Selected transactions for P. Islas, an interior decorating firm, in its first mo

Question

Selected transactions for P. Islas, an interior decorating firm, in its first month of business, are as follows Invested $12,000 cash in the business in exchange for common stock. Borrowed $10,000 on a 6%, two year note payable. All interest and principal will be repaid at the end of the two years Jan. 1 1 3 Purchased used car for $5,000 cash for use in the business 9 Purchased supplies on account for $400. 11 16 17 20 23 28 Billed customers $1,400 for services performed. Paid $250 cash for advertising Received $1,000 in advance from a customer Received $800 cash from customers billed on January 11. Paid creditor $200 cash on balance owed (re: Jan 9) Declared and paid a $1,300 cash dividend pecievabie Np Chart of Accounts: Cash, Accounts Peyabte, Supplies, Vehicles, Accounts Payable, Interest Payable, Unearned Revenue, Common Stock, Dividends Service Revenue, Advertising Expense, Interest Expense,xkohasargane,retained tarnings, income Summary inComc Summa Record (a) Journal entries, (b) post to T-accounts (set up T accounts in order of chart of accounts before posting), (c) find the balance in each account, (d) prepare an unadjusted tria balance, (d) Prepare two adjusting entries: (1) to record January's interest expense on the loan, and (2) to show that $700 of the amount received on Jan 17 has now been earned, (e) post the adjusting entries to the same t-accounts, (f) update the balances in any accounts affected by the adjusting entries, (g) Prepare an adjusted trial balance, (h) Prepare financial statements (Income Statement, Statement of Retained Earnings, Balance heet). (1) Prepare closing entries, () Prepare a post-closing trial balance.

Explanation / Answer

P. Islas Adjusted Trial Balance For the Month of January Unadjusted Adjusted Total Transactions Debit Credit Debit Credit Debit Credit Cash Accounts 17050 17050 0 Receivable 1400 1400 Supplies 400 400 Vehicles $5,000 5000 Accounts Payable 200 200 Note Payable $10,000 10000 Interest Payable 50 50 Unearned Revenue 1000 700 300 Common Stock 12000 12000 Dividends 1300 1300 Retained Earnings 0 Service Revenue 2200 700 2900 Advertising Expense 250 250 0 Interest Expense 50 50 25400 25400 750 750 25450 25450 Adjusting Entries Interest Expense - 10000*6%/12 50 Interest Expense $50 To interest Payable $50 Unearned Revenue $700 To Service Revenue $700

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