Question

i need help with 5-8

P3-8A The general ledger of Red Storm Cleaners at January 1, 2021, includes the following account balances: Accounts Credits Debits $20,000 8,000 4,000 15,000 Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Salaries Payable Common Stock Retained Earnings Totals $ 5,000 7,500 25,000 9,500 $47.000 $47,000 The following is a summary of the transactions for the year: 1. March 12 Provide services to customers, $60,000, of which $21,000 is on account. 2. May Collect on accounts receivable, $18,000. 3. June 30 Issue shares of common stock in exchange for $6,000 cash. 4. August 1 Pay salaries of $7,500 from 2020 (prior year). 5. September 25 Pay repairs and maintenance expenses, $13,000. 6. October 19 Purchase equipment for $8,000 cash. 7. December 30 Pay $1,100 cash dividends to stockholders. Required: 1. Set up the necessary T-accounts and enter the beginning balances from the trial balance. In addition to the accounts shown, the company also has accounts for Dividends, Service Revenue, Salaries Expense, Repairs and Maintenance Expense, Depreciation Expense, and Supplies Expense. 2. Record each of the summary transactions listed above. 3. Post the transactions to the accounts. 4. Prepare an unadjusted trial balance. 5. Record adjusting entries. Accrued salaries at year-end amounted to $19,600. Depreciation for the year on the equipment is $5,000. Office supplies remaining on hand at the end of the year equal $1,200. 6. Post adjusting entries. 7. Prepare an adjusted trial balance. 8. Prepare an income statement for 2021 and a classified balance sheet as of December 31, 2021.

Answer 1

Solution

Red Storm Cleaners

Q5. Adjusting Entries:

Date	Account Titles and Explanation	Debit	Credit
Dec 31, 2021	Salaries Expenses	$19,600
	Salaries Payable		$19,600
	(To record accrued salaries)
Dec 31, 2021	Depreciation Expense	$5,000
	Accumulated Depreciation - Equipment		$5,000
	(To record depreciation on equipment)
Dec 31, 2021	Supplies Expense	$2,800
	Supplies		$2,800
	(To record cost of supplies used)

Q6. Adjusted Trial Balance

Red Storm Cleaners
Adjusted Trial Balance
at December 31, 2021
Account Titles	Debit	Credit
Cash	$53,400
Accounts Receivable	$11,000
Supplies	$1,200
Equipment	$23,000
Accumulated Depreciation		$10,000
Salaries Payable		$19,600
Common Stock		$31,000'
Retained Earnings		$9,500
Revenue		$60,000
Dividends	$1,100
Salaries Expense	$19,600
Supplies Expense	$2,800
Repairs & Maintenance Expense	$13,000
Depreciation Expense	$5,000
Totals	$130,100	$130,100

1. Income Statement:

Red Storm Cleaners
Income Statement
for the year ended December 31, 2021
Service Revenue		$60,000
Expenses:
Salaries expense	$19,600
Repairs and maintenance expense	$13,000
Depreciation expense	$5,000
Supplies Expense	$2,800
Total expenses		$40,400
Net Income		$19,600

Workings –

Salaries expense -

salaries payable for 2020                    ($7,500)

salaries paid in 2021                           $7,500

Salaries expense 2021                        $19,600

Supplies Expense –

Beginning balance                  $4,000

Less: ending balance              $1,200

Cost of supplies used during the year = 4,000 – 1,200 = $2,800

2. Balance Sheet –

Red Storm Cleaners
Balance Sheet as on December 31, 2021
Assets			Liabilities
Cash	$	$53,400	Salaries Payable		$19,600
Accounts Receivable		$11,000	Stockholders' Equity:
Supplies		$1,200	Common stock		$31,000
Equipment	$23,000		Retained Earnings		$28,000
Less: Accumulated depreciation	($10,000)	$13,000	Stockholders' Equity		$59,000
Total assets		$78,600	Total liabilities and stockholders' equity		$78,600

Workings:

Cash –

Beginning balance                                          $20,000

Add: service revenue received in cash           $39,000

Add: Accounts receivable collected               $18,000

Add: Common stock issued                            $6,000

Total cash collections                                     $83,000

Less: Cash payments –

Salaries paid               $7,500

Equipment purchased $8,000

Cash dividends           $1,100

Repairs and Maint. Expense   $13,000

Total                                                                $29,600

Ending cash balance                                       $53,400

Accounts Receivable –

Beginning balance                  $8,000

Add: Service revenue $21,000

Total                                        $29,000

Less: cash received                 $18,000

Ending balance                       $11,000

Equipment –

Beginning balance                  $15,000

Add: purchases                       $8,000
Ending balance                       $23,000

Accumulated depreciation –

Beginning balance                              $5,000

Add: depreciation expense 2021        $5,000

Ending balance                                   $10,000

           

Common Stock –

Beginning balance      $25,000

Add: new issue           $6,000

Ending balance           $31,000

Retained Earnings –

Beginning balance      $9,500

Add: net income         $19,600

Less: Dividends          $1,100

Retained earnings December 31, 2021           $28,000