Accounting question

Paper , Order, or Assignment Requirements

A few years ago, Sam Gig founded Gig n Spin Consultancy Services. Sam is aware that you and your group members are pursuing an accounting course while in college and therefore has approached the team for advice. He wishes to know how much net income his business earned during the past year in order to decide whether to keep the company going. His accounting records consist a trial balance and some additional notes required to make adjustments to the financial statements. The company unadjusted trial balance for the year ended December 31st, 2015 was shown as follows:
Gig n Spin Consultancy Services
Trial Balance
December 31st 2015
DR CR
Cash 120,000
Accounts receivable 65,000
Supplies 25,000
Lease Hold Improvement 100,000
Accumulated depreciation – Leasehold Improvement 40,000
Furniture and Fixtures 500,000
Accumulated depreciation – Furniture and Fittings 300,000
Accounts payable 25,000
Salary Payable
Unearned service revenue 18,500
Sam Gig, Capital 223,200
Sam Gig, Withdrawal 148,000
Service revenue 398,800
Salary expense 39,000
Supplies Expense
Rent Expense
Depreciation expense -Leasehold Improvement
Depreciation expense – Furniture and Fixtures
Advertising expense 8,500
1,005,500 1,005,500
Data presented for the adjusting entries include the following:
1. Rent expense of $100,000 paid for the year was debited to Sam Gig’s withdrawal account as a result of an oversight on the part of the Data Entry Clerk and this remained unadjusted as at year end.
2. The company paid $13,000 on account for a credit purchase made earlier in the year but this entry was not recorded at year end.
3. Supplies on hand at year end, $15,000.
4. Depreciation on Leasehold improvement, $20,000.
5. Depreciation on Furniture and Fixtures, $100,000.
6. Salaries owed but not yet paid, $12,000.
7. Accrued service revenue, $18,000.
8. $14,000 of the unearned service revenue has been earned.
Requirements:
1. Explain why adjusting entries are required.
2. Prepare the adjusting journal entries at December 3st, 2015 in the general journal.
3. Open the ledger accounts in T-account form with their unadjusted balances then post the adjusting entries to the affected accounts, then balance off each account.
4. Prepare the income statement, the statement of owner’s equity and balance sheet as at December 31st, 2015.
5. Advice Sam Gig if he should continue the business given the company’s financial performance.

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