Tom and Jerry do not have an accountant and have approached you to help them prepare their annual...

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Tom and Jerry do not have an accountant and have approached you to help them prepare their annual financial statements for the year ended December 31, 2012. The financial statements should include a trial balance, balance sheet and income statement.  You are required to review the below series of transactions which occurred during the year from January 1, 2012 to December 31, 2012 and write the accounting journal entries for the each transaction.  Compile all the transactions in the year and prepare “T” accounts, a trial balance for the year then ended, Balance Sheet as at December 31, and a statement of income for the year then ended.  Transactions  1. Tom and Jerry equally contributed US$ 1,000,000 as their share of capital in the business on 1/1/2012. They decided to keep the capital in the Company’s bank account XXXXXXXXXXOn the same day, their friend Mario offered them some space to use as office and a store on rental basis. Mario, in exchange of the space, demanded an advance rent for QR. 200,000 for two years. The cash was paid by Tom and Jerry on the same day XXXXXXXXXXOn the evening of 1/1/2012, Tom and Jerry went to the furniture store to buy furniture for their store. They bought furniture worth QR. 100,000. They intended to scrap this furniture in 5 years before they will buy the new furniture XXXXXXXXXXA month later, when the office was set up, they decided to buy the tools which they can further sell in the market. They placed an order and they were able to buy 1000 hammers for US$ 10 each, Cement 1000 Kgs for US$ 50 per kg and 500 drill machines for US$ 100 per machine. Since they just started the business with little money they had, they negotiated with the supplier to supply them the desired goods on credit terms to be paid back within 60 days. They intended not to buy further stock till it is completely sold XXXXXXXXXXThey noticed that they will become famous if they spent some money on advertisement. Therefore they decided to pay the local newspaper an amount of US$ 1,000 cash in total for advertising about their new company for 3 months. They advertisement was made attractive by saying “cheap tools for sale” and the prices were marketed as follows    a. Hammer US$ 20 per hammer  b. Cement US$ 100 per Kg

David · Accepted Answer

GENERAL 
JOURNAL
                    
      
Date        Account Titles and Explanation 
P. 
R. Debit Credit
Jan 1 Cash A/c         
2,000,000.0
0   
        Tom's Capital A/c         
1,000,000.0
0 
    
     Jerry's Capital 
A/c         
1,000,000.0
0 
    ( Capital contributed by Tom and        
     Jerry, $ 1,000,000.00 each)
Jan 1 
Advance 
Rent         200,000.00   
          Cash A/c           200,000.00 
    (Advance given for two years to        
    landlord for 2 years)
Jan 1 Furniture         100,000.00   
          Cash A/c           100,000.00 
    (Furniture purchased with life of       
    five years)
Feb 1 Inventory Purchases       110,000.00   
         Supplier           110,000.00 
    (purchases made of 1000 hammer @       
    $10 each, 1000 kgs cement @ $50 per       
    kg, 500 drill machines @ $ 100 per       
    machine, payment to be made in 60       
    days)
Feb 1 Advertisement Expenses     1,000.00   
          Cash A/c           1,000.00 
    (Advertisement expenses paid for       
    3 months)
Dec 31 Salary Expenses       17,500.00   
          Cash A/c           17,500.00 
    (Salary paid for the period 1/6/2012 to       
    
31/12/2012 only 
50%)
Dec 31 
Office 
Supplies         2,000.00   
          Cash A/c           2,000.00 
    (Office supplies purchased for $2000)
    
Accounts 
Receivable       162,500.00   
         Sales            162,500.00 
    ( Sales made 750hammers @$ 20 each       
    800 kgs cement @ $ 100 per kg, 450       
    drill machine @ $ 150 per machine,        
    receipt to be received in 30 days)
Dec 31 Cash A/c         81,250.00   
    
    Mr. 
X             81,250.00 
    ( Mr. X paid only 50 % of the amount       
    due)
    Suppliers         55,000.00   
        Cash A/c           55,000.00 
    (50 % of the amount due to suppliers       
    made)
Dec 31 Cash A/c         10,000.00   
        Bank Interest         10,000.00 
    (Interest earned on bank balance)
Dec 31 
Bank 
Charges         5,000.00   
            Cash A/c           5,000.00 
    (Bank charges leveid by bank)
 
 
 
 
 
 

                  ADJUSTING ENTRIES
Dec 31 Rental Expense       100,000.00   
    Prepaid Rent         100,000.

Tom and Jerry do not have an accountant and have approached you to help them prepare their annual financial statements for the year ended December 31, 2012. The financial statements should include a...

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