ACCT 201 Lecture Notes - Lecture 3: Collet, Common Stock, Income Statement
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Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2014. The annual reporting period ends December 31. The trial balance on January 1, 2015, appears below (amounts are rounded to thousands of dollars to simplify). |
Account Titles | Debit | Credit | ||||
Cash | $ | 5 | ||||
Accounts Receivable | 4 | |||||
Supplies | 1 | |||||
Equipment | 6 | |||||
Accumulated Depreciation | $ | 0 | ||||
Software | 12 | |||||
Accumulated Amortization | 5 | |||||
Accounts Payable | 7 | |||||
Notes Payable (long-term) | 0 | |||||
Salaries and Wages Payable | 0 | |||||
Interest Payable | 0 | |||||
Income Tax Payable | 0 | |||||
Unearned Revenue | 0 | |||||
Common Stock | 12 | |||||
Retained Earnings | 4 | |||||
Service Revenue | 0 | |||||
Supplies Expense | 0 | |||||
Depreciation Expense | 0 | |||||
Salaries and Wages Expense | 0 | |||||
Amortization Expense | 0 | |||||
Interest Expense | 0 | |||||
Income Tax Expense | 0 | |||||
Totals | $ | 28 | $ | 28 | ||
Transactions during 2015 (summarized in thousands of dollars) follow: | |
1. | Borrowed $26 cash on July 1, 2015, signing a six-month note payable. |
2. | Purchased equipment for $23 cash on July 1, 2015. |
3. | Issued additional shares of common stock for $6. |
4. | Earned revenues for 2015 in the amount of $68, including $7 on credit and $61 received in cash. |
5. | Recognized salaries and wages expenses for 2015 of $40, paid in cash. |
6. | Purchased additional equipment, $2 cash. |
7. | Collected accounts receivable, $9. |
8. | Paid accounts payable, $12. |
9. | Purchased on account supplies for future use, $8. |
10. | Received a $5 cash deposit on work to start January 15, 2016. |
Data for adjusting journal entries: | |
11. | Amortization for 2015, $5. |
12. | Supplies of $6 were counted on December 31, 2015. |
13. | Depreciation for 2015, $3. |
14. | Accrued interest on notes payable of $1. |
15. | Wages earned since the December 24 payroll not yet paid, $4. |
. | 16.Income tax for 2015 was $2 and will be paid in 2016. Q1 Record journal entries for transactions (1) through (10) Q2Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions 1-10, adjusting entries 11-16, and closing entry Q3Post the journal entries from requirement 2 to T-accounts and prepare an unadjusted trial balance Q4Record the adjusting journal entries (11) through (16) Q5Post the adjusting entries from requirement 4 and prepare an adjusted trial balance Q6Prepare an income statement. and Prepare statement of retained earnings and Prepare balance sheet Q7Prepare the closing journal entry. Q8Post the closing entry from requirement 7 and prepare a post-closing trial balance |
NUMBERS:
Service Revenue Per Hour: $90.50
Sales Revenue Per Unit: $50.50
Cost of Inventory Per Unit: $24.75
Part 1 General Journal – Post the followingjournal entries to the general journal.
Trans. | Date | Description |
1 | May 1 | Sell 50,000 shares of common stock for $50,000 to obtain thefunds necessary to start your business. |
2 | May 1 | Borrow $20,000 from the local bank and sign a note promising torepay the full amount of the debt in 5 years. |
3 | May 1 | Issue 1,500 shares of $2 par value preferred stock at$30/share. |
4 | May 1 | Purchase equipment necessary for business operations for$15,000. |
5 | May 1 | Pay one year of rent in advance, $12,000 ($1,000 per month.) |
6 | May 3 | Purchase supplies on account, $800. |
7 | May 3 | Purchase 200 units of inventory with cash. |
8 | May 6 | Provide 40 hours of services to customers for cash (calculateusing your hourly service rate). |
9 | May 10 | Sell 100 units of inventory on account. (Perpetual method = 2entries) |
10 | May 12 | Sell 50 units of inventory to a customer on account with a salesdiscount of 2/10, n/30. |
11 | May 15 | Purchase an additional 300 units of inventory onaccount. |
12 | May 20 | The customer who purchased product on May 12th pays the amountdue (within discount period). |
13 | May 23 | Receive cash in advance for 20 hours of services to be completedin the future. |
14 | May 31 | Sell 200 units of inventory to a customer who signs a 6-monthpromissory note at 10% interest for the balance due. |
15 | May 31 | Pay employee salaries, $1,000. |
16 | May 31 | Pay cash dividends to shareholders, $600. |
Part 3 – GeneralLedger – Post the information from the journal entries into thegeneral ledger.
Part 4 – TrialBalance – Prepare a trial balance from the information in thegeneral ledger.
Part 2 cont. –Adjusting journal Entries – Post the following adjusting entries tothe general journal
Adj-1 | May 31 | Record the portion of the Prepaid Rent used in May. |
Adj-2 | May 31 | The company has $300 of supplies left at month end |
Adj-3 | May 31 | Record one month of depreciation on the equipment. The equipmenthas a useful life of 10 years |
Adj-4 | May 31 | Provide 10 hours of services that were paid in advance on May23rd. |
Adj-5 | May 31 | Record the receipt of a $300 utilities bill due on June5th. |
Adj-6 | May 31 | Record accrued interest on the $20,000 – 5 year note payable.The annual interest rate is 10%. |
Part 3 cont. –General Ledger - Post the adjusting entries to the GeneralLedger.
Part 5 – AdjustedTrial Balance – Post the ending balances from the General Ledger tothe Adjusted Trial Balance. Debits should equal credits if you havedone the prior steps correctly.
Part 6 – Prepare theend of month Income Statement.
Part 7 – Prepare theend of month Retained Earnings Statement .
Part 8 – Prepare theend of month Balance Sheet .
Part 1 cont. - Addthe following closing entries to the general journal:
Clo-1 | May 31 | Close out revenues/income |
Clo-2 | May 31 | Close out expenses/losses |
Clo-3 | May 31 | Close out dividends |
Part 2 cont. - Postthe above closing entries to the general ledger.
Part 9 – Prepare apost-closing trial balance.