Question

On January 1, 2021, the general ledger of Dynamite Fireworks includes the following account balances:

Accounts Debit Credit
Cash $23,900
Accounts Receivable 5,300
Supplies 3,200
Land 51,000
Accounts Payable $3,300
Common Stock 66,000
Retained Earnings 14,100
Totals $83,400 $83,400

During January 2021, the following transactions occur:

January 2 Purchase rental space for one year in advance, $6,300 ($525/month).
January 9 Purchase additional supplies on account, $3,600.
January 13 Provide services to customers on account, $25,600.
January 17 Receive cash in advance from customers for services to be provided in the future, $3,800.
January 20 Pay cash for salaries, $11,600.
January 22 Receive cash on accounts receivable, $24,200.
January 29 Pay cash on accounts payable, $4,100.

Required:
a. Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 - 7). Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances.
b. Record the adjusting entries.
c. Rent for the month of January has expired.
d. Supplies remaining at the end of January total $3,500.

Answer 1

a. Transaction recordings have been completed in the 'General Journal' tab for items 1 to 7, impacting various accounts based on the nature of each transaction. Adjustments have been made to accounts like Rent Expense, Supplies Expense, Accounts Receivable, Cash, Accounts Payable, and Service Revenue, among others.

b. Adjusting entries have been made to reflect the expired rent for January and the supplies remaining at the end of January, updating Rent Expense and Supplies Expense accordingly.

Step-by-step explanation:

In the 'General Journal' tab, each transaction has been accurately recorded to reflect their impact on Dynamite Fireworks' accounts. For instance, the purchase of rental space for one year in advance on January 2 is recorded as a debit to Prepaid Rent and a credit to Cash, as it involves a prepayment for future rent expenses. Similarly, the purchase of additional supplies on account on January 9 is recorded as a debit to Supplies and a credit to Accounts Payable.

Adjusting entries have been incorporated to ensure that the financial statements reflect accurate figures. For example, recognizing the expired portion of the rent for January involves a debit to Rent Expense and a credit to Prepaid Rent. Additionally, calculating the supplies remaining at the end of January results in an adjustment by debiting Supplies Expense and crediting Supplies to reflect the remaining amount of $3,500.

These transactions and adjusting entries ensure that the financial records accurately represent the impact of the January activities on Dynamite Fireworks' accounts, preparing the company for an accurate depiction of its financial position and performance at the end of the period.

Answer 2

January 2 Purchase rental space for one year in advance, $6,300 ($525/month).

Dr Prepaid expense 6,300

Cr Cash 6,300

January 9 Purchase additional supplies on account, $3,600.

Dr Supplies 3,600

Cr Accounts payable 3,600

January 13 Provide services to customers on account, $25,600.

Dr Accounts receivable 25,600

Cr Service revenue 25,600

January 17 Receive cash in advance from customers for services to be provided in the future, $3,800.

Dr Cash 3,800

Cr Unearned revenue 3,800

January 20 Pay cash for salaries, $11,600.

Dr Wages expense 11,600

Cr Cash 11,600

January 22 Receive cash on accounts receivable, $24,200.

Dr Cash 24,200

Cr Accounts receivable 24,200

January 29 Pay cash on accounts payable, $4,100.

Dr Accounts payable 4,100

Cr Cash 4,100

adjusting entries:

Rent for the month of January has expired.

Dr Rent expense 525

Cr Prepaid rent 525

Supplies remaining at the end of January total $3,500.

Dr Supplies expense 3,300

Cr Supplies 3,300