1. Andrew is the president of ABC, Inc.

, a company that provides temporary employees for

not-for-profit companies. ABC has been operating for five years; its revenues are
increasing with each passing year. You have been hired to help Andrew analyze the
following transactions for the first two weeks of April:
a. Billed the local UW office $23,500 for temporary services provided.
b. Paid $3,005 for supplies purchased and recorded on account last period.
c. Purchased supplies for the office for $2,600 on account.
d. Purchased a new computer for the office costing $3,800 cash.
e. Placed an advertisement in the local paper for $1,400 cash.
f. Paid employee wages of $11,900. Of this amount, $3,800 had been earned by
employees and recorded
in the Wages Payable account in the prior period.
g. Issued 3,000 additional shares of common stock for cash at $45 per share in
anticipation of building a
new office. The common stock had a par value of $0.50 per share.
h. Received $12,500 on account from the local United Way office for the services
provided in (a).
i. Billed F& C Services $14,500 for services rendered.
j. Purchased land as the site of a future office for $10,000. Paid $3,000 cash as a down
payment and
signed a note payable for the balance.
k. Received the April telephone bill for $1,950 to be paid next month.

Required:
For each of the transactions, prepare journal entries. Be sure to categorize each
account as an asset (A), liability (L), stockholders’ equity (SE), revenue (R), or
expense (E).

a. Accounts receivable (+A) ............................................................... 23,500

Service revenue (+R, +SE) ................................................... 23,500

b. Accounts payable (L) ................................................................... 3,005

Cash (A) ............................................................................. 3,005

c. Supplies (+A) .................................................................................. 2,600

Accounts payable (+L) ......................................................... 2,600

d. Equipment (+A) .............................................................................. 3,800

Cash (A) ............................................................................. 3,800

e. Advertising expense (+E, SE) ...................................................... 1,400

Cash (A) ............................................................................. 1,400

f. Wages expense (+E, SE) .............................................................. 8,100

Wages payable (L) ....................................................................... 3,800
 Cash (A) ............................................................................. 11,900

g. Cash (+A) ....................................................................................... 135,000

Common stock (+SE) ........................................................... 1,500
Additional paid-in capital (+SE) .......................................... 133,500

h. Cash (+A) ....................................................................................... 12,500

Accounts receivable (A) ..................................................... 12,500

i. Accounts receivable (+A) ............................................................... 14,500

Service revenue (+R, +SE) ................................................... 14,500

j. Land (+A) ....................................................................................... 10,000

Cash (A) ............................................................................. 3,000
Note payable (+L) ................................................................. 7,000

k. Utilities expense (+E, SE) ............................................................ 1,950

Accounts payable (+L) ......................................................... 1,950
 2. ABC Corp was organized on January 1, current year. At the end of the current year, the
following financial data are available:
a. Total revenues $ 299,000
b. Total expenses (excluding income taxes) 184,000
c. Income tax expense (all unpaid as of December 31) 34,500
d. Cash 70,150
e. Receivables from customers (all considered collectible) 34,500
f. Merchandise inventory (by inventory count at cost) 96,600
g. Payables to suppliers for merchandise purchased from them (will be paid during the
following year) 26,450
h. Common stock 59,800

No dividends were declared or paid during the first year.

Required:
Preparing an Income Statement and Balance Sheet

ABC Inc
Income Statement
For the Year Ended December 31, Current Year
Total revenues $299,000
Less: Total expenses (excluding income tax) 184,000
Pretax income 115,000
Less: Income tax expense 34,500
Net income $ 80,500

ABC Inc
Balance Sheet
At December 31, Current Year
Assets
Cash $ 70,150
Receivables from customers 34,500
Merchandise inventory 96,600
Total assets $201,250

Liabilities
Payables to suppliers $ 26,450
Income taxes payable 34,500
Total liabilities 60,950

Stockholders' Equity
Common stock 59,800
Retained earnings (from income statement above) 80,500
Total stockholders’ equity 140,300
Total liabilities and stockholders' equity $201,250