Alou Equipment Repair has a September 30 year end. The company adjusts and closes its accounts on an annual basis. On August 31, 2014, the account balances of Alou Equipment Repair were as follows:
During September, the following transactions were completed:
Sept. 1 Borrowed $10,000 from the bank and signed a two-year, 5% note payable.
2 Paid September rent, $500.
8 Paid employee salaries, $1,050.
12 Received $1,500 cash from customers on account.
15 Received $5,700 cash for services performed in September.
17 Purchased additional supplies on account, $1,300.
20 Paid creditors $2,300 on account.
21 Paid September telephone bill, $200.
22 Paid employee salaries, $1,050.
27 Performed services on account and billed customers for services provided, $900.
29 Received $550 from customers for services to be provided in the future.
30 Paid J. Alou $800 cash for personal use.
Adjustment data consist of the following:
1. Supplies on hand at September 30 cost $1,000.
2. Accrued salaries payable at September 30 total $630.
3. The equipment has an expected useful life of five years.
4. Unearned revenue of $450 is still not earned at September 30.
5. Interest is payable on the first of each month.
Instructions
(a) Prepare T accounts and enter the August 31 balances.
(b) Journalize the September transactions.
(c) Post to T accounts.
(d) Prepare a trial balance at September 30.
(e) Journalize and post adjusting entries.
(f) Prepare an adjusted trial balance at September 30.
(g) Prepare an income statement and a statement of owner’s equity, and a classified balance sheet.
(h) Prepare and post closing entries.
(i) Prepare post-closing trial balance at September 30?
SOLUTION
| (b) | GENERAL JOURNAL | J1 | |
|---|---|---|---|
| Date | Account Titles and Explanation | Debit | Credit |
| Sept. 1 | Cash | 10,000 | |
| Notes Payable | 10,000 | ||
| 2 | Rent Expense | 500 | |
| Cash | 500 | ||
| 8 | Salaries Expense | 1,050 | |
| Cash | 1,050 | ||
| 12 | Cash | 1,500 | |
| Accounts Receivable | 1,500 | ||
| 15 | Cash | 5,700 | |
| Service Revenue | 5,700 | ||
| 17 | Supplies | 1,300 | |
| Accounts Payable | 1,300 | ||
| 20 | Accounts Payable | 2,300 | |
| Cash | 2,300 | ||
| 21 | Telephone Expense | 200 | |
| Cash | 200 | ||
| 22 | Salaries Expense | 1,050 | |
| Cash | 1,050 | ||
| 27 | Accounts Receivable | 900 | |
| Service Revenue | 900 | ||
| Sept. 29 | Cash | 550 | |
| Unearned Revenue | 550 | ||
| 30 | J. Alou, Drawings | 800 | |
| Cash | 800 |
(a), (c), (e) and (h)
| Cash | Cash | ||
|---|---|---|---|
| Aug. 31 | 2,790 | ||
| Sept. 1 | 10,000 | ||
| Sept. 2 | 500 | ||
| Sept. 8 | 1,050 | ||
| Sept. 12 | 1,500 | ||
| Sept. 15 | 5,700 | ||
| Sept. 20 | 2,300 | ||
| Sept. 21 | 200 | ||
| Sept. 22 | 1,050 | ||
| Sept. 29 | 550 | ||
| Sept. 30 | 800 | ||
| Bal. | 14,640 |
| Accounts Receivable | Accounts Receivable | Accounts Receivable | |
|---|---|---|---|
| Aug. 31 | 7,910 | ||
| Sept. 12 | 1,500 | ||
| Sept. 27 | 900 | ||
| Bal. | 7,310 |
| Supplies | Supplies | ||
|---|---|---|---|
| Aug. 31 | 8,500 | ||
| Sept. 17 | 1,300 | ||
| Bal. | 9,800 | ||
| Sept. 30 | 8,800 | ||
| Bal. | 1,000 |
| Equipment | |||
|---|---|---|---|
| Aug. 31 | 9,000 | ||
| Accumulated Depreciation—Equipment | |||
| Aug. 31 | 1,800 | ||
| Sept. 30 | 1,800 | ||
| Bal. | 3,600 | ||
| Accounts Payable | |||
| Aug. 31 | 3,100 | ||
| Sept. 17 | 1,300 | ||
| Sept. 20 | 2,300 | ||
| Bal. | 2,100 | ||
| Unearned Revenue | |||
| Aug. 31 | 400 | ||
| Sept. 29 | 550 | ||
| Bal. | 950 | ||
| Sept. 30 | 500 | ||
| Bal. | 450 | ||
| Salaries Payable | |||
|---|---|---|---|
| Sept. 30 | 630 | ||
| Interest Payable | |||
| Sept. 30 | 42 | ||
| Notes Payable | |||
| Sept. 1 | 10,000 | ||
| J. Alou, Capital | |||
|---|---|---|---|
| Aug. 31 | 21,200 | ||
| Sept. 30 | 10,328 | ||
| Sept. 30 | 16,400 | ||
| Bal. | 15,128 | ||
| J. Alou, Drawings | |||
| Aug. 31 | 15,600 | ||
| Sept. 30 | 800 | ||
| Bal. | 16,400 | Sept. 30 | 16,400 |
| Bal. | 0 | ||
| Income Summary | |||
| Sept. 30 | 46,372 | Sept. 30 | 56,700 |
| Sept. 30 | 10,328 | ||
| Bal. | 0 | ||
| Service Revenue | |||
| Aug. 31 | 49,600 | ||
| Sept. 15 | 5,700 | ||
| Sept. 27 | 900 | ||
| Bal. | 56,200 | ||
| Sept. 30 | 500 | ||
| Sept. 30 | 56,700 | Bal. | 56,700 |
| Bal. | 0 | ||
| Rent Expense | |||
|---|---|---|---|
| Aug. 31 | 5,500 | ||
| Sept. 2 | 500 | ||
| Bal. | 6,000 | Sept. 30 | 6,000 |
| Bal. | 0 | ||
| Salaries Expense | |||
|---|---|---|---|
| Aug. 31 | 24,570 | ||
| Sept. 8 | 1,050 | ||
| Sept. 22 | 1,050 | ||
| Bal. | 26,670 | ||
| Sept. 30 | 630 | ||
| Bal. | 27,300 | Sept. 30 | 27,300 |
| Bal. | 0 | ||
| Telephone Expense | |||
| Aug. 31 | 2,230 | ||
| Sept. 21 | 200 | ||
| Bal. | 2,430 | Sept. 30 | 2,430 |
| Bal. | 0 | ||
| Supplies Expense | |||
| Sept. 30 | 8,800 | Sept. 30 | 8,800 |
| Bal. | 0 | ||
| Depreciation Expense | |||
| Sept. 30 | 1,800 | Sept. 30 | 1,800 |
| Bal. | 0 | ||
| Interest Expense | |||
| Sept. 30 | 42 | Sept. 30 | 42 |
| Bal. | 0 | ||
(d)
ALOU EQUIPMENT REPAIR
Unadjusted Trial Balance
September 30, 2014
Debit Credit
Cash $ 14,640
Accounts receivable 7,310
Supplies 9,800
Equipment 9,000
Accumulated depreciation—equipment $ 1,800
Accounts payable 2,100
Unearned revenue 950
Notes payable 10,000
J. Alou, capital 21,200
J. Alou, drawings 16,400
Service revenue 56,200
Rent expense 6,000
Salaries expense 26,670
Telephone expense 2,430 ____
Totals $92,250 $92,250
(e)
| GENERAL JOURNAL | J2 | ||
|---|---|---|---|
| Date | Account Titles and Explanation | Debit | Credit |
| Sept. 30 | Supplies Expense | 8,800 | |
| Supplies | 8,800 | ||
| ($9,800 – $1,000) | |||
| 30 | Salaries Expense | 630 | |
| Salaries Payable | 630 | ||
| 30 Depreciation Expense | 1,800 | ||
| Accumulated Depreciation | |||
| —Equipment | 1,800 | ||
| ($9,000 ÷ 5 years) | |||
| 30 | Unearned Revenue | 500 | |
| Service Revenue | 500 | ||
| ($950 – $450) | |||
| 30 | Interest Expense | 42 | |
| Interest Payable | 42 | ||
| ($10,000 × 5% × 1/12) |
(f)
ALOU EQUIPMENT REPAIR
Adjusted Trial Balance
September 30, 2014
Debit Credit
Cash $14,640
Accounts receivable 7,310
Supplies 1,000
Equipment 9,000
Accumulated depreciation—equipment $ 3,600
Accounts payable 2,100
Unearned revenue 450
Salaries payable 630
Interest payable 42
Notes payable 10,000
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