C5-1 (continued)
Req. 2
Cash (A)
Supplies (A)
Equipment (A)
Beg.
1/1
1/5
1/7
3,800
2,500
5,000
1,000
4,000
4,000
1,500
1/2
1/6
1/15
Beg.
1/3
500
200
Beg.
30,000
1/31
3,000
End.
5,800
End.
700
End.
30,000
Beg.
Beg.
Beg.
1/7
End.
End.
End.
6,000
End.
700
End.
End.
Beg.
Beg.
Beg.
End.
End.
End.
Beg.
1/5
End.
1/15
End.
C5-1 (continued)
Req. 3
Pulse Recording Studio
Bank Reconciliation
At January 31
Bank Statement
Company’s Books
Ending balance per bank
statement ……………………
$6,300
Ending balance per Cash
account ……………………..
$ 5,800
Additions:
Additions:
1/31 Deposit in transit ……
3,000
Interest Received
5
9,300
5,805
Deductions:
Deductions:
NSF check ……………….
500
1/6 Outstanding check……
4,000
Bank service charges …
5
505
Up–to-date cash balance ..
$5,300
Up–to-date cash balance ..
$5,300
Req. 4
10. Accounts Receivable …………………………………………. 500
Cash ………………………………………………………… 500
11. No journal entry required.
13. Cash ……………………………………………………………….. 5
Interest Revenue ……………………………………….. 5
C5-1 (continued)
C5-1 (continued)
Req. 6
Adj.
Adj.
Beg.
1,500
Adj.
End.
2,000
End.
500
Adj.
1,000
Adj.
1,500
Adj.
Beg.
Beg.
Beg.
(15)
200
(17)
200
Adj.
200
Adj.
Adj.
200
Beg.
Beg.
Beg.
1,000
Adj.
600
Adj.
Adj.
1,000
Prepaid Rent (A)
Beg.
3,000
1,000
(17)
Supplies (A)
Fwd.
700
200
(18)
C5-1 (continued)
Req. 6 (continued)
Pulse Recording Studio
Adjusted Trial Balance
January 31
Account Balance
Debits
Credits
Cash
$ 5,300
Cash Equivalents
500
Accounts Receivable
5,000
Supplies
500
Prepaid Rent
2,000
Equipment
30,000
Accumulated Depreciation-Equipment
$ 6,200
Accounts Payable
1,300
Interest Payable
60
Income Tax Payable
1,000
Salaries and Wages Payable
1,500
Unearned Revenue
3,000
Notes Payable (long-term)
12,000
Common Stock
10,000
Retained Earnings
5,300
Service Revenue
9,000
Interest Revenue
5
Salaries and Wages Expense
3,000
Rent Expense
1,000
Income Tax Expense
1,000
Utilities Expense
600
Depreciation Expense
200
Supplies Expense
200
Interest Expense
60
Office Expense
5
Totals
$ 49,365
$ 49,365
C5-1 (continued)
Req. 7
Pulse Recording Studio
Income Statement
For the Month Ended January 31
Revenue
Service Revenue
$ 9,000
Interest Revenue
5
Total Revenue
9,005
Expenses
Salaries and Wages Expense
3,000
Rent Expense
1,000
Income Tax Expense
1,000
Utilities Expense
600
Depreciation Expense
200
Supplies Expense
200
Interest Expense
60
Office Expense
5
Total Expenses
6,065
Net Income
$ 2,940
C5-1 (continued)
Req. 7 (continued) Pulse Recording Studio
Balance Sheet
At January 31
Assets
Current Assets
Cash and Cash Equivalents
$ 5,800
Accounts Receivable
5,000
Supplies
500
Prepaid Rent
2,000
Total Current Assets
13,300
Equipment
30,000
Accumulated Depreciation-Equipment
(6,200)
Equipment, net
23,800
Total Assets
$ 37,100
Liabilities and Stockholder’s Equity
Current Liabilities
Accounts Payable
$ 1,300
Interest Payable
60
Income Tax Payable
1,000
Salaries and Wages Payable
1,500
Unearned Revenue
3,000
Total Current Liabilities
6,860
Notes Payable (long-term)
12,000
Total Liabilities
18,860
Stockholder’s Equity
Common Stock
10,000
Retained Earnings
8,240
Total Stockholder’s Equity
18,240
Total Liabilities and Stockholder’s Equity
$ 37,100
Note: $8,240 Retained Earnings = $5,300 Beg + $2,940 Net Income – $0 Dividends
Req. 8
Current Ratio = Current Assets
Current Liabilities
= $13,300
$6,860
= 1.94
Yes, Pulse Recording Studios has met its loan covenant since its current ratio is 1.94