Question

Sarah Automotive On October 2018, Sarah began a car repair shop, Sarah Automotive. The following information about transactions from October to December 2018 Transactions: Oct 1, Sarah invested $50,000 cash to the business in exchange for capital. 1. Nov 5, Purchased land to be used in operations for $20,000 cash. 2. Nov 10, Purchased$ 12,000 of equipment paying cash 3. Dec 1, Paid $4,500 for a 9-month insurance policy starting on December 1. 4. Dec 4, Borrowed $30,000 from the bank for business use. Sarah signed a note payable to the bank in the name of the business. 5. Dec 8, Purchased office supplies on account, $3,000. 6. Dec 30, Revenues earned during December included $20,500 cash and $2,700 on account 7. The business received a bill for utilities to be paid in January, S260. 8. Paid employees' salaries $4,800 and building rent $800, Record as a compound entry 9. The business received $2,440 for services to be performed next month. 10. Sarah Automotive paid dividends of S4,000 cash. Additional information: • Office Supplies used during the month, S600. • The company uses straight line depreciation method and estimates that the equipment will have a useful life of 5 years. • One-month insurance has expired. • Accrued Interest Expense, $75.

Requiermints:

1- General journal

2- Ledger account

3- Unadjusted trial balance

4- Adjusted trial balance

5- Income statement

6- Retained earnings statement

7- Statement of financial position

8- Post-closing trial balance

Answer 1

	Books of Sarah Automotive
		1.General Journal
Ref.	Date	Account Title	Debit	Credit
NIL	1-Oct	Cash	50000
		Sarah Capital		50000
1	1-Nov	Land	20000
		Cash		20000
2	10-Nov	Equipment	12000
		Cash		12000
3	1-Dec	Prepaid Insurance	4500
		Cash		4500
4	4-Dec	Cash	30000
		Note payable		30000
5	8-Dec	Office Supplies	3000
		Accounts payable		3000
6	30-Dec	Cash	20500
		Accounts Receivables	2700
		Revenues		23200
7	31-Dec	Utilities expense	260
		Accounts payable		260
8		Salaries expense	4800
		Rent expense	800
		Cash		5600
9		Cash	2440
		Unearned revenue		2440
10		Dividends	4000
		Cash		4000
		Adjusting Entries
11		Office supplies expense	600
		Office Supplies		600
12		Depreciation expense	340
		Accumulated depn.-Eqpt.		340
		(12000/5/12*1.7 mths)
13		Insurance expense	500
		Prepaid Insurance		500
		(4500/9)
14		Interest expense	75
		Interest Payable		75
			156515	156515

3.Trial Balance(Un Adjusted)
Accoun Title	Debit	Credit
Cash	56840
Accounts Receivables	2700
Prepaid Insurance	4500
Office Supplies	3000
Land	20000
Equipment	12000
Accounts payable		3260
Unearned revenue		2440
Note payable		30000
Sarah Capital		50000
Dividends	4000
Revenues		23200
Rent expense	800
Salaries expense	4800
Utilities expense	260
Totals	108900	108900

4.Trial Balance(Adjusted)
Accoun Title	Debit	Credit
Cash	56840
Accounts Receivables	2700
Prepaid Insurance	4000
Office Supplies	2400
Land	20000
Equipment	12000
Accumulated depn.-Eqpt.		340
Accounts payable		3260
Unearned revenue		2440
Interest Payable		75
Note payable		30000
Sarah Capital		50000
Dividends	4000
Revenues		23200
Depreciation expense	340
Insurance expense	500
Office supplies expense	600
Rent expense	800
Salaries expense	4800
Utilities expense	260
Interest expense	75
Totals	109315	109315

5.Income Statement
Revenues		23200
Less: Operating expenses:
Depreciation expense	340
Insurance expense	500
Office supplies expense	600
Rent expense	800
Salaries expense	4800
Utilities expense	260	7300
Operating Income		15900
Less:Interest expense		75
Net Income		15825
6.Retained Earnings Stat.
Net income	15825
Less: Dividends	4000
Ending balance of R/E	11825
7- Statement of financial position
Current Assets
Cash	56840
Accounts Receivables	2700
Prepaid Insurance	4000
Office Supplies	2400
Total current assets		65940
Fixed assets
Land	20000
Equipment	12000
Acc. depn.-Eqpt.	-340
Total Fixed assets		31660
Total Assets		97600
Liabilities & owner's Equity
Current Liabilities
Accounts payable	3260
Unearned revenue	2440
Interest Payable	75
Total Current Liabilities		5775
Long-Term liabilities
Note payable		30000
Total Liabilities		35775
Owner's equity
Sarah Capital	50000
Retained Earnings	11825
Total Owner's equity		61825
Total Liabilities & owner's Equity		97600

8- Post-closing trial balance
Accoun Title	Debit	Credit
Cash	56840
Accounts Receivables	2700
Prepaid Insurance	4000
Office Supplies	2400
Land	20000
Equipment	12000
Accumulated depn.-Eqpt.		340
Accounts payable		3260
Unearned revenue		2440
Interest Payable		75
Note payable		30000
Sarah Capital		50000
Retained Earnings		11825
Totals	97940	97940