Accounting Cycle Exercise

On December 1 of the current year, M.B.Manuel opened the "MBM Men's Wear Shop",
and during the month, the following transactions were completed:

1-Dec M.B.Manuel invested 80,000 cash in the business

1-Dec He bought two sewing machines worth 30,000 each from Rufino Merchandising. Gave
15,000 down and the balance is payable within 60 days.
1-Dec Paid a three month rental of the shop, 30,000. This was charged to Prepaid Rent account.
1-Dec Paid a one year insurance policy, 5,700 (use expense method)
3-Dec Bought sewing tools 5,900 and sewing supplies 2,700 from Virigilio Trading on credit.
5-Dec Received 1,200 from a customer for a terno delivered
7-Dec Billed Flor Valdez, 5,000 for a two pair of pants and polo barong delivered.
10-Dec Purchased clothing materials from Divisoria Market and paid 15,000 cash.
13-Dec Received 12,500 from various customers for pants and barong made and delivered.
14-Dec Gave Rufino Merchandising 15,000 and issued a 60-day, 6% interest note for the balance.
15-Dec Paid the wages of the shop helper, 2,500.
17-Dec M.B. Manuel withdrew 5,000 from the business for personal use.
18-Dec F. Valdez gave 2,000 as partial payment of his account.
20-Dec Received 14,750 from various customers for pants and shirts delivered.
22-Dec Paid the wages of the shop helper, 2,500.
23-Dec Billed Julius Ilagan 4,000 for barong and pants delivered to him.
27-Dec Paid the monthly expenses: utility bills 1,500 and telephone bill, 2,500.

At the end of the month, the following data were gathered:

a. The sewing machines are estimated to have a 5-year useful life.
b. The actual count of sewing supplies revealed a balance of 1,700.
c. The business is conservative to estimate a 5% of the receivables to be uncollectible.
d. Balance of the clothing materials account is 7,000.

Required: I. Journal Entries

1. Journal entries Dec-01 Cash 80,000
2. Posting M.B., Capital
3. Trial Balance Sewing Equipment 60,000
4. Adjusting Journal Entries Cash
5. 10-column worksheet Accounts Payable
6. Income Statement Prepaid Rent 30,000
7. Balance Sheet Cash
8. Closing Entries Insurance Expense 5,700
Cash
Dec-03 Sewing Tools 5,900
Sewing Supplies 2,700
Accounts Payable
Dec-05 Cash 1,200
Service Income
 Dec-07 Accounts Receivable- Flor Valde
Service Income
Dec-10 Clothing Materials 15,000
Cash
Dec-13 Cash 12,500
Service Income
Dec-14 Accounts Payable 45,000
Notes Payable
Cash
Dec-15 Wages Expense 2,500
Cash
Dec-17 M.B., Drawing 5,000
Cash
Dec-18 Cash 2,000
Accounts Receivable- Flor Valde
Dec-20 Cash 14,750
Service Income
Dec-22 Wages Expense 2,500
Cash
Dec-23 Accounts Receivable- Julius Ilagan
Service Income
Dec-27 Utilities Expense
Telephone and Communication Expense
Cash

IV. Adjusting Entries

1. Depreciation Expense- Sewing Equipment
Accumulated Depreciation- Sewing Equipment
2. Sewing Supplies Used 1,000
Sewing Supplies
3. Bad Debt Expense 350
Allowance for Bad Debts
4. Clothing Materials Used 8,000
Clothing Materials

VI. Income Statement

MBM Men's Wear Shop
Income Statement
For the year ended Dec. 31, 2020
Service Income
Less: Operating Expenses
Insurance Expense 5,700
Wages Expense 5,000
Utilities Expense 1,500
Tel. & Comm. Expense 2,500
Depreciation Expense 1,000
Sewing Supplies Used 1,000
Bad Debts Expense 350
Clothing Materials Used 8,000
NET INCOME

VIII. Closing Entries

1. Service Income 37,450
Income and Expense Summary
2. Income and Expense Summary
Insurance Expense
Wages Expense
Utilities Expense
Tel. & Comm. Expense
Depreciation Expense
Sewing Supplies Used
Bad Debts Expense
Clothing Materials Used
3. Income and Expense Summary
M.B. Personal
4. M.B. Capital 7,400
M.B. Personal 7,400
 Chart of Accounts
Assets Owner's Equity
Cash M.B.Manuel, Capital
Accounts Receivable - Flor Valdez M.B.Manuel, Personal
Accounts Receivable - Julius Ilagan Income and Expense Summary
Allowance for Bad Debts
Sewing Supplies Income
Clothing Materials Service Income
Prepaid Rent
Prepaid Insurance Expenses
Sewing Tools Wages
Sewing Equipment Utility Expense
Accumulated Depreciation-Sewing Equipment Insurance Expense
Telephone and Communication Expense
Liabilities Sewing Supplies Used
Accounts Payable - Virgilio Trading Clothing Materials Used
Accounts Payable - Rufino Merchandising Rent Expense
Notes Payable Interest Expense
Accrued Interest Payable Depreciation Expense-Sewing Machine
Bad Debt Expense

III & V.
MBM Men's Wear Shop
80,000 Worksheet
For the period ended December 31, 2020
15,000
45,000 Trial Balance Adjustments
Account Titles Dr Cr Dr Cr
30,000 Cash 15,750
Accounts Receivable-F.Valdez 3,000
5,700 Accounts Receivable- J. Ilagan 4,000
Sewing Supplies 2,700 1,000
Sewing Tools 5,900
8,600 Clothing Materials 15,000 8,000
Sewing Equipment 60,000
1,200 Prepaid Rent 30,000
 5,000 Accounts Payable-Virgilio Tra. 8,600
5,000 Notes Payable 30,000
M.B. Capital 80,000
15,000 M.B. Personal 5,000
Service Income 37,450
12,500 Insurance Expense 5,700
Wages Expense 5,000
30,000 Utilities Expense 1,500
15,000 Tel. & Comm. Expense 2,500
156,050 156,050
2,500 Depreciation Expense 1,000
Accumulated Depreciation 1,000
5,000 Sewing Supplies Used 1,000
Bad Debt Expense 350
Receivable- Flor Valde 2,000 Allowance for Bad Debts 350
Clothing Materials Used 8,000
14,750 10,350 10,350

2,500
- Julius Ilagan 4,000
4,000
1,500
munication Expense 2,500
4,000

g Equipment 1,000
ciation- Sewing Equipment 1,000

1,000

350

8,000

VII. Balance Sheet

MBM Men's Wear Shop
Balance Sheet
ec. 31, 2020 Dec. 31, 2019
37,450 Assets
Cash 15,750
Accounts Receivable-F.Valdez 3,000 Liabilities & Capital
Accounts Receivable- J. Ilagan 4,000 Accounts Payable-Virgilio Tra
Sewing Supplies 1,700 Notes Payable
Sewing Tools 5,900 Total Liabilities
 Clothing Materials 7,000
Sewing Equipment 60,000 M.B. Capital
Less: AccumDepr.-Sewing Eqpt -1,000 Less: M.B. Personal
-25,050 Prepaid Rent 30,000 Net Income
37,450 Allowance for Bad Debt -350 Total Capital

Total Assets 126,000

37,450
25,050
5,700
5,000
1,500
2,500
1,000
1,000
350
8,000
5,000
5,000
Men's Wear Shop
Worksheet
ended December 31, 2020

Adjusted T.B. Income Statement Balance Sheet

Dr Cr Dr Cr Dr Cr
15,750 15,750
3,000 3,000
4,000 4,000
1,700 1,700
5,900 5,900
7,000 7,000
60,000 60,000
30,000 30,000
 8,600 8,600
30,000 30,000
80,000 80,000
5,000 5,000
37,450 37,450
5,700 5,700
5,000 5,000
1,500 1,500
2,500 2,500

1,000 1,000
1,000 1,000
1,000 1,000
350 350
350 350
8,000 8,000
157,400 157,400 25,050 37,450 132,350 119,950
12,400 12,400
37,450 37,450 132,350

Liabilities & Capital

Accounts Payable-Virgilio Tra. 8,600
Notes Payable 30,000
Total Liabilities 38,600
M.B. Capital 80,000
Less: M.B. Personal -5,000
Net Income 12,400
Total Capital 87,400

126,000