Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sof

Question

Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2008. The annual reporting period ends December 31. The trial balance on January 1, 2009, was as follows (the amounts are rounded to thousands of dollars to simplify):

Account Titles Debit Credit
Cash $ 5.90
Accounts Receivable 5.00
Supplies 3.00
Small Tools 6.70
Equipment 0
Accumulated Depreciation $ 0
Other Assets 9.40
Accounts Payable 6.30
Notes Payable 0
Wages Payable 0
Interest Payable 0
Income Taxes Payable 0
Unearned Revenue 0
Contributed Capital 15.10
Retained Earnings 8.60
Dividends Declared 0
Service Revenue 0
Depreciation Expense 0
Income Tax Expense 0
Interest Expense 0
Operating Expenses 0

Totals $ 30.00 $ 30.00


Transactions during 2009 (summarized in thousands of dollars) follow:
a. Borrowed $22.00 cash on July 1, 2009, signing a six-month note payable.
b. Purchased equipment for $17.90 cash on July 1, 2009.
c. Issued additional shares of stock for $5.90.
d. Earned revenues for 2009 in the amount of $65.80, including $8.20 on credit and $57.60 received in cash.
e. Recognized operating expenses for 2009, $34.40, including $8.10 on credit and $26.30 in cash.
f. Purchased additional small tools, $2.40 cash.
g. Collected accounts receivable, $7.20.
h. Paid accounts payable, $10.40.
i. Purchased on account supplies for future use, $10.90.
j. Received a $3.40 deposit on work to start January 15, 2010.
k. Declared and paid a cash dividend, $9.60.

Data for adjusting journal entries:

l. Supplies of $4.80 were counted on December 31, 2009.
m. Depreciation for 2009, $1.20.
n. Accrued interest on notes payable of $1.80.
o. Wages earned since the December 24 payroll not yet paid, $2.30.
p. Income tax for 2009 was $3.70, and will be paid in 2010.

1. (a)

For T-accounts given enter beginning balances and post transactions (a) through (k) and adjusting entries (l) through (p).

(b)

Record journal entries for transactions a. through k.

(c)

Prepare an unadjusted trial balance.

(d)

Record and post the adjusting journal entries (l) through (p)

Explanation / Answer

a through k Solutions: Dr (Cr) a) Cash 22 Notes Payable (22) b) Equipment 17.90 Cash (17.90) c) Cash 5.90 Contributed Capital (5.90) d) Acct Rec 8.20 Cash 57.60 Service Revenue ( 65.80) e) Operating Exp 34.40 Cash (26.30) Accounts Pay ((8.10) f)Small Tools 2.40 Cash (2.40) g) Cash 7.20 Acct Rec (7.20) h) Acct Pay 10.40 Cash (10.40) i) Supplies 10.90 Acct pay (10.90) j) Cash 3.40 Unearned Revenue (3.40) k) Retained Earnings 9.60 Cash (9.60) Solutions to l through p l) Oper. Exp 4.80 Supplies (4.80) m) Depn Exp 1.20 Accum Depn (1.20) n) Int Exp 1.80 Int Payable (1.80) o) Oper Exp 2.30 Wages Payable (2.30) p) Inc Tax EXp 3.70 Inc Tax Pay (3.70) YOU COULD POST BEG BALANCES TO T ACCOUNTS , THEN ENTER ENTRIES FROM a through k, prepare unadjusted trial balance, enter entries from l through p, you should be able to have the adjusted trial balance. Due to time constraint and for you to kinda know the fundamentals , i suggest doing the unadjusted and adjusted trial balances for practice. The journal entries I did would be your check point. In case you get lost or balances doesnt match, then let me know I could further help you...For now it would really be good if you practice doing the accounting basics...believe me it's for your own good...

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