ASSIGNMENT1: PART ONE: Eric Zhang completed these transactions during December of the current year： Dec. 1 Began a new accounting firm for provided consulting services by investing $10000 in
cash and office equipment having a $3000 fair value. 1 Prepaid one-year rent in advance for $1200 in cash. 1 Prepaid the annual premium on an insurance policy for $1200 in cash. 5 Purchased office supplies for $200 on credit. 6 Purchased office equipment for $2000 on credit. 8 Provided consulting service and received $1000 cash. 12 Paid for the office supplies purchased on Dec.5. 15 Provided consulting service on credit for $2500. 17 paid for the office equipment purchased on Dec.6. 20 Collected cash from a client in advance at $500. 25 Withdrew $ 900 for his personal use. 28 Collected $800 from client for his service rendered before. 31 Paid the utilities bills for $250. Required: The following accounts are opened: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Prepaid Rent; Office Equipment; Accumulated Depreciation; Accounts Payable; Salaries Payable; Unearned Service Revenue; Eric Zhang, Capital; Eric Zhang, Withdrawals; Service Revenue; Salaries Expense; Insurance Expense; Rent Expense; Supplies Expense; Depreciation Expense; Utilities Expense. a. Prepare general journal entries to record the transactions. b. Prepare a trial balance, titling it Eric Zhang, Accountant. c. Use the following information to prepare and post adjusting entries on Dec.31: (1) An examination of insurance policy shows the expired insurance. (2) Expired rent. (3) Supplies on hand at $100 (4) Half unearned revenue became earned revenue (5) Accrued salary for $200 (6) Depreciation for office equipment at $300. d. Prepare an adjusted trial balance, an income statement, a statement of changes in owner’s equity and balance sheet. PART TWO:TRANSLATION 1.Adjusting entries are accounting journal entries that convert a company's accounting records to the accrual basis of accounting. An adjusting journal entry is typically made just prior to issuing a company's financial statements. To demonstrate the need for an accounting adjusting entry let's assume that a company borrowed money from its bank on December 1, 2013 and that the company's accounting period ends on
December 31. The bank loan specifies that the first interest payment on the loan will be due on March 1, 2014. This means that the company's accounting records as of December 31 do not contain any payment to the bank for the interest the company incurred from December 1 through December 31. (Of course the loan is costing the company interest expense every day, but the actual payment for the interest will not occur until March 1.) For the company's December income statement to accurately report the company's profitability, it must include all of the company's December expenses—not just the expenses that were paid. Similarly, for the company's balance sheet on December 31 to be accurate, it must report a liability for the interest owed as of the balance sheet date. An adjusting entry is needed so that December's interest expense is included on December's income statement and the interest due as of December 31 is included on the December 31 balance sheet. The adjusting entry will debit Interest Expense and credit Interest Payable for the amount of interest from December 1 to December 31. Another situation requiring an adjusting journal entry arises when an amount has already been recorded in the company's accounting records, but the amount is for more than the current accounting period. To illustrate let's assume that on December 1, 2013 the company paid its insurance agent $2,400 for insurance protection during the period of December 1, 2013 through May 31, 2014. The $2,400 transaction was recorded in the accounting records on December 1, but the amount represents six months of coverage and expense. By December 31, one month of the insurance coverage and cost have been used up or expired. Hence the income statement for December should report just one month of insurance cost of $400 ($2,400 divided by 6 months) in the account Insurance Expense. The balance sheet dated December 31 should report the cost of five months of the insurance coverage that has not yet been used up. (The cost not used up is referred to as the asset Prepaid Insurance. The cost that is used up is referred to as the expired cost Insurance Expense.) This means that the balance sheet dated December 31 should report five months of insurance cost or $2,000 ($400 per month times 5 months) in the asset account Prepaid Insurance. Since it is unlikely that the $2,400 transaction on December 1 was recorded this way, an adjusting entry will be needed at December 31, 2013 to get the income statement and balance sheet to report this accurately. 2.Under the double-entry system every business transaction is recorded in at least two accounts. One account will receive a "debit" entry, meaning the amount will be entered on the left side of that account. Another account will receive a "credit" entry, meaning the amount will be entered on the right side of that account. The initial challenge with double-entry is to know which account should be debited and which account should be credited. To keep a company's financial data organized, accountants developed a system that sorts transactions into records called accounts. When a company's accounting system is set up, the accounts most likely to be affected by the company's transactions are identified and listed out. This list is referred to as the company's chart of accounts. Depending on the size of a company and the complexity of its business operations, the chart of accounts may list as few as thirty accounts or as many as thousands. A company has the flexibility of tailoring its chart of accounts to best meet its needs. Because every business transaction affects at least two accounts, our accounting system is known as a double-entry system. (You can refer to the company's chart of accounts to select the proper
accounts. Accounts may be added to the chart of accounts when an appropriate account cannot be found.) For example, when a company borrows $1,000 from a bank, the transaction will affect the company's Cashaccount and the company's Notes Payable account. When the company repays the bank loan, the Cash account and the Notes Payable account are also involved.If a company buys supplies for cash, its Supplies account and its Cash account will be affected. If the company buys supplies on credit, the accounts involved are Supplies and Accounts Payable.If a company pays the rent for the current month, Rent Expense and Cash are the two accounts involved. If a company provides a service and gives the client 30 days in which to pay, the company's Service Revenuesaccount and Accounts Receivable are affected. Although the system is referred to as double-entry, a transaction may involve more than two accounts. An example of a transaction that involves three accounts is a company's loan payment to its bank of $300. This transaction will involve the following accounts: Cash, Notes Payable, and Interest Expense.
DUE TIME:Dec 5th 2013 GOOD LUCK!