During its first month of operation, the Rawls Repair Company, which specializes

Question

During its first month of operation, the Rawls Repair Company, which specializes in bicycle repairs, completed the following transactions: Feb. 1 Owner, John Rawls, began business by investing $10,000 in exchange for common stock. Feb. 1 Paid the premium on a one-year insurance policy, $1,200. Feb. 1 Paid the current month's rent, $1,040. Feb. 3 Purchased repair equipment from Conklin Company, $4,400 by signing a 2-year note. Feb. 8 Purchased repair supplies from McKenna Company on credit, $420. Feb. 19 Made partial-payment to McKenna Company, $200. Feb. 20 Paid wages to part-time assistant, $800. Feb. 29 Cash bicycle repair revenue for February, $3,200. Feb. 29 Owner, John Rawls was paid a dividend of $600. Feb. 29 Received a bill for February utilities, $185, to be paid in March.

REQUIREMENT #1:

Prepare Feb. 29 adjusting entries in the Journal using the following information. Show your calculations where applicable!

a) One month's worth of prepaid insurance has expired.

b) The remaining amount of repair supplies at month-end is $194.

c) The estimated monthly depreciation on repair equipment is $70.

d) Unpaid wages at Feb. 29 are $100.

Requirement #2:

Post your adjustments to the T-accounts and compute adjusted balances.

(Just add to the February T-accts.)

Requirement #3:

Prepare an Adjusted Trial Balance.

Explanation / Answer

Journal Entries:

T- Accounts

Prepaid insurance

Supplies

Wages expense

Adjusted trial balance

Description Debit Credit Insurance expense $120 To Prepaid insurance 1200/12 $120 Supplies expense $226 To Supplies(420-194) $226 Depreciation expense $70 To Accumulated depreciation $70 Wages $100 To Wages paayble $100

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