balance to prepare the Balance Sheet.

 

Continue Example

a.      Prepare a multiple step income statement and a classified balance sheet.