The general ledger of the Karlin Company, a consulting company, at January 1, 20

Question

The general ledger of the Karlin Company, a consulting company, at January 1, 2013, contained the following account balances: Account Title Debits Credits Cash 30,000 Accounts receivable 15,000 Equipment 20,000 Accumulated depreciation 6,000 Salaries payable 9,000 Common stock 40,500 Retained earnings 9,500 ________________________________________ ________________________________________ Total 65,000 65,000 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ The following is a summary of the transactions for the year: a. Sales of services, $100,000, of which $30,000 was on credit. b. Collected on accounts receivable, $27,300. c. Issued shares of common stock in exchange for $10,000 in cash. d. Paid salaries, $50,000 (of which $9,000 was for salaries payable). e. Paid miscellaneous expenses, $24,000. f. Purchased equipment for $15,000 in cash. g. Paid $2,500 in cash dividends to shareholders. 1. Accrued salaries at year-end amounted to $1,000. 2. Depreciation for the year on the equipment is $2,000.

3. Prepare the closing entries.

4. Post the opening balances, transactions, adjusting and closing entries into the appropriate t-accounts

5. Prepare an unadjusted trial balance.

6. Prepare an adjusted trial balance.

7. Prepare an income statement for 2013.

8. Prepare a balance sheet as of December 31, 2013.

9. Prepare a post-closing trial balance.

Explanation / Answer

Sales of services, $100,000, of which $30,000 was on credit.
Accounts receivable (Dr.) 30000
Cash (Dr.) 70000
Service revenue (Cr.) 100000

Collected on accounts receivable, $27,300.
Cash (Dr.) 27300
Accounts receivable (Cr.) 27300

Issued shares of common stock in exchange for $10,000 in cash. (Assuming no-par common stock!)
Cash (Dr.) 10000
Common stock (Cr.) 10000

Paid salaries, $50,000 (of which $9,000 was for salaries payable).
Salary expense (Dr.) 41000
Salaries payable (Dr.) 9000
Cash (Cr.) 50000

Paid miscellaneous expenses, $24,000.
Miscellaneous expense (Dr.) 24000
Cash (Cr.) 24000

Purchased equipment for $15,000 in cash.
Equipment (Dr.) 15000
Cash (Cr.) 15000

Paid $2,500 in cash dividends to shareholders. (Assuming they were paid on the day declared!)
Cash dividends (Dr.) 2500
Cash (Cr.) 2500

Accrued salaries at year-end amounted to $1,000.
Salaries expense (Dr.) 1000
Salaries payable (Cr.) 1000

Depreciation for the year on the equipment is $2,000.
Depreciation expense - equipment (Dr.) 2000
Accumulated Depreciation - equipment (Cr.) 2000

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