Question

(Overnight) Michael McBryan, an experienced auto mechanic, opens his own automotive repair business, Overnight Auto Service. A distinctive feature of Overnight's business is that all repair work is done at night. This strategy offers customers the convenience of dropping off their cars in the evening and picking them up the following morning. Operating at night also enables Overnight to minimize its labor costs. Instead of hiring full-time employees, Overnight offers part-time work to mechanics who already have day jobs at major automobile dealerships. This eliminates the need for costly employee training programs and fringe benefits. McBryan officially started Overnight on January 23, 2017 (a Monday). On that day, Overnight was established, and 8,000 shares of stocks were issued at $10 per share to investors consisting of McBryan and several family members. Mcbryan opened a bank account in the name of Overnight in which he deposited the proceeds from the stock issuing. Overnight conducted the following transactions subsequently. The calendar on the next page might help analyzing these transactions. • Jan 23. Purchased land for $52,000, paying cash Jan 24. Purchased an old garage built on the land bought on Jan 20 for $26,000.' Overnight made a cash down payment of $6,000 was made, and issued a 90-day note payable, with interest at the rate of 12% per year, in one installment at maturity. The garage has an estimated remaining life of 10 years. Jan 26. Purchased tools and equipment for 13,800, on account, payable within 60 days. The tools and equipment have a useful life of three years. Jan 26. Hired a part-time crew of two mechanics with daily rate $100 each, covering working days only. The crew salaries are paid on a biweekly basis. Jan 27. Realizing that more than needed tools and equipment were bought, Overnight sold some of its new tools, worth $1,800 to Ace Towing, a neighboring business, at cost. Ace agreed to pay the amount within 45 days. Jan 29. Received partial payment of $600 from Ace Towing. Jan 30. Paid $6,800 in partial payment of the tools and equipment. Jan 31. Recorded $2,200 of sales (repair) revenue, received in cash. Jan 31. Received $200 utility bill for January. This amount is due on February 15. • • Even though the garage is built on the land, it has a different owner than the land,

Answer 1

Solution Question No. a

Joumal entries for the period 23rd January 2017 to 28th February 2017 Dulait January entries Share capital (no har 10 w ring industrin the busine) Parbaty 52,000 Land p lur Notes Payabic 20,000 (Gange purchased partly by cash and notes payable) 26th January Tools & Equipments Accounts Payable Tonis equipments purchased out) 27th by de Tuning Tools 5. Equipments (Ernst and later to train Ace Towing (el pan IV om www Uthy A nis wyable (partial patient for purchang tools and equipment perd) 31 January Salesfri (revenue accounted way Utilities (being utilities for Jan 30ocunted January closing entries :15 UTCIMG. Provision or Depreciation Garage (being depreciation for Garage provided) 21st January Depreciation Tool & quipments Provision for Depreciation Tools & Equipments (being depreciation for Gerard provided) 31 January intorc pens Internet payable Interest payable for 8 days at 125 on Nos $ 20000 being accounted February entries ty Ali Ep (cashforderten wspaper paid and February Advertisement parses (ratio advertisement expenses accounted) 3rd February Supplies Supli Arcs.nl being supplies purchased) Sth February Salaries 2.400 (being salariespaid for twe mechanisl weekly Sundays Icttouti 15th February (being revenue scout 15th Febny Provision for Hilities $ 200 Chinc in months 2 ramy (ting fu l ly Surat wys wat hulle ut DMdeed Payable (beng dided declared 40 ont pur share for shares accounted 28th February Divider duyable (being dividend gard for 200 shareholders 28th Febrvery Utilities PENISILMIN (being Feb month utilities being counted) February closing entries wlany CM Provision for Depreciation Garage (bung dep a n for provided 28th F ery Depreciation Tools Supers Provision for Depreciation Tools & Equipments (being depreciation for Gran provided) 28th February borst expenses In payable (interest payable for 23 days at 12% on Nota $ 20000 being accounts