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Event 1: Collins Consultants was established on
January 1, 2005, when it acquired $15,000 cash
from Collins.
1. Increase assets
(cash).
2. Increase equity
(common stock).
Assets
Cash
Debit
Credit
+
15,000
=
Liabilities
+
Equity
Common Stock
Debit
Credit
+
15,000
Event 2: On February 1, Collins Consultants
issued a 12%, $10,000 note payable to the
National Bank to borrow cash.
1. Increase assets (cash).
2. Increase liabilities
(notes payable).
Assets
Cash
Debit
Credit
+
10,000
=
Liabilities
+
Notes Payable
Debit
Credit
+
10,000
Equity
Event 3: On February 17, Collins Consultants
purchased $850 of office supplies on account
from Morris Supply Company.
1. Increase assets
(supplies).
2. Increase liabilities
(accounts payable).
Assets
Supplies
Debit
Credit
+
850
=
Liabilities
+
Accounts Payable
Debit
Credit
+
850
Equity
Event 4: On February 28, Collins Consultants
signed a contract to evaluate the internal control
system used by Kendall Food Stores. Kendall paid
Collins $5,000 in advance for these future
services.
1. Increase assets (cash).
2. Increase liabilities
(unearned revenue).
Assets
Cash
Debit
Credit
+
5,000
=
Liabilities
+
Unearned Revenue
Debit
Credit
+
5,000
Equity
Event 5: On March 1, Collins Consultants
received $18,000 from signing a contract to
provide professional advice to Harwood
Corporation over a one-year period.
1. Increase assets (cash).
2. Increase liabilities
(unearned revenue).
Assets
Cash
Debit
Credit
+
18,000
=
Liabilities
+
Unearned Revenue
Debit
Credit
+
18,000
Equity
Event 6: On April 10, Collins Consultants
provided $2,000 of services to Rex Company on
account.
1. Increase assets
(accounts receivable).
2. Increase equity
(consulting revenue).
Assets
Accounts Receivable
Debit
Credit
+
2,000
=
Liabilities
+
Equity
Consulting Revenue
Debit
Credit
+
2,000
Event 7: On April 29, Collins Consultants
performed services and received $8,400 cash.
1. Increase assets (cash).
2. Increase equity
(consulting revenue).
Assets
Cash
Debit
Credit
+
8,400
=
Liabilities
+
Equity
Consulting Revenue
Debit
Credit
+
8,400
Event 8: On May 1, Collins Consultants loaned
Reston Company $6,000. Reston issued a 9%
note to Collins.
1. Increase assets (notes
receivable).
2. Decrease assets (cash).
Assets
Cash
Debit
+
Credit
6,000
=
Notes Receivable
Debit
Credit
+
6,000
Liabilities
+
Equity
Event 9: On June 30, Collins purchased office
equipment for $42,000 cash.
1. Increase assets (office
equipment).
2. Decrease assets (cash).
Assets
Cash
Debit
+
Credit
42,000
=
Office Equipment
Debit
Credit
+
42,000
Liabilities
+
Equity
Event 10: On July 31, Collins paid $3,600 cash in
advance for a one year lease to rent office space
for a one-year period beginning August 1.
1. Increase assets
(prepaid rent).
2. Decrease assets (cash).
Assets
Cash
Debit
+
Credit
3,600
=
Prepaid Rent
Debit
Credit
+
3,600
Liabilities
+
Equity
Event 11: On August 8, Collins Consultants
collected $1,200 from Rex Company as partial
payment of the accounts receivable (see Event 6).
1. Increase assets (cash).
2. Decrease assets
(accounts receivable).
Assets
Cash
Debit
+
1,200
Credit
-
=
Accounts Receivable
Debit
Credit
+
1,200
Liabilities
+
Equity
Event 12: On September 4, Collins Consultants
paid employees who worked for the company
$2,400 in salaries.
1. Decrease assets (cash).
2. Decrease equity (salaries
expense).
Assets
=
Cash
Debit
Credit
+
2,400
Liabilities
+
Equity
Salaries Expense
Debit
Credit
+
2,400
Event 13: On September 20, Collins Consultants
paid a $1,500 cash dividend to its owner.
1. Decrease assets (cash).
2. Decrease equity (dividends).
Assets
=
Cash
Debit
Credit
+
1,500
Liabilities
+
Equity
Dividends
Debit
Credit
+
1,500
Event 14: On October 10, Collins Consultants
paid Morris Supply Company the $850 owed from
purchasing office supplies on account (see Event
3).
1. Decrease assets (cash).
2. Decrease liabilities
(accounts payable).
Assets
=
Cash
Debit
Credit
+
850
Liabilities
Accounts Payable
Debit
Credit
+
850
+
Equity
Event 15: On November 15, Collins completed its
consulting evaluation of the internal control
system used by Kendall Food Stores (see Event
4).
1. Decrease liabilities
(unearned revenue).
2. Increase equity (consulting
revenue).
Assets
=
Liabilities
Unearned Revenue
Debit
Credit
+
5,000
+
Equity
Consulting Revenue
Debit
Credit
+
5,000
Event 16: On December 18, Collins Consultants
received a $900 bill from Creative Ads for
advertisements which had appeared in regional
magazines. Collins plans to pay the bill later.
1. Increase liabilities
(accounts payable).
2. Decrease equity
(advertising expense).
Assets
=
Liabilities
+
Accounts Payable
Debit
Credit
+
900
Equity
Advertising Expense
Debit
Credit
+
900
Adjustment 1: Collins Consultants recognized
accrued interest on the $6,000 note receivable
from Reston (see Event 8).
1. Increase assets (interest
receivable).
2. Increase equity (interest
revenue).
Annual
interest
Principal  
rate
$ 6,000  
Assets
Interest Receivable
Debit
Credit
+
360
=
Time
  outstanding
0.09  
8/12
Liabilities
=
Interest
revenue
=
$
+
360
Equity
Interest Revenue
Debit
Credit
+
360
Adjustment 2: Collins Consultants recognized
accrued interest expense on the $10,000 note
payable it issued to National Bank (see Event 2).
1. Increase liabilities (interest
payable).
2. Decrease equity (interest
expense).
Annual
interest
Principal  
rate
$ 10,000  
Assets
=
Time
  outstanding
0.12  
11/12
Interest
= expense
=
Liabilities
+
Interest Payable
Debit
Credit
+
1,100
$
1,100
Equity
Interest Expense
Debit
Credit
+
1,100
Adjustment 3: Collins Consultants recognized
$800 of accrued but unpaid salaries.
1. Increase liabilities (salaries
payable).
2. Decrease equity (salaries
expense).
Assets
=
Liabilities
+
Salaries Payable
Debit
Credit
+
800
Equity
Salaries Expense
Debit
Credit
+
800
Adjustment 4: Collins Consultants recognized
$4,000 of depreciation on the office equipment it
had purchased on June 30 (see Event 9).
1. Decrease assets (accumulated
depreciation).
2. Decrease equity (depreciation
expense).
Straight-Line Depreciation
(Cost
 Salvage Value)  Useful Life = Depreciation Expense
 5 years = $4,000
$ 42,000 
$2,000)
Assets
=
Accumulated Depr.
Debit
Credit
+
4,000
Liabilities
+
Equity
Salaries Expense
Debit
Credit
+
4,000
Adjustment 5: Collins Consultants recognized rent
expense for the portion of prepaid rent used up since
entering the lease agreement on July 31 (see Event 10).
1. Decrease assets (prepaid
rent).
2. Decrease equity (rent
expense).
$ 3,600  12 months  $300 per month
$
300   5 months  $1,500 rent expense
Assets
=
Prepaid Rent
Debit
Credit
+
1,500
Liabilities
+
Equity
Rent Expense
Debit
Credit
+
1,500
Adjustment 6: A physical count at the end of the year
indicates that $125 worth of the supplies purchased on
February 17 are still on hand (see Event 3).
1. Decrease assets (supplies).
2. Decrease equity (supplies
expense).
Asset
Beginning
Ending
Asset
+ Purchases = Available =
Balance
Balance
Used
for Use
$
+ $
850 = $
850 - $
125 = $
725
Assets
=
Supplies
Debit
Credit
+
725
Liabilities
+
Equity
Supplies Expense
Debit
Credit
+
725
Adjustment 7: Collins Consultants adjusted its accounting
records to reflect revenue earned to date on the contract
to provide services to Harwood Corporation for a one-year
period beginning March 1 (see Event 5).
1. Decrease liabilities (unearned
revenue).
2. Increase equity (consulting
revenue).
$ 18,000  12 months  $1,500 per month
$ 1,500   10 months  $15,000 revenue
Assets
=
Liabilities
Unearned Revenue
Debit
Credit
+
15,000
+
Equity
Consulting Revenue
Debit
Credit
+
15,000