Hamilton Company, which began operations on May 1, had the following transactions:
May 1 – Marc Nichols, the owner, invested $9,000 cash, $12,000 of office equipment, and a building valued at $75,000 in the business. The office equipment has a service life of 5 years and the building has a service life of 25 years.
May 1 – Paid $240 for a four-month insurance policy
May 4 –Received $660 from a client to render services over the next four weeks.
May 11 –Paid $400 for various computer runs.
May 15 – Billed clients for services rendered, $6,800.
May 21 – Received $5,200 from clients on account.
May 24 – Borrowed $7,000 from the bank.
May 25 – Received the May electric bill of $100 to be paid on June 4.
May 26 – Purchased $12,000 of new office equipment; paid $7,000 down and agreed to pay the balance in June. This office equipment will not be depreciated until June.
May 29 – Paid wages of the office staff, $4,700.
May 30 – Processed a $2,500 cash withdrawal for the owner.
May 31 – Recorded $1,000 of miscellaneous expenses that were incurred in May but will be paid during June.
Hamilton’s chart of accounts follows.
|Cash||110||Unearned service revenue||250|
|Accounts receivable||120||Loan payable||260|
|Prepaid insurance||130||Marc Nichols, capital||310|
|Office supplies||135||Marc Nichols, drawing||320|
|Office equipment||140||Income summary||330|
|Accumulated depreciation: Office equipment||141||Service revenue||410|
|Building||150||Computer service expense||510|
|Accumulated depreciation: Building||151||Wage expense||520|
|Accounts payable||210||Insurance expense||530|
|Wages payable||220||Office supplies expense||540|
|Interest payable||230||Depreciation expense||550|
|Utilities payable||240||Utilities expense||560|
- As of May 31, accrued interest on the loan amounted to $40, while accrued wages totaled $300.
- Since the last billing to clients on May 15, the firm had rendered $2,480 of services.
- Hamilton has earned three weeks of revenue from the prepayment on May 4.
- Office supplies on hand at month-end amounted to $200.
- Hamilton must pay $1,000 of the bank loan within the next year.
- Record the transactions of May in the general journal.
- Post the journal entries to the proper ledger accounts.
- Complete a work sheet for the month ended May 31. Be certain to analyze all data presented to correctly determine Hamilton’s adjustments.
- Prepare an income statement, a statement of owner’s equity, and a classified balance sheet in good form.
- Record Hamilton’s adjusting entries in the journal and post to the proper ledger accounts.
- Record Hamilton’s closing in the journal and post to the proper ledger accounts.
- Prepare a port-closing trial balance.
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