Question

3. Journal Entries - external events Buka and Margot began operations of The Tail That Wags the Dog, a doggie day care, on January 1, 2020. The annual reporting period ends December 31. The trial balance on January 1, 2021 was as follows: Credit Cash Accounts Receivable Supplies Other current assets Equipment Accounts Payable Common Stock Retained Earnings Debit 5,000 4,000 2,000 9,000 6,000 7,000 7,000 12,000 Total 26,000 26,000 Record each of the following transactions that occurred during 2021: a. Borrowed $20,000 cash on July 1, 2021, signing a 10 percent note payable. Interest and the note are due on July 1, 2023. Accounts Debit Credit Purchased equipment for $18,000 cash on July 1, 2021. Accounts Debit Credit b. Sold 5,000 additional shares of common stock for $1 cash per share. Accounts Debit Credit

Answer 1

The Tail That Wags the Dog Journal entries Date Account al Cash Notes Payable Credit Calculation Debit $ 20,000 $ 20,000 $ 18,000 a2 Equipment Cash $ 18,000 b $ 5,000 Cash Common Stock $ 5,000 C Cash Accounts Receivable Day Care Revenue $ 56,000 $ 9,000 $ 65,000 d $ 22,000 Salaries expense Cash $ 22,000 $ 8,000 e Rent expense Cash $ 8,000 f $ 10,000 Supplies Accounts Payable $ 10,000 $ 11,000 & Accounts Payable Cash $ 11,000 h $ 3,000 Cash Unearned Revenue $ 3,000 $ 10,000 $ 10,000 i Dividends Cash Adjusting entries j Supplies expense Supplies $ 8,000 =2,000+10,000-4,000 $ 8,000 $ 2,000 k Depreciation expense Accumulated Depreciation $ 2,000 | $ 1,000 =20,000*10%*6/12 Interest expense Interest Payable $ 1,000 m $ 4,000 Income tax expense Income Taxes Payable $ 4,000

Credit Date Date Credit Date Credit The Tail That Wags the Dog T Accounts Date Debit Date Cash Op bal $5,000 a2 $ 20,000 d $ 5,000 e $ 56,000 g $ 3,000 i Debit Date Credit Accounts Receivable $ 4,000 $ 9,000 Debit Date Supplies $ 2,000 $ 10,000 Debit Date Other current assets $ 9,000 Op bal Op bal Op bal c $ 8,000 $ 18,000 $ 22,000 $ 8,000 $ 11,000 $ 10,000 Bal. Bal. Bal. Bal. $ 20,000 Equipment $ 6,000 $ 18,000 $ 13,000 Accumulated Depreciation $ 2,000 $ 9,000 Unearned Revenue $ 4,000 Accounts Payable Op bal $ 11,000 Op bal $ 3,000 $ 7,000 $ 10,000 Bal. $ 6,000 $ 3,000 $ 24,000 Interest Payable Bal. $ 2,000 Income Taxes Payable $ 4,000 Bal. Notes Payable $ 1,000 $ 20,000 $1,000 $ 4,000 Bal. $ 20,000 Bal. Common Stock Op bal b Bal. Retained Earnings Op bal $ 7,000 $ 5,000 Dividends $ 10,000 $ 12,000 $ 12,000 Bal. $ 12,000 Bal. Day Care Revenue Salaries expense $ 22,000 $ 10,000 Rent expense $ 8,000 Supplies expense $ 8,000 $ 65,000 d e Bal. Bal. $ 8,000 Bal. $ 65,000 Bal. Depreciation expense $ 2,000 $ 22,000 Interest expense $ 1,000 $ 8,000 Income tax expense $ 4,000 Bal. $ 2,000 $ 1,000 Bal. $ 4,000

The Tail That Wags the Dog Account Names Cash Accounts Receivable Supplies Other current assets Equipment Accumulated Depreciation Accounts Payable Unearned Revenue Interest Payable Income Taxes Payable Notes Payable Common Stock Retained Earnings Dividends Day Care Revenue Salaries expense Rent expense Supplies expense Depreciation expense Interest expense Income tax expense Totals Adjusted TB Debit Credit 20,000 13,000 4,000 9,000 24,000 2,000 6,000 3,000 1,000 4,000 20,000 12,000 12,000 10,000 65,000 22,000 8,000 8,000 2,000 1,000 4,000 125,000 125,000

Closing entries n Day Care Revenue Retained Earnings $ 65,000 $ 65,000 o $ 45,000 Retained Earnings Salaries expense Rent expense Supplies expense Depreciation expense Interest expense Income tax expense $ 22,000 $ 8,000 $ 8,000 $ 2,000 $ 1,000 $ 4,000 p $ 10,000 Retained Earnings Dividends $ 10,000

Closing entries Retained Earnings $ 45,000 Op bal $ 10,000 n $ 12,000 $ 65,000 Bal. $ 22,000

65,000 22,000 8,000 8,000 The Tail That Wags the Dog Income Statement For the Year Ended Dec 31, 2021 Day Care Revenue Operating expenses Salaries expense Rent expense Supplies expense Depreciation expense Total Operating expenses Operating Income Other Revenues & Expenses Interest expense Net Income before income taxes Income tax expense Net Income 2,000 40,000 25,000 1,000 24,000 4,000 20,000 Statement of Retained Earnings For the Year Ended Dec 31, 2021 Beginning Retained Earnings Add: Net Income Less: Dividends Ending Retained Earnings 12,000 20,000 (10,000) 22,000

The Tail That Wags the Dog Balance Sheet As of Dec 31, 2021 Assets Current Assets Cash Accounts Receivable Supplies Other current assets Total Current Assets 20,000 13,000 4,000 9,000 46,000 Property, Plant & Equipment Equipment Accumulated Depreciation Net Equipment Total Assets 24,000 (2,000) 22,000 68,000 Liabilities & Owners Equity Current Liabilities Accounts Payable Unearned Revenue Interest Payable Income Taxes Payable Total Current Liabilities 6,000 3,000 1,000 4,000 14,000 Non-Current Liabilties Notes Payable Total Liabilties 20,000 34,000 Owners Equity Common Stock Retained earnings Total Owners Equity Total Liabilities & Owners Equity 12,000 22,000 34,000 68,000