You are an accountant of GREENPLACE, a small business offering gardening and landscaping services. Before closing accounts for April 2018, you find three transactions that have not been recorded in the accounts as below:
- April 28, purchased supplies on credit $1200
- April 29, paid monthly office rent $3500
- April 30, received payment from a customer $5600
After recording the above transactions, below are the company’s account balances at 30 April 2017:
| Rent expense | $5,200 | Accounts receivable | $35,500 |
| Supplies expense | 1,200 | Cash | 20,000 |
| Long term Loan payable | 45,000 | Accumulated depreciation | 25,200 |
| Bartlett, Drawings | 5,000 | Accounts payable | 25,800 |
| Salary expense | 18,600 | Equipment | 120,000 |
| Salary payable | 18,400 | Advertising expense | 7,500 |
| Service revenue | 65,000 | Insurance expense | 3,600 |
| Supplies | 4,500 | Interest expense | 3,880 |
| Capital | 29,780 | Prepaid insurance | 8,600 |
| Depreciation expense | 9,800 | Unearned revenue | 34,200 |
Requirements:
- What is PALER? Based on PALER, identify the type of account for each account listed above. (4 marks)
- Provide journal entries for transactions that have not been recorded. (6 marks)
- From the account listed above, prepare the trial balance. (5 marks)
- What are temporary and permanent accounts? From the account listed above, choose four permanent and four temporary accounts. (4 marks)
- From the account listed above, choose two accounts with normal debit balances and two accounts with normal credit balances. (2 marks)
- What are adjusting entries? Why do we have to do adjusting entries? Give five examples with journal entries. (10 marks)
- Open T-accounts for all accounts listed above and post your examples of adjusting entries to the T-accounts. Provide your handwritten solution – scan or use your phone to copy and paste its image in your assignment. You can use a free scanning app such as Camscanner, OfficeLens, or Google Drive. (10 marks)
- Using your T-accounts in the preceding question and Excel spreadsheet, prepare the ten column worksheet for the month ended 30 April. In the spreadsheet, you are required to have a data section separated from a report section. Use an IF function for Profit or Loss. Present your answers in both normal and formula views, showing columns and rows. (15 marks)
- Using the spreadsheet, prepare three financial reports. Present your answers in both normal and formula views. (9 marks)
- Describe the current ratio. Calculate the firm’s current ratio, what does it tell you? (3 marks)
- Evaluate the firm’s debt ratio. (2 marks)
