Professional Documents
Culture Documents
Chapter 9
Accounting Cycle of a Service Business
Solutions:
ASSETS
Cash Accounts receivable
(1) 200,000 (6) 420,000
(2) 300,000 360,000 (3) 370,000 (7)
(5) 180,000 80,000 (4)
(7) 370,000 16,000 (8)
140,000 (9)
100,000 (10)
Bal. 354,000 Bal. 50,000
LIABILITIES
Notes payable
300,000 (2)
300,000 Bal.
EQUITY
Owner’s equity Owner’s drawings
INCOME EXPENSES
Service fees Utilities expense
180,000 (5)
420,000 (6) (8) 16,000
600,000 Bal. Bal. 16,000
Salaries expense
(9) 140,000
Bal. 140,000
Entity A
Unadjusted Trial Balance
December 31, 20x1
CLE #2
Income summary 345,000
Owner’s equity 345,000
CLE #3
Owner’s equity 100,000
Owner’s drawings 100,000
Page |7
Entity A
Balance Sheet
As of December 31, 20x1
ASSETS
Cash ₱354,000
Accounts receivable 50,000
Allowance for bad debts (3,000)
Office supplies 5,000
Equipment 360,000
Accumulated depreciation (12,000)
TOTAL ASSETS ₱754,000
LIABILITIES
Notes payable ₱300,000
Interest payable 9,000
TOTAL LIABILITIES 309,000
EQUITY
Owner's equity 445,000
TOTAL EQUITY 445,000
Entity A
Income Statement
For the two months ended December 31, 20x1
INCOME
Service Fees ₱600,000
EXPENSES
Utilities expense (16,000)
Salaries expense (140,000)
Interest expense (9,000)
Depreciation expense (12,000)
Bad debt expense (3,000)
Supplies expense (75,000)
TOTAL EXPENSES (255,000)
PROBLEM 2: WORKSHEET
Solutions:
ASSETS
Cash Prepaid rent
(1) 320,000 (4) 108,000
(2) 200,000 240,000 (3)
(5) 260,000 108,000 (4)
15,000 (6)
50,000 (7)
Equipment
(3) 240,000
Bal. 240,000
LIABILITIES
Notes payable
200,000 (2)
200,000 Bal.
EQUITY
Owner’s equity Owner’s drawings
INCOME EXPENSES
Service fees Utilities expense
Entity B
Unadjusted Trial Balance
December 31, 20x1
CLE #2
Income summary 212,000
Owner’s equity 212,000
CLE #3
Owner’s equity 50,000
Owner’s drawings 50,000
Requirement (g): Balance sheet and Income statement
Entity B
Balance Sheet
As of December 31, 20x1
ASSETS
Cash ₱367,000
Prepaid rent 90,000
Equipment 240,000
Accumulated depreciation (5,000)
TOTAL ASSETS ₱692,000
LIABILITIES
Notes payable ₱200,000
Salaries payable 8,000
Interest payable 2,000
TOTAL LIABILITIES 210,000
EQUITY
Owner's equity 482,000
TOTAL EQUITY 482,000
INCOME
Service Fees ₱260,000
EXPENSES
Utilities expense (15,000)
Salaries expense (8,000)
Interest expense (2,000)
Depreciation expense (5,000)
Rent expense (18,000)
TOTAL EXPENSES (48,000)
Solutions:
ASSETS
Cash Accounts receivable
(1) 100,000 (3) 400,000
(4) 270,000 60,000 (2) 270,000 (4)
60,000 (5)
180,000 (6)
Bal. 70,000 Bal. 130,000
EQUITY
Owner’s equity
100,000 (1)
100,000 Bal.
Owner’s drawings
(5) 60,000
Bal. 60,000
INCOME EXPENSES
Service fees Supplies expense
Salaries expense
(6) 180,000
Bal. 180,000
Requirement (c): Unadjusted trial balance
Guitar Doc
Unadjusted Trial Balance
December 31, 20x1
CLE #2
Income summary 140,000
Owner’s capital 140,000
CLE #3
Owner’s capital 60,000
Owner’s drawings 60,000
Guitar Doc
Balance Sheet
As of December 31, 20x1
ASSETS
Cash ₱70,000
Accounts receivable 130,000
Allowance for bad debts (10,000)
Prepaid supplies 20,000
TOTAL ASSETS ₱210,000
LIABILITIES
Salaries payable 30,000
TOTAL LIABILITIES 30,000
EQUITY
Owner's equity 180,000
TOTAL EQUITY 180,000
INCOME
Service Fees ₱400,000
EXPENSES
Supplies expense (40,000)
Salaries expense (210,000)
Bad debts expense (10,000)
TOTAL EXPENSES (260,000)
Solutions:
ASSETS
Cash Accounts receivable
(1) 2,000,000 (4) 2,900,000
(8) 2,700,000 800,000 (2) 2,700,000 (8)
720,000 (3)
190,000 (5)
260,000 (6)
1,900,000 (7)
Bal. 830,000 Bal. 200,000
Prepaid rent Office equipment
(3) 720,000 (2) 800,000
EQUITY
Owner’s equity
2,000,000 (1)
2,000,000 Bal.
INCOME EXPENSES
Service fees Supplies expense
Utilities expense
(6) 260,000
Bal. 260,000
Salaries expense
(7) 1,900,000
Bal. 1,900,000
Requirement (c): Unadjusted trial balance
Entity C
Unadjusted Trial Balance
December 31, 20x1
CLE #2
Income summary 110,000
Owner’s capital 110,000
Entity C
Balance Sheet
As of December 31, 20x1
ASSETS
Cash ₱830,000
Accounts receivable 200,000
Prepaid rent 360,000
Office equipment 800,000
Accumulated depreciation (80,000)
TOTAL ASSETS ₱2,110,000
LIABILITIES -
EQUITY
Owner's equity 2,110,000
TOTAL EQUITY 2,110,000
Entity C
Income Statement
For the year ended December 31, 20x1
INCOME
Service Fees ₱2,900,000
EXPENSES
Supplies expense (190,000)
Utilities expense (260,000)
Salaries expense (1,900,000)
Depreciation expense (80,000)
Rent expense (360,000)
TOTAL EXPENSES (2,790,000)
Solutions:
ASSETS
Cash Accounts receivable
(1) 1,000,000 (5) 3,200,000
(8) 2,900,000 700,000 (2) 2,900,000 (8)
200,000 (3)
42,000 (4)
420,000 (6)
2,400,000 (7)
Bal. 138,000 Bal. 300,000
P a g e | 30
Computer equipment
(2) 700,000
Bal. 700,000
EQUITY
Owner’s equity
1,000,000 (1)
1,000,000 Bal.
INCOME EXPENSES
Service fees Taxes & licenses
Insurance expense
(4) 42,000
Bal. 42,000
Utilities expense
(6) 420,000
Bal. 420,000
Salaries expense
(7) 2,400,000
Bal. 2,400,000
P a g e | 31
Wellness Massage
Unadjusted Trial Balance
December 31, 20x1
CLE #2
Owner’s equity 15,500
Income summary 15,500
P a g e | 35
Wellness Massage
Balance Sheet
As of December 31, 20x1
ASSETS
Cash ₱138,000
Accounts receivable 300,000
Allowance for bad debts (30,000)
Prepaid insurance 31,500
Computer equipment 700,000
Accumulated depreciation (35,000)
TOTAL ASSETS ₱1,104,500
LIABILITIES
Rent payable 120,000
TOTAL LIABILITIES 120,000
EQUITY
Owner's equity 984,500
TOTAL EQUITY 984,500
Wellness Massage
Income Statement
For the three months ended December 31, 20x1
INCOME
Service Fees ₱3,200,000
EXPENSES
Taxes and licenses (200,000)
Insurance expense (10,500)
Utilities expense (420,000)
Salaries expense (2,400,000)
Depreciation expense (35,000)
Bad debt expense (30,000)
Rent expense (120,000)
TOTAL EXPENSES (3,215,500)
GENERAL LEDGER
ASSETS
Cash Accounts receivable
BEG. 396,000 BEG. -
100,000 12/1
12/2 262,000 20,000 12/3
12/12 60,000 45,000 12/15 Bal. -
12/23 37,000 150,000 12/17
12/30 350,000 15,000 12/17
75,000 12/23
5,000 12/28
45,000 12/30
Bal. 650,000
Accum. Depreciation
240,000 BEG.
240,000 Bal.
P a g e | 40
LIABILITIES
Loans payable
1,000,000 BEG.
1,000,000 Bal.
EQUITY
Owner’s equity Owner’s drawings
1,254,000 BEG. 3,300,000
INCOME EXPENSES
Service fees Salaries expense
4,946,000 BEG. BEG. 990,000
262,000 12/2 12/15 45,000
60,000 12/12 12/23 75,000
37,000 12/23 12/30 45,000
350,000 12/30 Bal. 1,155,000
5,655,000 Bal.
Rent expense
BEG. 1,100,000
12/1 100,000
Bal. 1,200,000
P a g e | 41
Utilities expense
BEG. 165,000
12/17 15,000
Bal. 180,000
Insurance expense
BEG. 5,000
Bal. 5,000
P a g e | 42
JOURNAL
Date Account titles Debit Credit
Dec. 31 Accounts receivable 34,000
(i) Service fees 34,000
to accrue service fees rendered for Hedge Fund, Inc.
JOURNAL
Date Account titles Debit Credit
Dec. 31 Service fees 5,689,000
(Cl. E) Salaries expense 1,155,000
Rent expense 1,200,000
Utilities expense 187,500
Office supplies expense 95,000
Insurance expense 5,000
Depreciation expense 126,250
Interest expense 10,000
Income summary 2,910,250
to close the nominal accounts to income summary
ASSETS
Cash ₱650,000
Accounts receivable 34,000
Prepaid insurance 5,000
Office supplies 9,000
Computer equipment 1,550,000
Accumulated depreciation (366,250)
TOTAL ASSETS ₱1,881,750
LIABILITIES
Notes payable ₱1,000,000
Interest payable 10,000
Utilities payable 7,500
TOTAL LIABILITIES 1,017,500
EQUITY
Owner's equity 864,250
TOTAL EQUITY 864,250
INCOME
Service fees ₱5,689,000
EXPENSES
Salaries expense (1,155,000)
Rent expense (1,200,000)
Utilities expense (187,500)
Office supplies expense (95,000)
Insurance expense (5,000)
Depreciation expense (126,250)
Interest expense (10,000)
TOTAL EXPENSES (2,778,750)