The case: Frontier Marketing Co. is a sports marketing venture that began business on August
1, 20x2. The board of directors for Frontier has engaged your firm’s assistance in accounting for
transactions and preparing a Balance Sheet and Income Statement for the month ended August
31, 20x2. Frontier completed the following transactions during August 20x2:
1. Frontier was incorporated on August 1, 20x2, and on that date 10,000 shares of no-par
common stock was issued for $200,000 cash.
2. On August 1, Frontier purchased computer equipment costing $84,000 by signing a 5-
month, $84,000 note payable with a 6% annual interest rate. Both interest and principal
are due on January 1, 20x3. The equipment has a useful life of four years, has a $6,000
estimated salvage value, and is depreciated using the straight-line method.
3. Mike Sierra (a customer) remitted $21,000 cash to Frontier on August 2 for marketing
services that are expected to be completed by December 31, 20x2. The services will be
provided evenly during the months of August, September, October, November and
December.
4. On August 4, Frontier paid $6,000 cash for a one-year liability insurance policy that
expires on August 31, 20x3.
5. On August 5, Frontier purchased office supplies from Creative Office Solutions Co. for
$35,000 on account. The supplies will be used for general administrative activities within
the company. At August 31, an inventory count noted that $15,000 worth of supplies
remained.
6. On August 9, Frontier signed a contract with a local business for a Facebook web page
designing service to be provided in October. Frontier will commence work on the web
page in October, and payment of $10,000 is due following delivery of the web page to
the customer.
7. Frontier’s board of directors declared and paid a cash dividend of $5,000 on August 20.
8. Frontier pays employees’ salaries in cash. Employees are paid once a month, on the last
Friday of each month. The total payroll is $5,000 per each 5-day workweek. In August,
the pay period began on Monday, August 1. Consequently, the pay period ended on
Friday, August 26, with salaries of $25,000 being paid on August 26. Thus, employees
worked three days in August (Monday the 29th, Tuesday the 30th, Wednesday the 31st)
for which they were not yet paid as of August 31, 20x2.
9. Frontier paid Tango Realty $5,000 cash on August 31 for office rent for the month of
August.
10. During the month of August, Frontier provided $64,000 of digital marketing services to
Delta Company. On August 31, Delta paid Frontier $30,000 cash related to those
services. Also on August 31, Frontier billed Delta $34,000 for the remaining unpaid
amount.
11. Frontier provided $10,000 of Google search results prioritization services to a customer
on August 31. Frontier billed the client, but the client has not yet paid.

12. Frontier estimates that 4% of its ending accounts receivable balance will be
uncollectible. (Note: see textbook pages 283-286 for coverage of the allowance for
uncollectible accounts)
13. Frontier estimates that the company owes income taxes equal to $4,179 for the month
of August. August income taxes will not be paid until early in fiscal 20x3 (i.e., the next
year).

Create all necessary T-accounts and then post all of the journal entries and adjusting
journal entries to the appropriate T-accounts using the sheets titled ‘T-Accounts’.

Transcribed Image Text:

Cash 200,000 T-Accounts T-Accounts Common Stock 200,000 Cash 200,000 T-Accounts T-Accounts Common Stock 200,000

Answer rating: 100% (QA)

TAccounts for Frontier Marketing Co for August 20x2 Assets Account Debit Credit Balance Cash 300000 30000 270000 Accounts Receivable 34000 10000 44000 Prepaid Insurance 6000 6000 Office Supplies 35000 ... View the full answer