Refer to exercise E2-28 of Chapter 2. Start from the trial balance and the posted T-accounts prepared at January 18, 2017. Later in January, the business completed these transactions:
Jan. 21 Received $900 in advance for marketing work to be performed evenly over the next 30 days
21 Hired a secretary to be paid on the 15th day of each month
26 Paid $900 on account
28 Collected $600 on account
31 Declared and paid dividends of $1,000
1. Open these T-accounts: Accumulated Depreciation-Equipment, Accumulated Depreciation-Furniture, Salary Payable, Unearned Service Revenue, Retained Earnings, Depreciation Expense-Equipment, Depreciation Expense-Furniture, and Supplies Expense. Also, use the T-accounts opened for exercise E2-28.
2. Journalize the transactions of January 21 through 31.
3. Post the January 21 to January 31 transactions to the T-accounts, keying all items by date. Denote account balances as Bal.
4. Prepare a trial balance at January 31. Also, set up columns for the adjustments and for the adjusted trial balance, as illustrated in Exhibit 3-4, on page 126.
5. At January 31, the following information is gathered for the adjusting entries:
a. Accrued service revenue, $1,000
b. Earned $300 of the service revenue collected in advance on January 21
c. Supplies on hand, $300
d. Depreciation expense-equipment, $100; furniture, $200
e. Accrued expense for secretary's salary, $1,000
Make these adjustments directly in the adjustments columns and complete the adjusted trial balance at January 31, 2017.
6. Journalize and post the adjusting entries. Denote each adjusting amount as Adj. and an account balance as Bal.
7. Prepare the income statement and statement of retained earnings of Web Marketing Services Inc. for the month ended January 31, 2017, and the classified balance sheet at that date. Draw arrows to link the financial statements.
8. Journalize and post the closing entries at January 31, 2017. Denote each closing amount as Clo. and an account balance as Bal.
9. Using the information you have prepared, compute the current ratio and the debt ratio of Web Marketing Services Inc. (to two decimals) and evaluate these ratio values as indicative of a strong or weak financial position?