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 the financial statements for Rawls Repair Company as of February 29:

Income Statement

Retained Earnings Statement

Classified Balance Sheet (note: be sure to make a Classified Balance Sheet)

Requirement #2:

Prepare the closing entries at February 29 in the Journal.

Explanation / Answer

Closing Entry

Income Statement FOR the Month Feb. Sales Revenue $3,200.00 Costs: Supplies $420.00 Insurance $100.00 Rent $1,040.00 Wages $800.00 Fuel $185.00 Net Income $655.00 Less: Dividend $600.00 Retained Earning $55.00

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