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Mario and Luigi began operations of their plumbing supplies shop (M & L PS Co.) on January 1, 2010. The annual reporting period ends December 31. The trial balance on January 1, 2018, appears below (the amounts are rounded to thousands of dollars to simplify).

Account Titles Debit Credit Accounts Receivable Equipment Accumulated Depreciation (on Equipment) Other Assets Accounts Payable Notes Payable Wages Payable Interest Payabe Income Tax Payable Retained Ea Service Revenue Depreciation Expense Income Tax Expense Supplies and Operating Expenses Totals 8 8 4

Transactions during 2018 (summarized in thousands of dollars) follow (no particular date sequence):

  1. Borrowed $12 cash on a short-term note payable.
  2. Purchased land for future building site, paid cash, $9.
  3. Earned revenues for 2018, $160, including $40 on credit and $120 collected in cash.
  4. Issued additional shares for $3.
  5. Recognized operating expenses for 2018, $85, including $15 on credit and $70 paid in cash.
  6. Collected accounts receivable, $24.
  7. Purchased other assets, $10 cash.
  8. Paid accounts payable, $13.
  9. Purchased supplies on account for future use, $18.
  10. Signed a $25 service contract to start February 1, 2019.
  11. Declared and paid a cash dividend, $17.

Data for adjusting journal entries:

  1. Supplies counted on December 31, 2018, $10.
  1. Equipment cost was $60 has a useful life of 9 years with a residual value of $6.
  2. The notes payable of $12 in transaction (a) was taken out on September 1, 2018 at an interest rate of 25% per year. (round to the nearest month)
  3. Wages earned since the December 24 payroll not yet paid, $12.
  4. Income tax for the year was $8. It will be paid in 2019.

Required:

  1. Set up T-accounts for the accounts on the trial balance and enter beginning balances.
  2. Record journal entries for transactions (a) through (k), and post them to the T-accounts.
  3. Prepare an unadjusted trial balance.
  4. Record and post the adjusting journal entries (l) through (p).
  5. Prepare an adjusted trial balance.
  6. Prepare an income statement, statement of retained earnings, and balance sheet.
  7. Prepare and post the closing journal entries.
  8. Prepare a post-closing trial balance.
business   accounting   
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Answer #1

M& LPS Co Journal entries Date Debit Account Cash Notes Payable Credit 12 12 Land Cash Accounts Receivable Cash Service Revenue $120 $ 160 Cash Contributed Capital Supplies & Operating Expense Accounts Payable Cash 85 15 70 Cash Accounts Receivable 24 $ 24 Other Assets Cash 10 10 $ 13 Accounts Payable Cash $ 13 Supplies Accounts Payable 18 18 No en Dividends declared $ 17 Cash $ 17Adiusting entries Supplies & Operating Expense Supplies 20 -12+18-10 20 -(60-6)/9 Depreciation Expense Accumulated Depreciation-Equipment -12*25% *4/12 Interest Expense Interest Payable Supplies & Operating Expense Wages Payable 12 12 Income tax expense Income Tax Payable Closing entries Service Revenue $160 Retained earnings $ 160 $132 Retained earnings Depreciation Expense Income tax expense Interest Expense Supplies & Operating Expense $ 17 Retained earnings Dividends declared $ 17M & LPS Co. T Accounts Date Debit Date CreditDate Debit Date Credit Date Debit Date CreditDate Debit Date Credit Cash Accounts Receivable Supplies Land Op ba$3 b $ 9 Op bal$5 f $70 C $ 24 Op bal$ 12 $ 18 Op ba $20b $ 120 g $3 h $ 24k 10 $17 43 $ 21 Bal 10 Other Assets Bal Bal Bal Equipment Accum. Depr. Equipment Op ba $6 Accounts Payable Op ba $ 60 Op bal$4 $13 Op ba $ 5 15 18 10 Bal Bal S12 Ba 14 Bal Notes Payable Wages Payable Interest Payable Income Tax Payable Op baS - Op bal $ - Op bal $ Op bal$- $12 12 Bal 12 Bal 12 Bal Bal Retained Earnings $6 Op bal Contributed Capital Dividends Declared 8 k $ 160 Op ba65 r $17s $17 $ 17 Bal Bal $ 19 Bal Service Revenue Depreciation expense Income Tax expense Interest expense $ 160c $ 160 m Bal $Bal Bal Bal Supplies & Opeating expense $ 85 $ 20 BalOpening TB Debit Credit Unadjusted TB Debit Credit Adjusted TB Debit Credit Post Closing TB Debit Credit M& LPS Co Account Cash Accounts Receivable Supplies Land Equipment Accumulated Depreciation-Equipment Other Assets Accounts Payable Notes Payable Wages Payable Interest Payable Income Tax Payable Contributed Capital Retained earnings Dividends declared Service Revenue Depreciation Expense Income tax expense Interest Expense Supplies & Operating Expense Totals 43 43 21 10 43 21 10 21 12 12 12 14 14 14 12 12 12 12 12 17 17 160 160 279 279 157 157M& LPS Co Income Statement Service Revenue Expenses Supplies & Operating Expense Depreciation Expense Interest Expense Total Expenses Net profit before tax Income tax expense Net Profit 160 124 36 28 Statement of Retained Earnings Beginning Balance Net Profit Less Dividends paid Ending Balance 28 17 19M& LPS Co Balance Sheet Assets Current Assets Cash Accounts Receivable Supplies Total Current Assets 43 21 10 74 Non-Current Assets Land Equipment Accumulated Depreciation-Equipment Equipment, Net Other Assets Total Non-Current Assets Total Assets 9 60 12 48 14 71 145 Liabilities Current Liabilities Accounts Payable Notes Payable Wages Payable Interest Payable Income Tax Payable Total Current Liabilities 25 12 12 58 Contributed Capital Retained earnings Total Equity Total Liabilities & Equity 68 19 87 145

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