Answer:
Givens Graphics Company
(a) Journalize the adjusting entries at June 30. (Assume adjustments are recorded every 6 months.):
1. Debit Supplies Expense $2,400
Credit Supplies $2,400
To accrue supplies used to date.
2. Debit Interest Expense $750
Credit Interest Payable $750
To accrue interest due.
3. Debit Insurance Expense $600
Credit Insurance Prepaid $600
To accrue the insurance expense for 4 months.
4. Debit Consulting Fees (Unearned) $4,500
Credit Consulting Fees Earned $4,500
To accrue earned consulting fees.
5. Debit Accounts Receivable $2,000
Credit Graphic Revenue Earned $2,000
To accrued earned revenue.
6. Debit Depreciation Expense $1,000
Credit Accumulated Depreciation $1,000
To record depreciation charge for six months.
(b) Adjusted trial balance:
Cash $ 9,500
Accounts Receivable 16,000
Equipment 45,000
Insurance Expense 600
Insurance Prepaid 1,200
Salaries Expense 30,000
Supplies Expense 2,400
Supplies 1,300
Advertising Expense 1,900
Rent Expense 1,500
Utilities Expense 1,700
Notes Payable $ 20,000
Interest Expense 750
Interest Payable 750
Depreciation Expense 1,000
Accumulated Depreciation 1,000
Accounts Payable 9,000
Sue Givens, Capital 22,000
Graphic Revenue 54,100
Unearned Consulting Revenue 1,500
Consulting Revenue 4,500
Total $112,850 $112,850
(ci) Income statement for the 6 months ended June 30:
Graphic Revenue $54,100
Consulting Revenue 4,500
Total Revenue $58,600
Less Expenses:
Insurance Expense 600
Salaries Expense 30,000
Supplies Expense 2,400
Advertising Expense 1,900
Rent Expense 1,500
Utilities Expense 1,700
Interest Expense 750
Depreciation Expense 1,000 $39,850
Net Income $18,750
(cii) Owner's equity statement for the 6 months ended June 30:
Sue Givens, Capital $22,000
Retained Earnings 18,750
Total Equity $40,750
(ciii) Balance sheet at June 30:
Assets:
Cash $ 9,500
Accounts Receivable 16,000
Insurance Prepaid 1,200
Supplies 1,300
Equipment 45,000
Total Assets $73,000
Liabilities + Equity:
Notes Payable $ 20,000
Interest Payable 750
Accumulated Depreciation 1,000
Accounts Payable 9,000
Unearned Consulting Revenue 1,500
Sue Givens, Capital 22,000
Retained Earnings 18,750
Total Liabilities + Equity $73,000
Explanation:
a) Unadjusted Trial Balance at June 30:
Cash $ 9,500
Accounts Receivable 14,000
Equipment 45,000
Insurance Expense 1,800
Salaries Expense 30,000
Supplies Expense 3,700
Advertising Expense 1,900
Rent Expense 1,500
Utilities Expense 1,700
Notes Payable $ 20,000
Accounts Payable 9,000
Sue Givens, Capital 22,000
Graphic Revenue 52,100
Consulting Revenue 6,000
Total $109,100 $109,100
b) Adjusting Journal Entries are end of period adjustments (accrued expenses and revenue, unearned revenue and prepaid expenses, and depreciation charges) made to the accounts to match them to the accrual basis of generally accepted accounting principles.
The financial statements are the statements that reflect the status of the company regarding the growth and the financial structure of the company. It relies upon the market condition as well as the survival and growth of the company.
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