Question

On January 1, 2021, Red Flash Photography had the following balances: Cash, $13,000; Supplies, $8,100; Land, $61,000; Deferred Revenue, $5,100; Common Stock $51,000; and Retained Earnings, $26,000. During 2021, the company had the following transactions:

1.		February		15		Issue additional shares of common stock, $21,000.
2.		May		20		Provide services to customers for cash, $36,000, and on account, $31,000.
3.		August		31		Pay salaries to employees for work in 2021, $24,000.
4.		October		1		Purchase rental space for one year, $13,000.
5.		November		17		Purchase supplies on account, $23,000.
6.		December		30		Pay dividends, $2,100.

The following information is available on December 31, 2021:

1. Employees are owed an additional $4,100 in salaries.
2. Three months of the rental space has expired.
3. Supplies of $5,100 remain on hand.
4. All of the services associated with the beginning deferred revenue have been performed.

• 1

  Record the issuance of additional shares of common stock, $21,000.

• 2

  Record the entry for services provided to customers for cash, $36,000, and on account, $31,000.

• 3

  Record the salaries paid to employees for work in 2021, $24,000.

• 4

  Record the purchase of rental space for one year, $13,000.

• 5

  Record the purchase of supplies on account, $23,000.

• 6

  Record the payment of dividends, $2,100.

• 7

  Record the adjusting entry for salaries on December 31.

• 8

  Record the adjusting entry for rent on December 31.

• 9

  Record the adjusting entry for supplies on December 31.

• 10

  Record the adjusting entry for deferred revenue on December 31.

• 11

  Record the entry to close the revenue accounts.

• 12

  Record the entry to close the expense accounts.

• 13

  Record the entry to close the dividends accounts.

Answer 1

There are three types of entries in the question.

1. Transaction entries

2. Adjustment entries

3. Closing entries

Rent for 1 year = 13,000. For 3 months = 13,000*3/12 = 3,250

Following are the journal entries Credit 1 Date Account title and Explanation Debit Feb-15 Cash 21,000 Common stock (To record the issuance of additional common stock) 21,000 2 May-20 Cash 36,000 Accounts receivable 31,000 Service revenue (To record services provided by cash and on account) 67,000 3 24,000 Aug-31 Salaries expense Cash (To record salaries expense ) 24,000 4 13,000 Oct-01 Prepaid rent Cash (To record the payment of prepaid rent) 13,000 5 23,000 Nov-17 Supplies Accounts payable (To record supplies purchased on account) 23,000 6 2,100 Dec-30 Dividends Cash (To pay dividends by cash) 2,100 7 Dec-31 Salaries expense 4,100 Salaries payable (To record adjustment entry relating to salaries) 4,100 8 3,250 13,000*3/12=3,250 Dec-31 Rent expense Prepaid rent (To record adjustment entry relating to rent) 3,250 9 17,900 Dec-31 Supplies expense Supplies (To record adjustment entry for supplies) 17,900 10 Dec-31 Deferred revenue 5,100 Service revenue (To record adjustment entry relating to deferred revenue) 5,100 11 72,100 5,100+67,000=72,100 Dec-31 Service revenue Income summary (To close revenue accounts) 72,100 12 49,250 Dec-31 Income summary Salaries expense Rent expense supplies expense (To close expense accounts) 28,100 24,000+4,100=28,100 3,250 17,900 13 2,100 Dec-31 Retained earnings Dividends (To close dividend accounts) 2,100