Question

C4-4 From Recording Transactions (Including Adjusting Journal Entries) to Preparing Financial Statements and Closing Journal Entries (Chapters 2, 3, and 4) [LO 2-3, LO 3-3, LO 4-1, LO 4-2, LO 4-3, LO 4-4, LO 4-5, LO 4-6]

[The following information applies to the questions displayed below.]

Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (amounts are rounded to thousands of dollars to simplify).

Account Titles	Debit				Credit
Cash	$	5
Accounts Receivable		4
Supplies		2
Equipment		6
Accumulated Depreciation					$	0
Software		12
Accumulated Amortization						3
Accounts Payable						7
Notes Payable (long-term)						0
Salaries and Wages Payable						0
Interest Payable						0
Income Tax Payable						0
Deferred Revenue						0
Common Stock						15
Retained Earnings						4
Service Revenue						0
Supplies Expense		0
Depreciation Expense		0
Salaries and Wages Expense		0
Amortization Expense		0
Interest Expense		0
Income Tax Expense		0
Totals	$	29			$	29

Transactions during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $21 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $18 cash on July 2.
3. Issued additional shares of common stock on July 3 for $5.
4. Purchased additional equipment on August 4, $3 cash.
5. Purchased, on account, supplies on September 5 for future use, $10.
6. On December 6, recorded revenues in the amount of $65, including $9 on credit and $56 received in cash.
7. Paid salaries and wages expenses on December 7, $35.
8. Collected accounts receivable on December 8, $8.
9. Paid accounts payable on December 9, $11.
10. Received a $3 deposit on December 10 for work to start January 15, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $3.
12. Supplies of $4 were counted on December 31, 2018.
13. Depreciation for 2018, $2.
14. Accrued interest on notes payable of $1.
15. Wages earned but not yet paid, $3.
16. Income tax for 2018 was $4 and will be paid in 2019.

C4-4 Part 5

5. Post the adjusting entries from requirement 4 and prepare an adjusted trial balance. (Enter your answers in thousands of dollars.)

Answer 1

5)

Adjusted Trial Balance:

Alison and Chuck Renny
Trial Balance
As on December 31.
	Debit	Credit
Cash	$31
Accounts Receivable	$5
Supplies	$4
Equipment	$27
Accumulated Depreciation		$2
Software	$12
Accumulated Amortization		$6
Accounts Payable		$6
Notes Payable (Short-term)		$21
Notes Payable (Long-term)		$0
Salaries and Wages Payable		$3
Interest Payable		$1
Income Tax Payable		$4
Deferred Revenue		$3
Common Stock		$20
Retained Earnings		$4
Service Revenue		$65
Supplies Expense	$8
Depreciation Expense	$2
Salaries and Wages Expense	$38
Amortization Expense	$3
Interest Expense	$1
Income Tax Expense	$4
Totals	$135	$135

T-Accounts:

T-Accounts or Leger Accounts:
Cash					Accounts Receivable
Beg. Bal.	$5				Beg. Bal.	$4
a.	$21	$18	b.		f.	$9	$8	h.
c.	$5	$3	d.
f.	$56	$35	g.
h.	$8	$11	i.
j.	$3
End. Bal.	$31				End. Bal.	$5
Supplies					Equipment
Beg. Bal.	$2				Beg. Bal.	$6
e.	$10	$8	l.		b.	$18
					d.	$3
End. Bal.	$4				End. Bal.	$27
$2 + $10 - $4 = $8.
Accumulated Depreciation					Software
Beg. Bal.		$0			Beg. Bal.	$12
		$2	m.
End. Bal.		$2			End. Bal.	$12
Accumulated Amortization					Accounts Payable
Beg. Bal.		$3			Beg. Bal.		$7
		$3	k.		i.	$11	$10	e.
End. Bal.		$6			End. Bal.		$6
Notes Payable (short-term)					Salaries and Wages Payable
Beg. Bal.		$0			Beg. Bal.		$0
		$21	a.				$3	o.
End. Bal.		$21			End. Bal.		$3
Interest Payable					Income Tax Payable
Beg. Bal.		$0			Beg. Bal.		$0
		$1	n.				$4	p.
End. Bal.		$1			End. Bal.		$4
Deferred Revenue					Common Stock
Beg. Bal.		$0			Beg. Bal.		$15
		$3	j.				$5	c.
End. Bal.		$3			End. Bal.		$20
Retained Earnings					Service Revenue
Beg. Bal.		$4			Beg. Bal.		$0
							$65	f.
End. Bal.		$4			End. Bal.		$65
Income Tax Expense					Interest Expense
Beg. Bal.	$0				Beg. Bal.	$0
p.	$4				n.	$1
End. Bal.	$4				End. Bal.	$1
Depreciation Expense					Supplies Expenses
Beg. Bal.	$0				Beg. Bal.	$0
m.	$2				l.	$8
End. Bal.	$2				End. Bal.	$8
Salaries and Wages Expense					Amoritization Expense
Beg. Bal.	$0				Beg. Bal.	$0
g.	$35				k.	$3
o.	$3
End. Bal.	$38				End. Bal.	$3
Note: As per the requirement, opening balance are shown in each T-Account (ledger account) along with posting of all the transactions including adjustments and calculating the ending balances but closing entries are not prepared as per the requirement. Hence, closing entries need to be passed in order to close all revenue accounts, all expenss accounts etc.