Comprehensive Problem On July 31, 2020, the end of its most recent fiscal year, Elizabeth River...

  

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Comprehensive Problem On July 31, 2020, the end of its most recent fiscal year, Elizabeth River Business Consultants' post- closing trial balance was as follows: Accounts Debit Credit Cash $ 26,150 Accounts receivable 6,000 Supplies Utility Expense Payable 3,450 2$ 2,000 Unearned service revenue 5,600 Common stock 18,000 Retained earnings 10,000 $ 35,600 $ 35,600 The company engaged in the following transactions during August 2020, and adjusts its accounts monthly: Date Transaction/Events August 1 Purchased Equipment, paying $20,000 cash, and signing a 2-year note payable for $100,000. The Equipment has a 4-year useful life. The note has a 6% interest rate, which is payable on the first day of each following month. 2 Issued 20,000 shares of common stock for $250,000 cash. 3 Paid $18,000 cash for a 12-month insurance policy effective August 1. 3 Paid two months' rent for August and September at an annual lease of office space for $20,000 per month. 6 Paid $19,000 for supplies. 9 Visited client offices and agreed on the terms of a consulting project. Elizabeth River will bill the client every month on the 20th of each month for services performed. 10 Collected $6,000 cash on account from Niki Brothers. This client was billed in July when Elizabeth River performed the service. 13 Performed services for Jedai Enterprises. This client paid $5,600 in advance last month. All services relating to this payment are now complete. 14 Paid $2,000 cash for a utility bill. This related to July utilities that were accrued at the end of July. 16 Signed a contract with a new client, Tina Technologies. Received $60,000 cash in advance for future services to be performed. 18 Paid semi-monthly salaries for $ 55,000 20 Performed services worth $ 140,000 on the account, and customers were billed. 20 Received a bill for $11,000 for advertising services received during August, but the amount is not due until September 15. 23 Completed the part of the project for Tina Technologies. Recognized $50,000 of revenue from the cash advance received on August 16. 27 Received $75,000 in cash from customers who were billed on August 20. 31 Declared and paid dividends of $2,000 Adjustment data: 1. Adjustment of prepaid insurance for the expired portion. 2. Adjustment of prepaid rent for the expired portion. 3. Supplies used during the month were $6,250. 4. Depreciate Equipment for the month of August. 5. Accrual of interest on the note payable. (Hint: Principal x Rate x Time to compute interest.) 6. Salaries for the second half of August accrued $55,000, to be paid on September 1. 7. Estimated utility expense for August accrued, $ 4,000 (invoice will be received next month). 8. Income tax expense for August, $6,000, will be paid in September. The chart of accounts for Elizabeth River Business Consultants contains the following accounts: Code Account Head 101 Cash 102 Accounts Receivable Supplies Prepaid Insurance Prepaid Rent Equipment Accumulated Depreciation-Equipment Advertising Expense Payable Notes Payable Interest Payable Income Taxes Payable Salaries and Wages Payable 103 104 105 106 107 201 202 203 204 205 206 Unearned Service Revenue 207 Utility Expense Payable 301 Common Stock 302 Retained Earnings 303 Dividends 304 Income Summary 401 Service Revenue Supplies Expense Depreciation Expense Insurance Expense Salaries and Wages Expense Advertising Expense Income Tax Expense Interest Expense Rent Expense Utility Expense 501 502 503 504 505 506 507 508 509 Required: Part 1: Enter the August 1 balances in the ledger accounts; journalize the August transactions and events, post the journals into ledger accounts, and prepare an unadjusted trial balance at August 31 Part 2: Journalize and post the adjusting entries for the month ending August 31. Also, prepare an adjusted trial balance (use Worksheet to populate the adjustments). Part 3: Use the Work Sheet prepared in Part 2 to the extend to Income Statement and Balance Sheet and prepare an appropriately formatted income statement, retained earnings statement, and a classified Balance Sheet at August 31. Also, journalize and post-closing entries and complete the closing process and prepare a post-closing trial balance on August 31. Part 4: Prepare a Statement of Cash Flows for August from the other financial statements prepared in Part 3. Comprehensive Problem On July 31, 2020, the end of its most recent fiscal year, Elizabeth River Business Consultants' post- closing trial balance was as follows: Accounts Debit Credit Cash $ 26,150 Accounts receivable 6,000 Supplies Utility Expense Payable 3,450 2$ 2,000 Unearned service revenue 5,600 Common stock 18,000 Retained earnings 10,000 $ 35,600 $ 35,600 The company engaged in the following transactions during August 2020, and adjusts its accounts monthly: Date Transaction/Events August 1 Purchased Equipment, paying $20,000 cash, and signing a 2-year note payable for $100,000. The Equipment has a 4-year useful life. The note has a 6% interest rate, which is payable on the first day of each following month. 2 Issued 20,000 shares of common stock for $250,000 cash. 3 Paid $18,000 cash for a 12-month insurance policy effective August 1. 3 Paid two months' rent for August and September at an annual lease of office space for $20,000 per month. 6 Paid $19,000 for supplies. 9 Visited client offices and agreed on the terms of a consulting project. Elizabeth River will bill the client every month on the 20th of each month for services performed. 10 Collected $6,000 cash on account from Niki Brothers. This client was billed in July when Elizabeth River performed the service. 13 Performed services for Jedai Enterprises. This client paid $5,600 in advance last month. All services relating to this payment are now complete. 14 Paid $2,000 cash for a utility bill. This related to July utilities that were accrued at the end of July. 16 Signed a contract with a new client, Tina Technologies. Received $60,000 cash in advance for future services to be performed. 18 Paid semi-monthly salaries for $ 55,000 20 Performed services worth $ 140,000 on the account, and customers were billed. 20 Received a bill for $11,000 for advertising services received during August, but the amount is not due until September 15. 23 Completed the part of the project for Tina Technologies. Recognized $50,000 of revenue from the cash advance received on August 16. 27 Received $75,000 in cash from customers who were billed on August 20. 31 Declared and paid dividends of $2,000 Adjustment data: 1. Adjustment of prepaid insurance for the expired portion. 2. Adjustment of prepaid rent for the expired portion. 3. Supplies used during the month were $6,250. 4. Depreciate Equipment for the month of August. 5. Accrual of interest on the note payable. (Hint: Principal x Rate x Time to compute interest.) 6. Salaries for the second half of August accrued $55,000, to be paid on September 1. 7. Estimated utility expense for August accrued, $ 4,000 (invoice will be received next month). 8. Income tax expense for August, $6,000, will be paid in September. The chart of accounts for Elizabeth River Business Consultants contains the following accounts: Code Account Head 101 Cash 102 Accounts Receivable Supplies Prepaid Insurance Prepaid Rent Equipment Accumulated Depreciation-Equipment Advertising Expense Payable Notes Payable Interest Payable Income Taxes Payable Salaries and Wages Payable 103 104 105 106 107 201 202 203 204 205 206 Unearned Service Revenue 207 Utility Expense Payable 301 Common Stock 302 Retained Earnings 303 Dividends 304 Income Summary 401 Service Revenue Supplies Expense Depreciation Expense Insurance Expense Salaries and Wages Expense Advertising Expense Income Tax Expense Interest Expense Rent Expense Utility Expense 501 502 503 504 505 506 507 508 509 Required: Part 1: Enter the August 1 balances in the ledger accounts; journalize the August transactions and events, post the journals into ledger accounts, and prepare an unadjusted trial balance at August 31 Part 2: Journalize and post the adjusting entries for the month ending August 31. Also, prepare an adjusted trial balance (use Worksheet to populate the adjustments). Part 3: Use the Work Sheet prepared in Part 2 to the extend to Income Statement and Balance Sheet and prepare an appropriately formatted income statement, retained earnings statement, and a classified Balance Sheet at August 31. Also, journalize and post-closing entries and complete the closing process and prepare a post-closing trial balance on August 31. Part 4: Prepare a Statement of Cash Flows for August from the other financial statements prepared in Part 3.

Answer rating: 100% (QA)

Answer Solution Cash flow statement of Elizabeth River Business ... View the full answer