September, 2010 1 Rex Carswell organized Rex Carswell’s Auto Repairs, Inc. by in

Question

September, 2010

1          Rex Carswell organized Rex Carswell’s Auto Repairs, Inc. by investing $2,400 in the business in exchange for company stock

2          Rex borrowed $3,000 from the bank, signing a one-year, 6% note payable

2          Rex rented a space, formerly used as a gas station, for use as his office and shop,

for $20 per month. The owner required Rex to pay 4 months rent in advance.

2          Rex purchased several items for the business: Shop Tools, $240; Office

Furniture and Equipment, $540. Rex paid $150 cash and agreed to pay the balance in May.

3          Rex agreed to wash and perform routine maintenance on the delivery trucks owned by

Pisa Pizza Company. (The owner, Lisa Pisa, is an old school friend of Tex’s.) The agreement calls for Rex to wash and service the trucks at a contract price of $40 per month; Lisa paid the first three months’ fees in advance.          

4          Rex purchased shop supplies on account, $35.

8          Received a bill from the accountant, Will Figures, for setting up the company’s

accounting system, $80 (increase “professional services expense”).

15        Paid wages to Hugo Carswell, Rex’s nephew, for working part-time in the shop, $100

25        Paid $40 of the amount owed to Will Figures

30        Rex has the following information regarding the company’s September activities:

                        Cash received for repair services performed     $2,500

                        Billed customers for repair services performed    1,250

                        Cash received from customers billed                      750

30        The company paid a dividend to Rex, $250

ADDITIONAL INFORMATION AT SEPTEMBER 30

1.         Depreciation expense for the month is determined using straight-line depreciation over the following useful lives (no salvage value expected):

                        Shop Tools                  2 years

                        Office Furniture           3 years

2.              Accrued wages, earned by Hugo for the period September 16 – 30, $120

3.               

4.              Interest accrued on the Note payable, $15 (Can you determine how that amount was calculated?)

5.              Shop supplies on hand September 30 total $15

Explanation / Answer

Assests Liabilities Equity Cash AR Pre Rent Supplies AP NP Un REV Stock Rev & Exp Dividend 2400 2400 3000 3000 -80 80 -150 780 630 120 120 -35 35 80 -80 -100 -100 -40 -40 2500 2500 1250 1250 750 -750 -250 -250 -25 -25 120 -120 15 -15 -20 -20 -20 -20 8115 500 60 770 790 3015 120 2400 3370 -250 Total assets 9445 Total Liabilities & equity 9445

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