Question

Problem #3 The adjusted trial balance columns of the worksheet for Company, owned by Meteor and Blue, are as follows.

Meteor and Blue’s COMPANY

Worksheet For the Year Ended December 31, 2020

Trial Balance

Dr. Cr.

101 Cash 5,300

112 Accounts Receivable 10,800

126 Supplies 1,500

130 Prepaid Insurance 2,000

157 Equipment 27,000

158 Accumulated Depreciation 5,600

200 Notes Payable 15,000

201 Accounts Payable 6,100

212 Salaries and Wages Payable 2,400

230 Interest Payable 600

301 Owner’s Capital 13,000

306 Owner’s Drawing 7,000

400 Service Revenue 61,000

610 Advertising Expense 8,400

631 Supplies Expense 4,000

711 Depreciation Expense 5,600

722 Insurance Expense 3,500

726 Salaries and Wages Expense 28,000

905 Interest Expense 600

Totals 103,700 (Dr,) 103,700 (Cr,)

Instructions (a) Complete the worksheet by extending the balances to the financial statement columns.

(b) Prepare an income statement, owner’s equity statement, and a balance sheet. (Note: $5,000 of the notes payable become due in 2021.) Meteor and Blue did not make any additional investments in the business during the year. (c) Prepare the closing entries.

Answer 1

Requirement a:

	Adjusted Trial balance		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	5,300				5,300
Accounts Receivable	10,800				10,800
Supplies	1,500				1,500
Prepaid Insurance	2,000				2,000
Equipment	27,000				27,000
Accumulated Depreciation		5,600				5,600
Notes Payable		15,000				15,000
Accounts Payable		6,100				6,100
Salaries and Wages Payable		2,400				2,400
Interest Payable		600				600
Owner’s Capital		13,000				13,000
Owner’s Drawing	7,000				7,000
Service Revenue		61,000		61,000
Advertising Expense	8,400		8,400
Supplies Expense	4,000		4,000
Depreciation Expense	5,600		5,600
Insurance Expense	3,500		3,500
Salaries and Wages Expense	28,000		28,000
Interest Expense	600		600
Total	103,700	103,700	50,100	61,000	53,600	42,700
Net income			10,900			10,900
Total			61,000	61,000	53,600	53,600

Requirement b:

Income Statement

Blue's Company
Income Statement
For the Year Ended December 31,2020
Revenues:
Service Revenue		61,000
Expenses:
Advertising Expense	8,400
Supplies Expense	4,000
Depreciation Expense	5,600
Insurance Expense	3,500
Salaries and Wages Expense	28,000
Interest Expense	600
Total expenses		50,100
Net income		10,900

Statement of Owner's equity

Blue's Company
Statement of Owner's Equity
For the Year Ended December 31,2020
Owner’s Capital , Beginning	13,000
Add: Net income	$10,900
Balance	23,900
(Less): Owner's Drawing	-7,000
Owner’s Capital , Ending	16,900

Balance Sheet

Blue's Company
Balance Sheet
For the Year Ended December 31,2020
Assets		Liabilities and Owner's equity
Current Assets:		Current liabilities:
Cash	5,300	Notes Payable	5,000
Accounts Receivable	10,800	Accounts Payable	6,100
Supplies	1,500	Salaries and Wages Payable	2,400
Prepaid Insurance	2,000	Interest Payable	600
Total current assets	19,600	Total current liabilities	14,100
Property,plant,and Equipment:		Notes Payable	10,000
Equipment	27,000	Total liabilities	24,100
Accumulated Depreciation	-5,600	Owner's Equity:
Total property,plant,and equipment	21,400	Owner's Capital	16,900
Total assets	41,000	Total liabilities and Owner's equity	41,000

Requirement (c):

Date	Account title and Explanation	Debit	Credit
12/31/2020	Service Revenue	61,000
	Income Summary		61,000
	[To close revenue accounts]
12/31/2020	Income Summary	50,100
	Advertising Expense		8,400
	Supplies Expense		4,000
	Depreciation Expense		5,600
	Insurance Expense		3,500
	Salaries and Wages Expense		28,000
	Interest Expense		600
	[To close expenses accounts]
12/31/2020	Income Summary	10,900
	Owner's capital		10,900
	[To close income summary account]
12/31/2020	Owner's capital	7,000
	Owner's drawings		7,000
	[To close drawings account]