A.

Journal Entries
Date Account Debit Credit
20x1
Jan. 1 Cash 2,000,000.00
Owner's Capital 2,000,000.00
to record initial investment
Equipment 1,000,000.00
Cash 1,000,000.00
to record acquisition of equipment
Jul. 1 Cash 500,000.00
Notes Payable 500,000.00
to record bank loan
Sept. 30 Prepaid Insurance 160,000.00
Cash 160,000.00
to record prepayment of insurance
Cash 2,000,000.00
Accounts Receivable 4,000,000.00
Service Fees 6,000,000.00
to record service fees
Cash 1,800,000.00
Accounts Receivable 1,800,000.00
to record collection of accounts receivable
Salaries Expense 1,200,000.00
Cash 1,200,000.00
to record salaries expense
Utilities Expense 500,000.00
Cash 500,000.00
to record utilities expense
Prepaid Supplies 120,000.00
Cash 120,000.00
to record supplies purchased
Owner's Drawings 1,400,000.00
Cash 1,400,000.00
to record owner's drawings
B. Posting

ASSETS LIABILITIES

Cash Accounts Receivable Notes payable

2,000,000.00 1,000,000.00 4,000,000.00 1,800,000.00
500,000.00 160,000.00
2,000,000.00 1,200,000.00
1,800,000.00 500,000.00
120,000.00
1,400,000.00 EQUITY

6,300,000.00 4,380,000.00 4,000,000.00 1,800,000.00 Owner's capital

1,920,000.00 2,200,000.00

Prepaid insurance Prepaid supplies

160,000.00 120,000.00

160,000.00 120,000.00 Owner's drawings

1,400,000.00
Equipment
1,000,000.00
1,400,000.00
1,000,000.00
 LIABILITIES INCOME EXPENSES

Notes payable Service Fees Salaries expense

500,000.00 6,000,000.00 1,200,000.00

500,000.00 6,000,000.00 1,200,000.00

EQUITY Utilities expense

500,000.00
Owner's capital
2,000,000.00
500,000.00

2,000,000.00

Owner's drawings
C. Unadjusted Trial Balance D. Adjusting Entries
Date
Entity A Dec. 1
Unadjusted Trial Balance
as of December 31, 20x1

Account Debit Credit

Cash 1,920,000.00
Accounts Receivable 2,200,000.00
Prepaid Insurance 160,000.00
Prepaid Supplies 120,000.00
Equipment 1,000,000.00
Notes Payable 500,000.00
Owner's Capital 2,000,000.00
Owner's Drawings 1,400,000.00
Service Fees 6,000,000.00
Salaries Expense 1,200,000.00
Utilities Expense 500,000.00
TOTALS 8,500,000.00 8,500,000.00
. Adjusting Entries
Account Debit Credit
Depreciation Expense 100,000.00
Accumulated Depreciation - Equipment 100,000.00
to record depreciation expense fo the year
Interest Expense 30,000.00
Expense Payable 30,000.00
to accrue interest expense
Insurance Expense 40,000.00
Prepaid Insurance 40,000.00
to recognize insurance expense
Supplies Expense 80,000.00
Prepaid Supplies 80,000.00
to recognize supplies expense
E. Worksheet

Unadjusted Trial Balance Adjustments

Account Debits Credits Debits
Cash 1,920,000.00
Accounts Receivable 2,200,000.00
Prepaid Insurance 160,000.00
Prepaid Supplies 120,000.00
Equipment 1,000,000.00
Accumulated Depreciation - Equipment
Interest Payable
Notes Payable 500,000.00
Owner's Capital 2,000,000.00
Owner's Drawings 1,400,000.00
Income Summary
Service Fees 6,000,000.00
Salaries Expense 1,200,000.00
Utilities Expense 500,000.00
Interest Expense 30,000.00
Depreciation Expense 100,000.00
Insurance Expense 40,000.00
Supplies Expense 80,000.00
8,500,000.00 8,500,000.00 250,000.00
 Entity A
Worksheet
as of December 31, 20x1
Adjustments Adjusted Trial Balance Income Statement
Credits Debits Credits Debits Credits
1,920,000.00
2,200,000.00
40,000.00 120,000.00
80,000.00 40,000.00
1,000,000.00
100,000.00 100,000.00
30,000.00 30,000.00
500,000.00
2,000,000.00
1,400,000.00

6,000,000.00 6,000,000.00
1,200,000.00 1,200,000.00
500,000.00 500,000.00
30,000.00 30,000.00
100,000.00 100,000.00
40,000.00 40,000.00
80,000.00 80,000.00
250,000.00 8,630,000.00 8,630,000.00 1,950,000.00 6,000,000.00
4,050,000.00
6,000,000.00 6,000,000.00
 Balance Sheet Closing Entries Post-closing Trial Balance
Debits Credits Debits Credits Debits
1,920,000.00 1,920,000.00
2,200,000.00 2,200,000.00
120,000.00 120,000.00
40,000.00 40,000.00
1,000,000.00 1,000,000.00
100,000.00
30,000.00
500,000.00
2,000,000.00 2,650,000.00
1,400,000.00 1,400,000.00 -

6,000,000.00
1,200,000.00 -
500,000.00 -
30,000.00 -
100,000.00 -
40,000.00 -
80,000.00 -
6,680,000.00 2,630,000.00 6,000,000.00 6,000,000.00 5,280,000.00
4,050,000.00
6,680,000.00 6,680,000.00
ost-closing Trial Balance
Credits

100,000.00
30,000.00
500,000.00
4,650,000.00

5,280,000.00
F. Closing Entries
Date Account Debit Credit
Dec. 31 Service Fees 6,000,000.00
Salaries Expense 1,200,000.00
Utilities Expense 500,000.00
Interest Expense 30,000.00
Depreciation Expense 100,000.00
Insurance Expense 40,000.00
Supplies Expense 80,000.00
Income Summary 4,050,000.00
to close income and expense accounts to income summary
Dec. 31 Income Summary 4,050,000.00
Owner's Equity 4,050,000.00
to close income summary to equity
Dec. 31 Owner's Equity 1,400,000.00
Owner's Drawing 1,400,000.00
to close drawings account
G. Balance Sheet & Income Statement

Entity A Entity A
Balance Sheet Income Statement
as of December 31, 20x1 For the month ended December 31, 20x1

Account Amount Account

ASSETS INCOME
Cash 1,920,000.00 Service Fees
Accounts Receivable 2,200,000.00
Prepaid Insurance 120,000.00 EXPENSES
Prepaid Supplies 40,000.00 Salaries Expense
Equipment, net 900,000.00 Utilities Expense
TOTAL ASSETS 5,180,000.00 Interest Expense
Depreciation Expense
LIABILITIES Insurance Expense
Interest Payable 30,000.00 Supplies Expense
Notes Payable 500,000.00 TOTAL EXPENSES
TOTAL LIABILITIES 530,000.00
PROFIT FOR THE PERIOD
EQUITY

TOTAL EQUITY 4,650,000.00

TOTAL LIABILITIES & EQUITY 5,180,000.00

 Entity A
me Statement
ended December 31, 20x1

Amount

6,000,000.00

1,200,000.00
500,000.00
30,000.00
100,000.00
40,000.00
80,000.00
1,950,000.00

4,050,000.00
MULTIPLE CHOICE
1 d. Prepayments initially recorded using the asset method
2 c. Adjusting entry to record accrued interest income

ENTRIES
Date Account Debit
3 20x1, Sept. 30 Insurance Expense 160,000.00
Cash
to record the prepayment of insurance
4 20x1, Dec. 31 Prepaid Insurance 120,000.00
Insurance Expense
to recognize prepaid insurance
5 20x2, Jan. 1 Insurance Expense 120,000.00
Prepaid Insurance
to reverse the adjusting entry for prepaid insurance
Credit

160,000.00

120,000.00

120,000.00