| In addition to the above accounts, VGCâs chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense. | 1. | Analyze the effect of the January transactions (shown below) on the accounting equation, and indicate the account, amount, and direction of the effect (+ for increase and â for decrease) of each transaction. (Enter any decreases to account balances with a minus sign.) |
| a. | Received $52,250 cash from customers for subscriptions that had already been earned in 2014. | | b. | Received $235,000 cash from Electronic Arts, Inc. for service revenue earned in January. | | c. | Purchased 10 new computer servers for $41,900; paid $12,000 cash and signed a three-year note for the remainder owed. | | d. | Paid $15,600 for an Internet advertisement run on Yahoo! in January. | | e. | Sold 10,100 monthly subscriptions at $10 each for services provided during January. Half was collected in cash and half was sold on account. | | f. | Received an electric and gas utility bill for $5,900 for January utility services. The bill will be paid in February. | | g. | Paid $310,000 in wages to employees for work done in January. | | h. | Purchased $5,100 of supplies on account. | | i. | Paid $5,100 cash to the supplier in (h). | | | | | Assets | = | Liabilities | + | Stockholdersâ Equity | | a. | Cash | 52,250 | | | | | | | | Accounts Receivable | (52,250) | | | | | | | | b. | Cash | 235,000 | | | | | Service Revenue | 235,000 | | c. | Equipment | 41,900 | | | | | | | | Cash | (12,000) | | Notes Payable (long-term) | 29,900 | | | | | d. | Cash | (15,600) | | | | | Advertising Expense | (15,600) | | e. | Cash | 50,500 | | | | | Service Revenue | 101,000 | | Accounts Receivable | 50,500 | | | | | | | | f. | | | | Accounts Payable | 5,900 | | Utilities Expense | (5,900) | | g. | Cash | (310,000) | | | | | Salaries and Wages Expense | (310,000) | | h. | Supplies | 5,100 | | Accounts Payable | 5,100 | | | | | i. | Cash | (5,100) | | Accounts Payable | (5,100) | | | | | | 2. | Prepare journal entries for the January transactions listed in part 1, using the letter of each transaction as a reference. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) |
| No | Transaction | General Journal | Debit | Credit | | 1 | a | Cash | 52,250 | | | 1 | | Accounts Receivable | | 52,250 | | | | | | | 2 | b | Cash | 235,000 | | | 2 | | Service Revenue | | 235,000 | | | | | | | 3 | c | Equipment | 41,900 | | | 3 | | Cash | | 12,000 | | 3 | | Notes Payable (long-term) | | 29,900 | | | | | | | 4 | d | Advertising Expense | 15,600 | | | 4 | | Cash | | 15,600 | | | | | | | 5 | e | Cash | 50,500 | | | 5 | | Accounts Receivable | 50,500 | | | 5 | | Service Revenue | | 101,000 | | | | | | | 6 | f | Utilities Expense | 5,900 | | | 6 | | Accounts Payable | | 5,900 | | | | | | | 7 | g | Salaries and Wages Expense | 310,000 | | | 7 | | Cash | | 310,000 | | | | | | | 8 | h | Supplies | 5,100 | | | 8 | | Accounts Payable | | 5,100 | | | | | | | 9 | i | Accounts Payable | 5,100 | | | 9 | | Cash | | 5,100
| | 3. | Create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts. | | 4. | Prepare an unadjusted trial balance as of January 31, 2015. | | | | | VANISHING GAMES CORPORATION | | Unadjusted Trial Balance | | At January 31, 2015 | | Account Name | Debit | Credit | | Cash | | | | Accounts Receivable | | | | Supplies | | | | Equipment | | | | Buildings | | | | Land | | | | Accounts Payable | | | | Unearned Revenue | | | | Notes Payable (long-term) | | | | Common Stock | | | | Retained Earnings | | | | Service Revenue | | | | Salaries and Wages Expense | | | | Advertising Expense | | | | Utilities Expense | | | | Total | $0 | $0 | | | 5. | Prepare an Income Statement for the month ended January 31, 2015, using unadjusted balances from part 4. | | | | VANISHING GAMES CORPORATION | | Income Statement | | For the Month Ended January 31, 2015 | | Revenues | | | | | | | | Service Revenue | | | | Total Revenues | | | | Expenses | | | | Salaries and Wages Expense | | | | Utilities Expense | | | | Advertising Expense | | | | | | | Total Expenses | | | | Net Income | | | | 6. Prepare a Statement of Retained Earnings for the month ended January 31, 2015, using the beginning balance given above and the net income from part 5. Assume VGC has no dividends. | | | | VANISHING GAMES CORPORATION | | Statement of Retained Earnings | | For the Month Ended January 31, 2015 | | Retained Earnings, January 1, 2015 | | | Add: Net Income | | | Less: Dividends | | | Retained Earnings, January 31, 2015 | $0 | | | |
