Part (B) Accounting Cycle Comprehensive Problem [75 marks in total]

Best solutions, Inc. completed the following transactions during January 2019:

a. Shareholders invested in the business $60,000 cash and a delivery truck valued at $72,000 in

exchange for common stock.

b. Purchased supplies for $3000 cash.

c. Paid $5,500 for a one-year insurance policy, effective January1.

d. Performed delivery services for a customer and received $4,000 cash.

e. Completed a large delivery job for a customer on account for $15,000.

f. Paid $10,000 for employee salaries.

g. Performed delivery services for customers and received $110,000 cash.

h. Collected $5,000 in advance for delivery service to be performed later.

i. Collected $7,000 cash from a customer on account.

j. Purchased fuel for the truck, paying $3,600 with a company credit card (Credit accounts

payable).

k. Performed delivery services on account, $9,500.

l. Paid office rent $2,400.

m. Paid $2,000 for accounts payable.

n. Paid cash dividends of $18,000.

Requirements:

1. Record each transaction in the journal. Key each transaction by its letter (Explanations are not

required).

[28 marks]

2. Post the transactions that you recorded in requirement 1 to the ledger accounts using T-accounts. The ledger for Best solutions contains the following accounts:

Cash

Accounts receivable Supplies

Prepaid insurance Delivery truck

Service revenue Salaries expense Depreciation expense Insurance expense Fuel expense

3

Accumulated depreciation Accounts payable Salaries payable Unearned service revenue Common stock

Retained earnings Dividends

rent expense supplies expense

3. Prepare a trial balance at January 31 on a worksheet

4. Enter the following adjustments on the worksheet.

a. Accrued but unpaid employee salaries were $3,500.

b. Depreciation expense for the month was $250.

c. Prepaid insurance expired, $500.

d. An inventory count shows $750 of supplies on hand at January 31. e. Unearned service revenue earned during January, $1,750.

5. Complete the worksheet showing:

- The adjusted trial balance 10 marks

- The income statement for the month ended January 31, 2019 5 marks

- The balance sheet on the same date. [ 5 marks]