Question

Requirement #1:

During its first month of operation, the Quick Tax Corporation, which specializes in tax preparation,

completed the following transactions.

July 1

Began business by making a deposit in a company bank account of $40,000, in exchange

for 4,000 shares of $10 par value common stock.

July 3

Paid the current month's rent, $2,500

July 5

Paid the premium on a 1-year insurance policy, $3,600

July 7

Purchased supplies on account from Little Company, $700.

July 10

Paid employee salaries, $2,800

July 14

Purchased equipment from Lake Company, $9,500. Paid $1,500 down and the balance was

placed on account. Payments will be $500.00 per month for 20 months. The first payment is due 8/1.

Note: Use accounts payable for the balance due.

July 15

Received cash for preparing tax returns for the first half of July, $6,500

July 19

Made payment on account to Lake Company, $500.

July 31

Received cash for preparing tax returns for the last half of July, $8,250

July 31

Declared and paid cash dividends of $450.

Requirement #4:

Prepare adjusting entries using the following information in the General Journal

below. Show your calculations!

a) One month's insurance has expired.

b) The remaining inventory of supplies is $300.

c) The estimated depreciation on equipment is $125.

d) The estimated income taxes are $2700.

General Journal

Date

Description (Account Name)

Debit

Credit

Requirement #5:

Post the adjusting entries to the General Ledger T-accounts and compute adjusted balances.

Just add to the balances that are already listed.

Requirement #6:
Prepare an adjusted trial balance in the space below.
Quick Tax Corporation
Adjusted Trial Balance
July 31
	0	0

Answer 1

Requirement 1:

In the books of Quick Tax Corporation :

Date	General Journal	Debit	Credit
		$	$
July 1	Cash	40,000
	Common Stock		40,000
July 3	Rent Expense	2,500
	Cash		2,500
July 5	Prepaid Insurance	3,600
	Cash		3,600
July 7	Supplies	700
	Accounts Payable		700
July 10	Salaries Expense	2,800
	Cash		2,800
July 14	Equipment	9,500
	Cash		1,500
	Accounts Payable		8,000
July 15	Cash	6,500
	Service Revenue		6,500
July 19	Accounts Payable	500
	Cash		500
July 31	Cash	8,250
	Service Revenue		8,250
July 31	Dividends	450
	Cash		450

Requirements 2 & 5:

T- Accounts:

Cash :

Common Stock	40,000	Rent Expense	2,500
Service Revenue	6,500	Prepaid Insurance	3,600
Service Revenue	8,250	Salaries Expense	2,800
		Equipment	1,500
		Accounts Payable	500
		Dividends	450
Balance, July 31	43,400

Supplies:

Accounts Payable	700	Supplies Expense	400
Balance, July 31	300

Prepaid Insurance:

Cash	3,600	Insurance Expense	300
Balance, July 31	3,300

Equipment:

Cash	1,500
Accounts Payable	8,000
Ending balance	9,500

Accumulated Depreciation : Equipment

		Depreciation Expense	125
		Ending balance	125

Accounts Payable:

Cash	500	Supplies	700
		Equipment	8,000
		Ending balance	8,200

Income Taxes Payable:

		Income Tax Expense	2,700
		Ending balance	2,700

Common Stock:

		Cash	40,000
		Ending Balance	40,000

Dividends:

Cash	450

Service Revenue:

		Cash	6,500
		Cash	8,250
		Ending balance	14,750

Salaries Expense:

Cash	2,800

Rent Expense:

Cash	2,500

Insurance Expense:

Prepaid Insurance	300

Supplies Expense:

Supplies	400

Depreciation Expense:

Accumulated Depreciation : Equipment	125

Income Tax Expense:

Income Taxes Payable	2,700

Requirement 4:

Adjusting entries:

	Account Titles	Debit	Credit
July 31		$	$
a.	Insurance Expense	300
	Prepaid Insurance		300
b.	Supplies Expense	400
	Supplies		400
c.	Depreciation Expense	125
	Accumulated Depreciation : Equipment		125
d.	Income Tax Expense	2,700
	Income Taxes Payable		2,700

Requirement 6:

Quick Tax Corporation

Adjusted Trial Balance

July 31

Account Titles	Debit	Credit
	$	$
Cash	43,400
Supplies	300
Prepaid Insurance	3,300
Equipment	9,500
Accumulated Depreciation : Equipment		125
Accounts Payable		8,200
Income Taxes Payable		2,700
Common Stock		40,000
Dividends	450
Retained Earnings		0
Service Revenue		14,750
Salaries Expense	2,800
Rent Expense	2,500
Insurance Expense	300
Supplies Expense	400
Depreciation Expense	125
Income Tax Expense	2,700
Totals	65,775	65,775