Question

The general ledger of the Karlin Company, a consulting company, at January 1, 2021, contained the following account balances: Account Title Cash Accounts receivable Equipment Accumulated depreciation Salaries payable Common stock Retained earnings Total Debits Credits 33,500 10,000 15,000 4,500 6,000 41,000 7,000 58,500 58,500 The following is a summary of the transactions for the year: a. Service revenue, $102,000, of which $30,600 was on account and the balance was received in cash. b. Collected on accounts receivable, $22,000. c. Issued shares of common stock in exchange for $7,500 in cash. d. Paid salaries, $37,000 (of which $6,000 was for salaries payable at the end of the prior year). e. Paid miscellaneous expense for various items, $20,000 f. Purchased equipment for $10,000 in cash. g. Paid $2,425 in cash dividends to shareholders. 1. Accrued salaries at year-end amounted to $740. 2. Depreciation for the year on the equipment is $1,500. Required: 2., 5, & 8. Prepare the summary, adjusting and closing entries for each of the transactions listed. 3. Post the transactions, adjusting and closing entries into the appropriate t-accounts. 4. Prepare an unadjusted trial balance.

Answer 1

Credit Karlin Company Journal entries Date Account Accounts Receivable Cash Service Revenue Debit $ 30,600 $ 71,400 $ 102,000 b $ 22,000 Cash Accounts Receivable $ 22,000 $ 7,500 Cash Common Stock $ 7,500 Salaries Payable Salaries expense Cash $ 6,000 $ 31,000 $ 37,000 $ 20,000 Miscellaneous expenses Cash $ 20,000 $ 10,000 Equipment Cash $ 10,000 $ 2,425 $ 2,425 g Dividends Cash Adjusting entries Salaries expense Salaries Payable $ 740 $ 740 $ 1,500 $ 1,500 Depreciation expense Accumulated Depreciation Closing entries Service Revenue Retained Earnings $ 102,000 $ 102,000 $ 53,240 Retained Earnings Salaries expense Miscellaneous expenses Depreciation expense $ 31,740 $ 20,000 $ 1,500 $ 2,425 Retained Earnings Dividends $ 2,425

Credit Date Date Credit Date Karlin Company T Accounts Date Debit Date Cash Op bal $ 33,500 d $ 71,400 e b $ 22,000 C $ 7,500 Debit Date Credit Accounts Receivable $10,000 $ 30,600 b $ 22,000 Debit Date Equipment $ 15,000 $ 10,000 Debit Date Credit Accumulated Depreciation Op bal $ 4,500 $ 1,500 Op bal f $ 37,000 Op bal $ 20,000 $ 10,000 $ 2,425 Bal. $ 64,975 Bal. Bal. Bal. $ 6,000 $ 18,600 Common Stock Op bal Salaries Payable $ 6,000 Op bal h d $ $ k $ 25,000 Retained Earnings $53,240 Op bal $ 2,425 D j 6,000 740 $41,000 $ 7,500 $ 2,425 Dividends $ 2,425 & $ 7,000 $102,000 $ 740 Bal. $ 48,500 Bal. Bal. Service Revenue а $ 102,000 $ 53,335 Miscellaneous expenses $ 20,000 $ 20,000 $ 102,000 Salaries expense $ 31,000 $ 740 k d h Depreciation expense $ 1,500 k $ 1,500 $ 31,740 Bal. $ - Bal. $ Bal. $ - Bal. $

Unadjusted TB Debit Credit 64,975 18,600 25,000 4,500 Adjusted TB Debit Credit 64,975 18,600 25,000 Karlin Company Account Names Cash Accounts Receivable Equipment Accumulated Depreciation Salaries Payable Common Stock Retained Earnings Dividends Service Revenue Salaries expense Miscellaneous expenses Depreciation expense Totals Post Closing TB Debit Credit 64,975 18,600 25,000 6,000 740 48,500 53,335 6,000 48,500 7,000 740 48,500 7,000 2,425 2,425 102,000 102,000 31,000 20,000 31,740 20,000 1,500 164,240 162,000 162,000 164,240 108,575 108,575

102,000 Karlin Company Income Statement For the Year Ended Dec 31, 2021 Service Revenue Expenses Salaries expense Miscellaneous expenses Depreciation expense Total Operating expenses Net Income 31,740 20,000 1,500 53,240 48,760 Statement of Retained Earnings For the Year Ended Dec 31, 2021 Beginning balance Net Income Less Dividends Ending Balance 7,000 48,760 (2,425) 53,335

Karlin Company Balance Sheet As of Dec 31, 2021 Assets Current Assets Cash Accounts Receivable Total Current Assets Liabilities & Stockholders Equity Current Liabilities 64,975 Salaries Payable 18,600 83,575 Total Current Liabilities 740 740 Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Stockholders Equity 25,000 Common Stock (6,000) Retained earnings 19,000 Total Stockholders Equity 48,500 53,335 101,835 Total Assets 102,575 Total Liabilities & Stockholders Equity 102,575