Week6 AComprehensiveIllustration

Week 6:
A Comprehensive
Illustration
Iron Mountain Consulting

For the past several years, Kareem
Ismail has operated a part-time
consulting business from his home.
As of 1 October 2010, Kareem decided
to move to rented quarters and to
operate the business, which was to be
known as Iron Mountain Consulting, on
a full-time basis.
Iron Mountain Consulting entered into
the following transactions during
October:
October Transactions
Date
Oct 1
The following assets were received from Kareem Ismail:

Cash, $18,000
Accounts receivable, $5,000
Supplies, $1,500
Office equipment, $10,750.
There were no liabilities received.
Oct 1
Paid 3 months rent on a lease rental contract, $4,800.
Oct 2
Paid the premiums on property and casualty insurance

policies, $2,700.
Oct 4
Received cash from clients as an advance payment for

services to be provided and recorded it as unearned fees,
$3,150.
Oct 5
Purchased additional office equipment on account from

Office Station Co., $1,250.
Oct 6
Received cash from clients on account, $2,000.
October Transactions (Contd.)

Date
Oct 10
Paid cash for a newspaper advertisement, $325.
Oct 12
Paid Office Station Co. for part of the debt incurred on

Oct 5, $750.
Oct 12
Recorded services provided on account for the period

Oct 1-12, $5,750.
Oct 14
Paid part-time receptionist for 2 weeks salary, $900.
Oct 17
Recorded cash from cash clients for fees earned for

the period Oct 1-17, $9,250.
Oct 18
Paid cash for supplies, $600.
Oct 20
Recorded services provided on account for the period

Oct 13-20, $4,100.
Oct 24
Recorded cash from cash clients for fees earned during

October Transactions (Contd.)

Date
Oct 26
Received cash from clients on account, $3,450.
Oct 27
Paid part-time receptionist for 2 weeks salary,

$900.
Oct 29
Paid telephone bill for October, $250.
Oct 31
Paid electricity bill for October, $300.
Oct 31
Recorded cash from cash clients for fees

earned for the period Oct 25-31, $3,975.
Oct 31
Recorded services provided on account for the

remainder of October, $2,500.
Oct 31
Kareem withdrew $7,500 for personal use.
Instructions
Journalise each transaction.
Journal entries
Oct 1:
The following assets were received from Kareem
Ismail:
Cash, $18,000
Accounts receivable, $5,000
Supplies, $1,500
Office equipment, $10,750.
There were no liabilities received.
Journal entry
DR
DR
DR
DR
CR
Cash
Accounts Receivable
Supplies
Office Equipment
Kareem Ismail, Capital
18,000
5,000
1,500
10,750
35,250
Journal entries
Oct 1:
Paid 3 months rent on a lease rental
contract, $4,800.
Journal entry
DR Prepaid Rent
CR Cash
4,800
4,800
Journal entries
Oct 2:
Paid the premiums on property and
casualty insurance policies, $2,700.
Journal entry
DR Prepaid Insurance
CR Cash
2,700
2,700
Journal entries
Oct 4:
Received cash from clients as an advance
payment for services to be provided and
recorded it as unearned fees, $3,150.
Journal entry
DR Cash
CR Unearned fees
3,150
3,150
Journal entries
Oct 5:
Purchased additional office equipment on
account from Office Station Co., $1,250.
Journal entry
DR Office equipment
CR Accounts payable
1,250
1,250
Journal entries
Oct 6:
Received cash from clients on account,
$2,000.
Journal entry
DR Cash
CR Accounts receivables
2,000
2,000
Journal entries
Oct 10:
Paid cash for a newspaper advertisement,
$325.
Journal entry
DR Miscellaneous expense
CR Cash
325
325
Journal entries
Oct 12:
Paid Office Station Co. for part of the debt
incurred on Oct 5, $750.
Journal entry
DR Accounts payable
CR Cash
750
750
Journal entries
Oct 12:
Recorded services provided on account for
Journal entry
DR Accounts receivable
CR Fees earned
5,750
5,750
Journal entries
Oct 14:
Paid part-time receptionist for 2 weeks
salary, $900.
Journal entry
DR Salary expense
CR Cash
900
900
Journal entries
Oct 17:
Journal entry
DR Cash
CR Fees earned
9,250
9,250
Journal entries
Oct 18:
Paid cash for supplies, $600.
Journal entry
DR Supplies
CR Cash
600
600
Journal entries
Oct 20:
Journal entry
CR Fees earned
4,100
4,100
Journal entries
Oct 24:
Journal entry
DR Cash
CR Fees earned
4,850
4,850
Journal entries
Oct 26:
Received cash from clients on account,
$3,450.
Journal entry
DR Cash
CR Accounts receivable
3,450
3,450
Journal entries
Oct 27:
Paid part-time receptionist for 2 weeks
salary, $900.
Journal entry
DR Salary expense
CR Cash
900
900
Journal entries
Oct 29:
Paid telephone bill for October, $250.
Journal entry
CR Cash
250
250
Journal entries
Oct 31:
Paid electricity bill for October, $300.
Journal entry
CR Cash
300
300
Journal entries
Oct 31:
Journal entry
DR Cash
CR Fees earned
3,975
3,975
Journal entries
Oct 31:
the remainder of October, $2,500.
Journal entry
CR Fees earned
2,500
2,500
Journal entries
Oct 31:
Kareem withdrew $7,500 for personal use.
Journal entry
DR Kareem Ismail, Drawing
CR Cash
7,500
7,500
Instructions
Post the journal to individual
ledgers.
Posting journal entries to ledger

accounts Debit
Cash
Credit
Oct 1
18,000
4,800
2,700
3,150
2,000
10
325
12
750
14
900
17
9,250
18
600
24
4,850
26
3,450
27
900
29
250
31
300
31
3,975
31
7,500
Bal c/f
25,650
44,675
Bal b/f
25,650
44,675

accounts
Accounts receivable
Debit
Oct 1
5,000
Credit
2,000
12
5,750
20
4,100
26
3,450
31
2,500
Bal c/f
11,900
17,35
0 17,350
Bal b/f
11,90
0

accounts
Supplies
Debit
Oct 1
1,500
18
Credit
600
Bal c/f
2,100
2,100
Bal b/f
2,100
2,100

accounts
Prepaid rent
Debit
Oct 1
4,800
Bal c/f
4,800
4,800
Bal b/f
Credit
4,800
4,800

accounts
Prepaid insurance
Debit
Oct 2
2,700
Bal c/f
2,700
2,700
Bal b/f
Credit
2,700
2,700

accounts
Office equipment
Debit
Oct 1
10,75
0
1,250
Bal c/f
Credit
12,000
12,00
0 12,000
Bal b/f
12,00
0

accounts
Accounts payable
Debit
Oct 5
Credit
1,250
12
750
Bal c/f
500
1,250
Bal b/f
1,250
500

accounts
Unearned fees
Debit
Oct 4
Credit
3,150
Bal c/f
3,150
3,150
Bal b/f
3,150
3,150

accounts
Debit
Oct 1
Credit
35,250
Bal c/f
35,25
0
35,25
0 35,250
Bal b/f
35,250

accounts
Kareem Ismail, Drawing
Debit
Oct 31
7,500
Bal c/f
7,500
7,500
Bal b/f
Credit
7,500
7,500

accounts
Fees earned
Debit
Credit
Oct 12
5,750
17
9,250
20
4,100
24
4,850
31
3,975
31
2,500
Bal c/f
30,42
5
30,42
5 30,425
Bal b/f
30,425

accounts
Salary expense
Debit
Oct 14
900
27
900
Bal c/f
1,800
1,800
Bal b/f
Credit
1,800
1,800

accounts
Miscellaneous expense
Debit
Oct 10
325
29
250
31
300
Bal c/f
875
875
Bal b/f
Credit
875
875
Instructions
Prepare an unadjusted trial
balance.
Accounts
Unadjusted Trial
balance
Debit
Cash
25,650
Accounts receivable
11,900
Supplies
2,100
Prepaid rent
4,800
Prepaid insurance
2,700
Office equipment
12,000
Accumulated depreciation office

equipment
Credit
Accounts payable
500
Salary payable
Unearned fees
3,150
Kareem Ismail, capital

Kareem Ismail, drawing
35,250
7,500
Accounts
Unadjusted
Trial balance
Debit
Credit
Fees earned
Salary expense
30,425
1,800
Rent expense
Supplies expense
Depreciation expense
Insurance expense
875
69,325
69,325
Adjustments
At the end of October, the following adjustment
data were assembled:
1.Insurance expired during October is $225.
2.Supplies on hand on Oct 31 are $875.
3.Depreciation of office equipment for October is
$400.
4.Accrued receptionist salary on Oct 31 is $200.
5.Rent expired during October is $1,600.
6.Unearned fees on Oct 31 are $1,150.
Journalise the adjusting entries &

post them to the relevant ledger
accounts.
1.Insurance expired during
October is $225.
Journal entry:
Cr Prepaid insurance
Dr Insurance Expense
$225
$225
Posting adjusting entries to ledger

accounts
Prepaid insurance
Debit
Oct 2
2,700
31
Adjusting
Credit
225

accounts
Insurance expense
31
Adjusting
Debit
225
Credit
2. Supplies on hand on Oct 31 are $875.

Supplies per unadjusted TB: $2,100
Actual balance at year end: $875
Therefore, the balance needs to be adjusted
by: $2,100 - $875 = $1,225.
Journal entry:
Cr Supplies
Dr Supplies Expense
$1,225
$1,225

accounts
Supplies
Debit
Oct 1
1,500
18
31
Credit
600
Adjusting
1,225

accounts
Supplies expense
Debit
31
1,225
Adjusting
Credit
3. Depreciation of office equipment for

October is $400.
Journal entry:
Cr Accumulated depreciation
Dr Depreciation Expense
$400
$400

accounts
Accumulated depreciation
31
Adjusting
Debit
Credit
400

accounts
31
Adjusting
Debit
400
Credit
4.Accrued receptionist salary on

Oct 31 is $200.
Journal entry:
Cr Salaries payable
Dr Salary expense
$200
$200

accounts
Salaries payable
Oct 31 Adjusting
Debit
Credit
200

accounts
Salary expense
Debit
Oct 14
900
27
900
31
Adjusting
200
Credit
5. Rent expired during October is

$1,600.
Journal entry:
Cr Prepaid rent
Dr Rent Expense
$1,600
$1,600

accounts
Prepaid rent
Debit
Oct 1
4,800
31
Adjusting
Credit
1,600

accounts
Rent expense
Debit
31
1,600
Adjusting
Credit
6. Unearned fees on Oct 31 are $1,150.

Unearned service revenue per unadjusted
TB: $3,150
Actual balance at year end: $1,150
Therefore, the balance needs to be adjusted
by: $3,150 - $1,150 = $2,000.
Journal entry:
Dr Unearned fees
Cr Fees earned
$2,000
$2,000

accounts
Unearned fees
Debit
Oct 4
31
Credit
3,150
Adjusting
2,000

accounts
Fees earned
Debit
Credit
Oct 12
5,750
17
9,250
20
4,100
24
4,850
31
3,975
31
2,500
31
Adjusting
2,000
Instructions
Prepare an adjusted trial

balance, using an end-ofperiod worksheet.
Accounts
Trial balance
Adjustments
Debit
Debit
Cash
25,6
50
Accounts receivable
11,9
00
Supplies
2,10
0
Prepaid rent
4,80
0
Prepaid insurance
2,70
0
Office equipment
12,0
00
Accumulated depreciation office equipment
Credit
225
Accounts payable
500
Salary payable
Unearned fees
3,15
0
35,2
50

Fees earned
Credit
7,50
0
30,4
25
Adjd TB
Debit
Credit
Accounts
Trial balance
Adjustments
Debit
Debit
Cash
25,6
50
Accounts receivable
11,9
00
Supplies
2,10
0
Prepaid rent
4,80
0
Prepaid insurance
2,70
0
Office equipment
12,0
00
Credit
1,22
5
225
Accounts payable
500
Salary payable
Unearned fees
3,15
0
35,2
50

Fees earned
Credit
7,50
0
30,4
25
Adjd TB
Debit
Credit
Accounts
Trial balance
Adjustments
Debit
Debit
Cash
25,6
50
Accounts receivable
11,9
00
Supplies
2,10
0
Prepaid rent
4,80
0
Prepaid insurance
2,70
0
Office equipment
12,0
00
Credit
1,225
225
Accounts payable
500
Salary payable
Unearned fees
3,15
0
35,2
50

Fees earned
Credit
7,50
0
30,4
25
400
Adjd TB
Debit
Credit
Accounts
Trial balance
Adjustments
Debit
Debit
Cash
25,6
50
Accounts receivable
11,9
00
Supplies
2,10
0
Prepaid rent
4,80
0
Prepaid insurance
2,70
0
Office equipment
12,0
00
Credit
1,225
225
Accounts payable
Unearned fees
3,15
0
35,2
50
Fees earned
400
500
Salary payable
Credit
7,50
0
30,4
25
200
Adjd TB
Debit
Credit
Accounts
Trial balance
Adjustments
Debit
Debit
Credit
Credit
Cash
25,6
50
Accounts receivable
11,9
00
Supplies
2,10
0
1,225
Prepaid rent
4,80
0
1,60
0
Prepaid insurance
2,70
0
225
Office equipment
12,0
00
Accounts payable
500
Salary payable
Unearned fees
3,15
0
35,2
50

Fees earned
400
7,50
0
30,4
25
200
Adjd TB
Debit
Credit
Accounts
Trial balance
Adjustments
Debit
Debit
Credit
Credit
Cash
25,6
50
Accounts receivable
11,9
00
Supplies
2,10
0
1,225
Prepaid rent
4,80
0
1,600
Prepaid insurance
2,70
0
225
Office equipment
12,0
00
Accounts payable
500
Salary payable
Unearned fees
3,15
0
35,2
50

Fees earned
400
200
2,00
0
7,50
0
30,4
25
2,00
0
Adjd TB
Debit
Credit
Accounts
Trial balance
Adjustments
Debit
Debit
Credit
Credit
Adjd TB
Debit
Cash
25,6
50
25,65
0
Accounts receivable
11,9
00
11,90
0
Supplies
2,10
0
1,225
875
Prepaid rent
4,80
0
1,600
3,200
Prepaid insurance
2,70
0
225
2,475
Office equipment
12,0
00
12,00
0
0
Accounts payable
Unearned fees
3,15
0
35,2
50
Fees earned
400
400
500
Salary payable
Credit
500
200
200
2,00
0
1,150
35,25
0
7,50
0
7,500
30,4
25
2,00
0
32,42
5
Instructions
Prepare an income statement,

a statement of owners equity
and a balance sheet.
Income Statement
For the month ended 31 October
2010
Fees
earned ........................................................................
$ 32,425
Expenses:
Salary expense ............................................... $2,000
Rent expense .................................................. 1,600
Supplies expense ............................................. 1,225
Depreciation expense .....................................
400
Insurance expense ............................................. 225
Miscellaneous expense ..................................... 875
Total expenses ...................................................
6,325
Net
income ........................................................................
.. $ 26,100
Statement of Owners Equity

For the month ended 31 Oct 2010
Kareem Ismail, capital, October 1,
2010 ........................... $ 0
Additional investments during the
month ....................... 35,250
Total ...........................................................................
....... $ 35,250
Net income for the month ..............................$ 26,100
Less withdrawals ................................................
(7,500)
Increase in owners
equity ................................................ 18,600
Kareem Ismail, capital, October 31, 2010 .....................
$ 53,850
Balance Sheet
31 Oct 2010
Assets
Liabilities
Current assets:
Current liabilities:
Cash
25,650 Accounts payable
500
Accounts receivable
11,900 Salaries payable
200
Supplies
875 Unearned fees
1,150
Prepaid rent
3,200 Total liabilities
1,850
Prepaid insurance
2,475
Total current assets
44,100
Property, plant &

equipment:
Office equipment
Less: Acc. Depreciation
Owners equity
12,000 Kareem Ismail, capital
53,850
(400)
11,600
Total assets
55,700 Total liabilities &
55,700
Instructions
Prepare & post the closing entries.
Closing entries
1.
Oct
Debit
31
32,42
5
Fees earned
32,42
5
Income summary
2.
31
Income summary
Credi
t
6,325
Salary expense
2,000
Rent expense
1,600
Supplies expense
1,225
400
Insurance expense
225
Miscellaneous
Closing entries
3.
Oc
t
Debit
31
26,10
0
Income summary
26,10
0

4.
31

Kareem Ismail,
drawing
Credi
t
7,500
7,500
Posting closing entries to ledger

accounts
Debit
Credit
Oct 1
35,250
Oct 31 Closing (Ref 3)
26,100
Oct 31 Closing (Ref 4)

Balance c/f
7,500
53,850

accounts
Kareem Ismail, Drawing
Debit
Oct 31
7,500
Closing (Ref 4)
Balance c/f
Credit
7,500
0

accounts
Income Summary
Oct 31
Debit
Closing (Ref 1)
32,425
Closing (Ref 2)
6,325
Closing (Ref 3)
26,100
Balance c/f
Credit

accounts
Fees earned
Oct 31
Debit
Adjusted balance
Closing (Ref 1)
Credit
32,425
32,425
Balance c/f
Salary expense
Oct 31
Adjusted balance
2,000
Closing (Ref 2)
2,000
Balance c/f
Rent expense
Oct 31
Adjusted balance
Closing (Ref 2)
Balance c/f
1,600
1,600
0

accounts
Debit
Credit
Supplies expense
Oct 31
Adjusted balance
855
Closing (Ref 2)
855
Balance c/f
Oct 31
Adjusted balance
Closing (Ref 2)
Balance c/f
400
400
0

accounts
Debit
Credit
Insurance expense
Oct 31
Adjusted balance
225
Closing (Ref 2)
225
Balance c/f
Oct 31
Adjusted balance
Closing (Ref 2)
Balance c/f
875
875
0
Instructions
Prepare a post-closing trial
balance.
Accounts
Post closing TB
Debit
Cash
25,65
0
Accounts receivable
11,90
0
Supplies
Credit
875
Prepaid rent
3,200
Prepaid insurance
2,475
Office equipment
12,00
0
400
Accounts payable
500
Salary payable
200
Unearned fees
1,150

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Week6 AComprehensiveIllustration

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Week 6:

Iron Mountain Consulting

The following assets were received from Kareem Ismail:

Paid 3 months rent on a lease rental contract, $4,800.

Paid the premiums on property and casualty insurance

Received cash from clients as an advance payment for

Purchased additional office equipment on account from

Received cash from clients on account, $2,000.

October Transactions (Contd.)

Paid cash for a newspaper advertisement, $325.

Paid Office Station Co. for part of the debt incurred on

Recorded services provided on account for the period

Paid part-time receptionist for 2 weeks salary, $900.

Recorded cash from cash clients for fees earned for

Paid cash for supplies, $600.

Recorded services provided on account for the period

Recorded cash from cash clients for fees earned during

October Transactions (Contd.)

Received cash from clients on account, $3,450.

Paid part-time receptionist for 2 weeks salary,

Paid telephone bill for October, $250.

Paid electricity bill for October, $300.

Recorded cash from cash clients for fees

Recorded services provided on account for the

Kareem withdrew $7,500 for personal use.

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Posting journal entries to ledger

Accumulated depreciation office

Kareem Ismail, capital

Journalise the adjusting entries &

Posting adjusting entries to ledger

Posting adjusting entries to ledger

2. Supplies on hand on Oct 31 are $875.

Posting adjusting entries to ledger

Posting adjusting entries to ledger

3. Depreciation of office equipment for

Posting adjusting entries to ledger

Posting adjusting entries to ledger

4.Accrued receptionist salary on

Posting adjusting entries to ledger

Posting adjusting entries to ledger

5. Rent expired during October is

Posting adjusting entries to ledger

Posting adjusting entries to ledger

6. Unearned fees on Oct 31 are $1,150.

Posting adjusting entries to ledger

Posting adjusting entries to ledger

Prepare an adjusted trial

Accumulated depreciation office equipment

Kareem Ismail, capital

Kareem Ismail, drawing

Accumulated depreciation office equipment