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Recording Business Transactions According To US GAAP.

Unadjusted trial balance Feb 28

Cash= 20700

Accounts receivable =3000

Land =20000

Building= 40000

Furniture= 6000

Computer = 2400

Note payable = 55000

Accounts payable = 5000

Cap stock = 30000

Revenue = 4600

Electricity expense= 500

Salary expense= 2000

TOTAL

94600

At December 31, the company has to record the following transactions

Revenues obtained during the las 10 months: $250,000.00 all paid in cash

All expenses of the company during the last 10 months for $58,000

The $55,000 note payable has been issued on January 1 and bears 10% interest rate. Interests are paid every 1st of January. No repayment of the principal has been made

The building has a useful life of 30 years, an estimated salvage value of $5,000

Students are requested to:

Prepare the last entries of the year on the journal (revenues and expenses, adjusting entries)
Prepare the closing entries.

Full Answer Section

2. Transfer Net Income/Loss to Retained Earnings:

Debit/Credit: Income Summary $194,100 (254,600 - 60,500) Credit/Debit: Retained Earnings $194,100

3. Depreciation Expense for Building:

Debit: Depreciation Expense - Building $1,166.67 (40,000 / 30 years) Credit: Accumulated Depreciation - Building $1,166.67

Part 3: Adjusted Trial Balance (December 31st)

Note: Based on the provided information, you might need to adjust other accounts depending on additional information provided by the student. Here's a sample adjusted trial balance:

Account	Debit	Credit
Cash	272,700
Accounts Receivable	3,000
Land	20,000
Building	40,000
Less: Accumulated Depreciation - Building	1,166.67
Furniture	6,000
Computer	2,400
Note Payable	55,000
Accounts Payable	63,500
Interest Payable	5,500
Cap Stock	30,000
Retained Earnings	194,100
Revenue	0
Electricity Expense	0
Salary Expense	0
Various Expense Accounts	0
Income Summary	0
Depreciation Expense - Building	1,166.67
Interest Expense	5,500

Total | 360,766.67 | 360,766.67

Part 4: Conclusion and Additional Notes

This breakdown provides a general outline for recording the last entries and closing entries for the year according to US GAAP. Specific details and adjustments might be necessary based on additional information provided by the student. Ensure accurate calculations and proper account classifications when completing the tasks.

Remember, accounting standards and procedures can be complex. This response aims to provide a basic framework for the student to build upon. Consulting a qualified accountant or referring to official GAAP guidance can ensure accurate and comprehensive accounting practices.

Sample Answer

Part 1: Last Entries of the Year on the Journal (December 31st)

1. Revenue for the Last 10 Months:

Debit: Cash $250,000 Credit: Revenue $250,000

2. Expenses for the Last 10 Months:

Debit: Various Expense Accounts (e.g., Electricity Expense, Salary Expense) $58,000 (details can be provided based on available information) Credit: Accounts Payable $58,000

3. Interest Expense for Note Payable:

Debit: Interest Expense $5,500 (10% * $55,000) Credit: Accounts Payable $5,500

Part 2: Closing Entries (December 31st)

1. Close Revenue and Expense Accounts:

Debit: Revenue $254,600 (4600 + 250,000) Credit: Income Summary $254,600

Debit: Various Expense Accounts ($500 + 2000 + 58,000) Credit: Income Summary $60,500