Question & Answer: elp with those. I posted those for the information in case you need it for the other questions…..

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Question & Answer: elp with those. I posted those for the information in case you need it for the other questions…..
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Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $10. At the start of January 2015, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows:
Cash $ 2,360,000
  Accounts Receivable 152,000
  Supplies 19,100
  Equipment 948,000
  Land 1,920,000
  Building 506,000
  Accounts Payable 109,000
  Unearned Revenue 152,000
  Notes Payable (due 2018) 80,000
  Common Stock 2,200,000
  Retained Earnings 3,364,100
In addition to the above accounts, VGC’s 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 − 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 + Stockholders’ 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.
Unadjusted Trial Balance
At January 31, 2015
Account Name Debit Credit
Accounts Receivable
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.
Income Statement
For the Month Ended January 31, 2015
Service Revenue
Total Revenues
Salaries and Wages Expense
Utilities Expense
Advertising Expense
Total Expenses
Net Income



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.

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

Expert Answer


Cash Accounts receivable
opening 2,360,000 12,000 c. opening 152,000 52,250 a.
a. 52,250 15,600 d. e. 50,500
b. 235,000 310,000 g.
e. 50,500 5,100 i end bal 150,250
end bal 2,355,050
supplies Equipment
opening 19,100 opening 948,000
h. 5,100 c. 41,900
end bal 24,200 end bal 989,900
land Building
opening 1,920,000 opening 506,000
Accounts payable unearned revenue
i. 5,100 109,000 opening 152,000 opening
5,900 f.
5,100 h.
114,900 end bal Common stock
2,200,000 opening
notes payable
80,000 opening retained earnings
29,900 c. 3,364,100 opening
109,900 balance
Service revenue Advertising expense
235,000 b. d. 15,600
101,000 e.
336,000 end bal
Utilities expense
Salaries & wages expense f. 5,900
g. 310,000
Unadjusted trial balance income statement
Debit Credit revenues
Cash 2,355,050
Accounts receivable 150,250 service revenue 336,000
supplies 24,200 total revenues
Equipment 989,900 expenses
Buildings 506,000 salaries & wages expense 310,000
land 1,920,000 utilities expense 5,900
Accounts payable 114,900 advertising expense 15,600
unearned revenue 152,000
notes payable (long term) 109,900 total expense 331,500
common stock 2,200,000 net income 4,500
retained earnings 3,364,100
service revenue 336,000
salaries and wage expense 310,000 Retained earnings 3,364,100
advertising expense 15,600 add :net income 4,500
utilties expense 5,900 less:divdiends 0
total 6,276,900 6276900 retained earnings, jan 31 3,368,600

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