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

I have already answered questions 1 and 2, I don’t need help 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.

Required:

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.

VANISHING GAMES CORPORATION
Unadjusted Trial Balance
At January 31, 2015
Account Name	Debit	Credit
Cash
Accounts Receivable
Supplies
Equipment
Buildings
Land
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.

VANISHING GAMES CORPORATION
Income Statement
For the Month Ended January 31, 2015
Revenues

Service Revenue
Total Revenues
Expenses
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.

VANISHING GAMES CORPORATION
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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