Comprehensive Problem

Hamilton Company, which began operations on May 1, had the following transactions:

May 1Marc 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.

1Paid $240 for a four-month insurance policy

4Received $660 from a client to render services over the next four weeks.

6Purchased $350 of office supplies for cash

11Paid $400 for various computer runs.

15 Billed clients for services rendered, $6,800.

21 Received $5,200 from clients on account.

24 Borrowed $7,000 from the bank.

25Received the May electric bill of $100 to be paid on June 4.

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.

29 Paid wages of the office staff, $4,700.

30 Processed a $2,500 cash withdrawal for the owner.

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 Â	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 Â	Service revenue	410
Building	150	Computer service expense Â	510
Accumulated depreciation: Building Â	151	Wage expense 520	Â
Accounts payable	210	Insurance expense Â	530
Wages payable	220	Office supplies expense	540
Interest payable	230	Depreciation expense Â	550
Utilities payable	240	Utilities expense Â	560
Â	Â	Interest expense Â	570
Â	Â	Miscellaneous expense Â	580

 

 

 

 

 

 

Additional information:

1. As of May 31, accrued interest on the loan amounted to $40, while accrued wages totaled

$300.

2. Since the last billing to clients on May 15, the firm had rendered $2,480 of services.

3. Hamilton has earned three weeks of revenue from the prepayment on May 4.

4. Office supplies on hand at month-end amounted to $200.

5. Hamilton must pay $1,000 of the bank loan within the next year.

Instructions

a. Record the transactions of May in the general journal.

b. Post the journal entries to the proper ledger accounts.

c. Complete a work sheet for the month ended May 31. Be certain to analyze all data

presented to correctly determine Hamilton’s adjustments.

d. Prepare an income statement, a statement of owner’s equity, and a classified balance

sheet in good form.

e. Record Hamilton’s adjusting entries in the journal and post to the proper ledger accounts.

f. Record Hamilton’s closing in the journal and post to the proper ledger accounts.

g. Prepare a port-closing trial balance.