During August, the following summary transactions were completed — 2018 beginning its current fiscal year opening account balances listed alphabetical order

On August 1, 2018, the beginning of its current fiscal year, the following opening account balances, listed in alphabetical order, were reported by Tobique Ltd.

During August, the following summary transactions were completed.

Aug. 1 Paid $400 cash for advertising in local newspapers. Advertising flyers will be included with newspapers delivered during August and September. (Hint: Use the Prepaid Advertising account.)

3 Paid August rent $380. (Hint: Use the Prepaid Rent account.)

6 Received $3,200 cash from customers in payment of accounts.

10 Paid $3,120 for salaries due employees, of which $1,700 is for August and $1,420 is for July salaries payable.

13 Received $3,800 cash for services performed in August.

15 Purchased additional equipment on account $2,000.

17 Paid creditors $2,000 of accounts payable due.

22 Purchased supplies on account $800.

24 Paid salaries $2,900.

27 Performed services worth $4,760 on account and billed customers.

29 Received $780 from customers for services to be provided in the future.

31 Declared and paid a $500 dividend.

Tobique records adjustments monthly. Adjustment data for the month of August are as follows:

1. One month's worth of advertising services have been received.

2. The August rent has expired.

3. Accrued salaries payable are $1,540.

4. Depreciation for the month is $200.

5. Supplies on hand at August 31 are $960.

6. Services were performed to satisfy $800 of unearned revenue.

7. One month of interest revenue related to the $4,000 note receivable has accrued. The note was issued on June 30 and is due October 31 and has a 6% annual interest rate. Interest is due at maturity.

8, Income tax of $300 is estimated to be owed for the month of August.

Instructions

(a) Record the above summary transactions.

(b) Set up T accounts, enter any opening balances, and post the general journal entries prepared in part (a).

(c) Prepare a trial balance at August 31.

(d) Prepare and post the August adjusting journal entries.

(e) Prepare an adjusted trial balance as at August 31.

(f) Prepare (1) an income statement, (2) a statement of changes in equity, and (3) a statement of financial position.

(g) Prepare and post the closing journal entries, assuming Tobique closes its books monthly.

(h) Prepare a post-closing trial balance.

SOLUTION

(a)

Aug. 1 Prepaid Advertising 400

Cash 400

3 Prepaid Rent 380

Cash 380

6 Cash 3,200

Accounts Receivable 3,200

10 Salaries Expense 1,700

Salaries Payable 1,420

Cash 3,120

13 Cash 3,800

Service Revenue 3,800

15 Equipment 2,000

Accounts Payable 2,000

17 Accounts Payable 2,000

Cash 2,000

22 Supplies 800

Accounts Payable 800

24 Salaries Expense 2,900

Cash 2,900

27 Accounts Receivable 4,760

Service Revenue 4,760

29 Cash 780

Unearned Revenue 780

31 Dividends Declared 500

Cash 500

(b), (d), and (g)

(c)

TOBIQUE LTD.

Trial Balance

August 31, 2018

(Total debits = Total credits)

(d)

Aug. 31 Advertising Expense 200 Prepaid Advertising 200 ($400 × 1/2)

31 Rent Expense 380

Prepaid Rent 380

31 Salaries Expense 1,540

Salaries Payable 1,540