Which of the following events listed below results in an accounting transaction for Clothing Ltd? State a reason if it is not an accounting transaction.
- Clothing Ltd signed a contract to hire a new store manager for a salary of $150,000 per annum. The manager will start work next month.
- The founder of Clothing Ltd., who is also a major shareholder, purchased additional stock in another company.
- Clothing Ltd borrowed $230,000 from a local bank.
- Clothing Ltd purchased a sewing machine, which it paid for by signing a note payable.
- Clothing Ltd issued 10,000 shares to a private investor, who is also a car business owner, in return for a new delivery truck.
- Two investors in Clothing Ltd sold their stock to another investor.
- Clothing Ltd ordered some fabric to be delivered next week.
- Clothing Ltd lent $250,000 to a member of the board of directors.
The financial year end for Riverwood Ltd is 30 June.
- Prepaid insurance as at 1 July 2015 was $4,000. This represents the cost of one year’s insurance policy that expires on 30 June 2016.
- Commissions to sales personnel for the five day working week ending 2 July 2016, totaling $9,600, will be paid on 2 July.
- Sales revenue for the year included $570 of customer deposits for products that have not yet been shipped to them.
- A total of $900 worth of stationery was charged to the office supplies expense during the year. On 30 June about $490 worth of stationery is still considered useful for next year.
- The company has a bank loan and pays interest annually (in arrears) on 31 December. The estimated total interest cost for the calendar year ended 31 December 2016 is $500.
- Show the effect of each of the situations above (a. – e.) on the accounting equation on 30 June 2016.
- Provide the adjusting journal entry for each of the situations above (a. – e.) on 30 June 2016.
SRP Ltd has the following unadjusted trial balance as at 31 Dec 2015.
|Account Titles||Debit ($)||Credit ($)|
|Share Capital (3000 shares outstanding all year)||16,000|
Note: Data not yet recorded as at 31 Dec 2015 includes the following five (5) transactions:
- Depreciation expense for 2015 was $3,000.
- Insurance expired during 2015 was $450.
- Wages earned by employees but not yet paid on 31 December 2015 was $2,100.
- The supplies count on 31 December 2015 reflected $800 remaining supplies on hand to be used in 2016.
- Income tax expense was $3,150.
- Record the 2015 adjusting entries.
- Prepare an income statement and a classified balance sheet for 2015 to include the effect of the five (5) transactions listed above.
- Prepare closing entries.
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