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Hiwot established a sole proprietorship, known as Hiwot beauty salon and training center. She
started the business on September 1 of 2020. The business provides training on beauty salon on
fee basis. It also renders decoration service to clients.
The following transactions occurred for the month of Sept at the start of the business.
Sept 1. Hiwot invested in the business the following assets & liabilities
Cash $ 140,000
Furniture 50,000
Note payable 100,000 (a bank note due in 5 years with an interest rate of
12 % & an equal yearly installment payment).
Sept. 1. Paid a one year rent of $ 20,000
Sept. 1. Purchased machinery at cost of $ 35,000 by paying $ 10,000 down payment and
the remaining amount will pay in the near future.
Sept.1. Paid a 6 month insurance premium of $ 2,400
Sept. 2. Purchased office equipment on cash for $ 25,000
Sept. 4. Paid $ 800 for television advertisement
Sept. 7. Purchased supplies worth of $ 5,000 on cash
Sept.10. Purchased a land for $ 60,000 cash which will be used for future building site.
Sept.15. Received a total of $ 150,000 advance payment from trainees for a 4-month
tuition fee starting from September 1.
Sept.17. Received $ 5000 from clients for decorating services rendered.
Sept.20. Paid $ 15,000 partial payment to creditors for the September 1 purchase of
machinery.
Sept.20. purchased additional supplies on account $ 7000.
Sept.26. Send a bill to customers for the service rendered on account $ 12,000.
Sept.26. Paid $ 6.500 salary to employees.
Sept.28. paid $ 1,000 utilities expenses.
Sept.28. paid to creditors on account for the Sept 20 purchase of supplies.
Sept.30. Received cash from customer on account $ 5,000.
Sept.30. Withdraw a case of 5,000 for personal use.
Accounts that require Adjustment at the end of the year are as follows:
1. The physical count shows that at the end of September supplies on hand is $ 4,000
2. Record rent expense
3. Record insurance expired
4. Assume that depreciation of the following plant assets is determined to be:
Office equipment-----------------------------315
Furniture---------------------------------------625
Machinery-------------------------------------500
5. The salary paid at September 26 is a 26-day salary from September 1 to 26, the salary
from September 26 to 30 is not paid and also not recorded.
6. Record interest expense incurred but not recorded.
7. The $ 150,000 tuition fee received from students is a liability to the business. But part of
it becomes revenue as of September 30.
Required: - Complete the accounting cycle (prepare financial statements) by show all the
necessary steps.
