a)Journal Entries
Sr.No. Description Debit Credit
1 Insurance expenses A/c…………Dr $52,500
To Prepaid Insurance $52,500
(Being insurance expenses for half of the year from 1 July to 31 Dec recorded)
2 Salary A/c……………Dr $3,000
To Salary Payable $3,000
(Being outstanding salary paid as on 31 December 2019)
3 Advertisement A/c………Dr $50,000
To Advertisement Exp Payable A/c………Dr $50,000
(being placing advertisement through web platform)
4 Supplies A/c…………Dr $1,000
To Supplier A/c $1,000
(being supplies purchased)
5 No Entry Required
If the contingent loss is remote, meaning it has a less than 50 percent chance of occurring, the liability should not be reflected on the balance sheet.
6 Unearned Revenue A/c……………..Dr $5,000
To Sales $5,000
Being t-shirt delivered to customer of which advance has received earlier)
6 Cash/Bank A/c……………….Dr $2,000
To Unearned revenue A/c $2,000
(Being advance received for t-shirt to be delivered in next month)
7 Interest A/c………..Dr $1,125
To Cash/Bank $1,125
(Being interest paid on 31 Dec for the first quarter End on$75000@1.5%P.Q.)
8 Income Tax expenses A/c…………Dr $100,800
To Income tax payable A/c $100,800
(being income tax liability payable on 31 March 2020)
9 Depreciation A/c…………..Dr $8,750
To Accumulated Depreciation $8,750
(Being depreciation provided from June to Dec 2019)$120000/8 years/12 Month*7 month)
b)Income Statement Amount
Sales Revenue $2,525,000.00
Less:Sales return and allowances $156,000.00
Net Sales $2,369,000.00
Less
urchases $821,250.00
Less:Supplies(6250+1000) $7,250.00
Gross Profit $1,540,500.00
Less:Expenses
Insurance Expenses(52500+75000) $127,500.00
Office supplies $1,800.00
Depreciation($130000-$10000)/8 Years $15,000.00
Interest On 6% notes($75000*1.5%per quarter) $1,125.00
Salary Expenses $660,750.00
Rent Expenses $242,000.00
Advertisement Expenses($188000+$50000) $238,000.00
interest expenses($750+1125) $1,875
Income Before tax $252,450.00
Less:Tax Expenses $103,600.00
Income after tax $148,850.00