Question

Exercise 3-20A Record transactions and prepare adjusting entries, adjusted trial balance, financial statements, and closing entries (LO3-3, 3-4, 3-5, 3-6, 3-7) (GL) On January 1, 2021, Red Flash Photography had the following balances: Cash, $20,000; Supplies, $8,800; Land, $68,000; Deferred Revenue, $5,800; Common Stock $58,000; and Retained Earnings, $33,000. During 2021, the company had the following transactions: 1. February 15 Issue additional shares of common stock, $ 28,000. 2. May 20 Provide services to customers for cash, $ 43,000, and on account, $38,000. 3. August 31 Pay salaries to employees for work in 2021, $31,000. 4. October 1 Purchase rental space for one year, $20,000. 5. November 17 Purchase supplies on account, $30,000. 6. December 30 Pay dividends, $2,800. The following information is available on December 31, 2021: 1. Employees are owed an additional $4,800 in salaries. 2. Three months of the rental space has expired. 3. Supplies of $5,800 remain on hand. 4. All of the services associated with the beginning deferred revenue have been performed. Requirement General Journal General Ledger Trial Balance Income Statement Statement of SE Balance Sheet 1. Record each of the transactions listed above in the 'General Journal' tab. Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances. 2. Record the adjusting entries in the 'General Journal' tab. 3. Review the adjusted 'Trial Balance' as of December 31, 2021. 4. Prepare an income statement for the year ended December 31, 2021, in the 'Income Statement' tab. 5. Prepare the statement of Stockholder's Equity for the year ended December 31, 2021, in the 'Income Statement' tab. 6. Prepare a classified balance sheet as of December 31, 2021 in the 'Balance Sheet' tab. 7. Record the closing entries in the 'General Journal' tab.

Answer 1

1. Journal Entries

Date Particulars 15-Feb Cash Common Stock Debit Credit 28000 28000 20-May Cash 43000 Account Receivable 38000 Service Revenue 81000 31000 31-Aug Salaries Cash 31000 1-Oct Prepaid Rent Cash 20000 20000 30000 17-Nov Supplies Accounts Payable 30000 2800 30-Dec Dividend Cash 2800

2. Adjustment Entries

Adjustment Entries 31-Dec Salaries Salaries Payable 4800 4800 5000 31-Dec Rent Expense Prepaid Rent 5000 31-Dec Supplies Expense Supplies 33000 5800 31-Dec Deferred Revenue Service Revenue 5800

3. Adjusted Trial Balance

Adjusted Trial Balance Particulars Cash Supplies Land Accounts Receivable Prepaid Rent Deferred revenue Retained Earnings Accounts Payable Salaries Payable Common Stock Service revenue Salaries Dividend Rent Supplies expense Opening Trial Balance Adjustments Closing Trial Balance Debit Credit Debit Credit Debit Credit 20000 17200 37200 8800 30000 33000 38800 33000 68000 68000 38000 38000 15000 15000 5800 5800 5800 5800 33000 33000 30000 30000 4800 4800 58000 28000 86000 86800 86800 35800 35800 2800 2800 5000 5000 33000 33000 96800 96800 182600 182600 279400 279400

4. Income Statement

Income Statement Red Flash Photography For the year ended December 31, 2021 Particulars Revenue Less: Expenses Salaries 35800 Rent 5000 Supplies expense 33000 Amount 86800 73800 13000

5. Stockholder's Equity

Statement of Shareholder's Equity Red Flash Photography For the year ended December 31, 2021 Common Stock Retained Earnings Total stockholder's Equity Opening Balance 58000 33000 91000 Add: During the year issue of shares & net income transfer 28000 13000 41000 Dividend -2800 -2800 86000 43200 129200

6. Balance Sheet

30000 4800 Assets Cash Supplies Accounts Receivable Prepaid Rent Total Current Assets Long term assets Land Total Assets Red Flash Photorraphy Balance Sheet As of January 31, 2021 Amount Liabilities 37200 Accounts Payable 5800 Salaries Payable 38000 15000 96000 Total Current Liabil Stockholder's Equit 68000 164000 Total Liabilities & S 34800 129200 164000

7. Closing Entries

Income Summary

86800 31-Dec Service Revenue Income Summary 86800 73800 31-Dec Income Summary Salaries Rent Supplies Expense 35800 5000 33000 13000 31-Dec Income Summary Retained Earnings 13000 2800 31-Dec Retained Earnings Dividend A/C 2800

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