Case 1:
The following information relates to Chater’s AdvertisingServices for the accounting period ending December 31, 2018. Thecompany is a leader within your local advertising industry buttheir accountant resigned just days before the final year end andonly the information now presented was made available. The ownershave decided to test your groups’ knowledge in accounting havingbeen made aware that you are currently pursuing a course inaccounting at the university level. In this regard your group hasbeen approached to use the information presented alongside yourknowledge to advise and present the company financial statementsfor the period.
Charter’s Advertising Service
Trial Balance
December 18, 2018
Account Name | DR | CR |
| 25,500 | |
Cash | 3,100 | |
Accounts Receivable | 2,300 | |
Supplies | 2,600 | |
Equipment | | |
Accumulated Depreciation - Equipment | | |
Furniture | 6,000 | |
Accumulated Depreciation - Furniture | | |
Accounts Payable | | 4,000 |
Salary Payable | | |
Unearned Service Revenue | | |
Charter’s Capital | | 40,000 |
Charter’s Withdrawal | | |
Service Revenue | | 4,200 |
Rent Expense | 3,600 | |
Utilities Expense4 | 1,700 | |
Salaries Expense | 3,400 | |
Depreciation Expense - Equipment | | |
Depreciation Expense - Furniture | | |
Supplies Expense | | |
Total | 48,200 | 48,200 |
| |
Later in December, the business completed these transactions, asfollows:
Dec. 21 Received $2,500 in advance for advertising serviceexpected to be performed in January 2019.
Dec 21 Paid secretary $500 for the week December 17 to 21.
Dec. 26 Paid $1,000 on account.
Dec 28 Collected $1,200 on account.
Dec 30 Charter withdrew cash of $2,000 for personal use.
Requirements
- Journalize the transactions of December 21 – 30 and post to therespective T-accounts and key all items by date. Write abrief narration for each journal entry.
- At December 31, the business gathers the following informationfor the adjusting journal entries:
- Accrued service revenue, $600
- Earned $700 of the service revenue collected in advance onDecember 21 because of a change in the agreement between client andthe company to split the advertising campaign to December 2018 andthe remaining balance of $1,800 for January 2019.
- Supplies on hand, $1,300.
- Depreciation expense – equipment $260: furniture $600.
- Accrued $500 expense for secretary’s salary December 24 to28.
- After journalizing the transactions in requirement 2, post themto their respective T-accounts. Write a brief narration foreach journal entry.
- Prepare the income statement and the statement of owner’sequity of Charter Advertising Services for the month ended December31, 2018 and prepare the balance sheet at that date.
