Question

on Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sota Furniture, Inc.) on January 1, 2008. The annual reporting period ends December 31. The trial balance January 1, 2009, was as follows (the amounts are rounded to thousands of dollars to simplify): Debit Credit Account Titles $ 5 4 2 6 0 $ 0 9 7 0 0 0 Cash Accounts Receivable Supplies Small Tools Equipment Accumulated Depreciation Other Assets Accounts Payable Notes Payable Wages Payable Interest Payable Income Tax Payable Unearned Revenue Contributed Capital Retained Earnings Dividends Declared Service Revenue Depreciation Expense Income Tax Expense Interest Expense Operating Expenses Totals 0 0 15 4 0 0 0 0 0 0 $26 $26 a. b. c. d. Transactions during 2009 (summarized in thousands of dollars) follow: Borrowed $21 cash on July 1, 2009, signing a six-month note payable. Purchased equipment for $18 cash on July 1, 2009. Issued additional shares of stock for $5. Earned revenues for 2009 in the amount of $65, including $9 on credit and $56 received in cash. Recognized operating expenses for 2009, $35, including $7 on credit and $28 in cash. f. Purchased additional small tools, $3 cash. e.

Answer 1

Accounts + Cash (A) + Receivable (A) + Supplies (A) Bal. 5 b 18 Bal. 4 8 Bal. 2 a 21 e 28 d 9 i 10 с 5f 3 12 d 56 h 11 1 8 8 k 10 j 3 Bal. 28 Bal. Bal. 4 Accumulated + Equipment (A) Depreciation (xA) + Beg. 6 Beg. 0 b 18 m 2 f 3 Bal. 27 Bal. + Other Noncurrent Accounts Notes Assets (A) - Payable (L) + - Payable (L) + Bal. 9 h 11 Bal. 7 Beg. 0 e 7 a 21 i 10 Bal. 9 Bal. 13 Bal. 21 Interest Income Tax Wages - Payable (L) + Beg Payable (L) + - Payable (L) + 0 Beg. 0 Beg. 0 o 3 n 1 р 4 Bal. Bal. Bal. 4

Unearned Dividends Contributed - Revenue (L) + + Declared (D) - Capital (SE) + 0 Beg. 0 Bal. 15 Beg. j 3 k 10 CE2 10 с 5 Bal. _3 Bal. 0 Bal. 20 Retained Service Operating Earnings (SE) + - Revenue (R) + + Expenses (E) - Bal. 4 Beg. 0 Beg. 0 e 35 CE2 10 CE1 12 CE1 65 d 65 1 8 0 3 CE1 46 Bal. 6 Bal. 0 Bal. 0 Income Tax Interest Depreciation + Expense (E) + Expense (E) + Expense (E) Beg. 0 Beg. 0 Beg. 0 p 4 n 1 m 2 CE1 4 CE1 1 CE1 2 Bal. 0 Bal. 0 Bal. 0 Req. 2 a. dr Cash (+A) 21 cr Notes Payable (short-term) (+L). 21 Borrowed cash on note. b. dr Equipment (+A). 18 cr Cash (-A) .. 18

Purchased equipment. c. dr Cash (+A) 5 5 cr Contributed Capital (HSE). Sold capital stock for cash. d. dr Cash (+A) 56 dr Accounts Receivable (+A)... 9 cr Service Revenue (+R, +SE). 65 Service revenues earned. e. 35 dr Operating Expenses (+E, -SE). cr Accounts Payable (+L) 7 cr Cash (-A). 28 Operating expenses incurred. f. 3 dr Equipment (+A). cr Cash (-A) Purchased additional equipment. 3 dr Cash (+A) 8 cr Accounts Receivable (-A). 8 Collected on customers' accounts. h. dr Accounts Payable (-L). 11 cr Cash (-A). 11 Paid on accounts payable. i. 10 dr Supplies (+A). cr Accounts Payable (+L) 10

Purchased supplies for future use. j. dr Cash (+A) 3 cr Unearned Revenue (+L)... 3 Deposit received for revenue not yet earned. k. dr Dividends Declared (+D,-SE). 10 cr Cash (-A). 10 Declared and paid a dividend. Req. 3 LAZY SOFA FURNITURE, INC. Unadjusted Trial Balance At December 31, 2012 (in thousands) Account Titles Debit Credit Cash $ 28 Accounts Receivable 5 12 Supplies Equipment Accumulated Depreciation (Equipment) 27 $ 0 Other Noncurrent Assets 9 13 21 Accounts Payable Notes Payable Wages Payable Interest Payable Income Tax Payable 0 0 0 Unearned Revenue 3 20 Contributed Capital Retained Earnings 4

Dividends Declared 10 65 0 Service Revenue Depreciation Expense Income Tax Expense Interest Expense Operating Expenses 0 0 35 Totals $ 126 $ 126 Req.4 1. 8 dr Operating Expenses (+E, -SE) cr Supplies (-A) To record supplies used-up ($12 – 4). 8 m. 2 dr Depreciation Expense (+E, -SE). cr Accumulated Depreciation (+xA, -A)... To record depreciation for the year (amount is given). 2 n. 1 dr Interest Expense (+E, -SE) cr Interest Payable (+L) To accrue interest for July - December, 2012. 1 0. 3 dr Operating Expenses (+E, -SE). cr Wages Payable (+L).. To accrue wages incurred but not paid. 3 p. 4 dr Income Tax Expense (+E, -SE) cr Income Tax Payable (+L) 4 To accrue income tax. Req. 5

LAZY SOFA FURNITURE, INC. Adjusted Trial Balance At December 31, 2012 (in thousands) Account Titles Debit Credit Cash $ 28 Accounts Receivable 5 4 27 Supplies Equipment Accumulated Depreciation (Equipment) Other Noncurrent Assets $ 2 9 13 21 Accounts Payable Notes Payable Wages Payable Interest Payable Income Tax Payable 3 1 4 Unearned Revenue 3 20 Contributed Capital Retained Earnings 4 Dividends Declared 10 Service Revenue 65 2 4 Depreciation Expense Income Tax Expense Interest Expense Operating Expenses 1 46 Totals $ 136 $ 136 Req. 6 LAZY SOFA FURNITURE, INC. Income Statement

For the Year Ended December 31, 2012 (in thousands) Revenues: Service Revenue $ 65 46 2 Expenses: Operating Expenses Depreciation Expense Interest Expense Income Tax Expense Total Expenses 1 4 53 | গ ৪ Net Income $ 12 LAZY SOFA FURNITURE, INC. Statement of Retained Earnings For the Year Ended December 31, 2012 (in thousands) $ 4 Balance, January 1, 2012 Add: Net Income 12 Subtract: Dividends Declared (10) Balance, December 31, 2012 $ 6 LAZY SOFA FURNITURE, INC. Balance Sheet At December 31, 2012 (in thousands) Assets: Liabilities: Current Assets: Current Liabilities: Cash $ 28 Accounts Payable $ 13

Accounts Receivable 5 21 Supplies 4 3 Total Current Assets 37 Notes Payable Wages Payable Interest Payable Income Tax Payable Unearned Revenue 1 4 $ 27 3 Equipment Less: Accum. Depr. 2 25 Total Current Liabilities 45 Other Noncurrent Assets 9 $ 20 Stockholders' Equity: Contributed Capital Retained Earnings Total Stockholders' Equity 6 26 Total Liabilities and Total Assets $ 71 Stockholders' Equity $ 71 Req. 7 1 dr Service Revenue (-R). 65 cr Depreciation Expense (-E) 2 cr Income Tax Expense (-E) 4 1 cr Interest Expense (-E) cr Operating Expenses (-E) cr Retained Earnings (+SE) 46 12 2 dr Retained Earnings (-SE) 10 cr Dividends Declared (-D).... 10 Req. 8 LAZY SOFA FURNITURE, INC. Post-Closing Trial Balance

At December 31, 2012 (in thousands) Account Titles Debit Credit Cash $ 28 Accounts Receivable 5 4 27 Supplies Equipment Accumulated Depreciation (Equipment) Other Noncurrent Assets $ 2 9 13 21 Accounts Payable Notes Payable Wages Payable Interest Payable Income Tax Payable 3 1 4 Unearned Revenue 3 20 Contributed Capital Retained Earnings Dividends Declared 6 0 0 0 Service Revenue Depreciation Expense Income Tax Expense Interest Expense Operating Expenses 0 0 0 Totals $ 73 $ 73 Req. 9 Lazy Sofa Furniture, Inc., generated $12 (thousand) in net income during 2012. The company is financed primarily by liabilities, with liabilities providing financing for $45 (thousand) of total assets and stockholders' equity providing financing of $26 (thousand).