Question

The following is Sunland Cycle Repair Shop's trial balance at January 31, 2021, the company’s fiscal year end:

SUNLAND CYCLE REPAIR SHOP Trial Balance January 31, 2021
	Debit		Credit
Cash	$4,200
Accounts receivable	6,640
Prepaid insurance	6,420
Supplies	5,240
Land	52,000
Building	190,000
Accumulated depreciation—building			$11,000
Equipment	27,000
Accumulated depreciation—equipment			4,500
Accounts payable			6,700
Unearned revenue			21,960
Mortgage payable			183,000
H. Dude, capital			61,000
H. Dude, drawings	99,100
Service revenue			239,550
Salaries expense	119,200
Utilities expense	12,000
Interest expense	5,910
	$527,710		$527,710

Additional information:

1.		The 12-month insurance policy was purchased on June 1, 2020.
2.		A physical count of supplies shows $1,310 on hand on January 31, 2021.
3.		The building has an estimated useful life of 50 years. The equipment has an estimated useful life of 9 years.
4.		The mortgage payable has a 6% interest rate. Interest is paid on the first day of each month for the previous month's interest.
5.		By January 31, 2021, $1,300 of services related to the unearned revenue have been provided.
6.		During the next fiscal year, $4,500 of the mortgage payable is to be paid.

Prepare the adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 125.)

Prepare an adjusted trial balance. (Round answers to 0 decimal places, e.g. 125.)

Prepare an income statement.

Prepare a statement of owner’s equity. The owner, Henry Dude, invested $5,000 cash in the business on November 17, 2020. (The investment has been recorded and it is included in the capital account). (List items that increase owner's equity first. Round answers to 0 decimal places, e.g. 125.)

Prepare a classified balance sheet. The owner, Henry Dude, invested $5,000 cash in the business on November 17, 2020. (The investment has been recorded and it is included in the capital account). (List Property, Plant and Equipment in order of Land, Buildings and Equipment. Round answers to 0 decimal places, e.g. 125.)

Prepare the closing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 125.)

Answer 1

Answer : In the given question trial balance has been prepared that means all the trasactions are shown trial balance has been recorded in books of accounts, so we just need to prepare the adjusting entries in the books of accounts,

Journal Entries for adjusting items

Serial No	Particular	L.F	Amount (Dr)	Amount (Cr)
1.	Insurance a/c Dr.		4,280
	To Prepaid Insurance			4,280
	(Being prepaid insurance amount allocated to insurance a/c for the expired period only i.e, upto from Jun 1, 2021 to Jan 31 , 2021 (eight months --- 6420*8/12) & rest will remail in prepaid insurance accounts for the unexpired period)
2.	No Entry		0
	(Valuation of closing stock is just a
	working not a transactions)
3.	Depreciation (on Building) a/c Dr.		3,800
	Depreciation (on Equipement) a/c Dr.		3,000
	To Accumulated depreciation-Building			3,800
	To Accumulated depreciation-Equipement			3,000
	(Being Depreciation charged on fixed assest on Straight Line Method i.e, Depreciation (per year) = cost of assets/ no of usefull life of assets) Bulding = 190,000/50 = 3,800 Equipement = 27,000/9 = 3,000
4.	Interest Expenses a/c Dr.		915
	To Outstanding interest a/c			915
	(Being unpaid interest on Mortgage Loan is booked as outstanding interest i,e,183,000*6%*1/12) for 1 month only
5.	Unearned Revenue a/c Dr.		1,300
	To Service Revenue a/c			1,300
	(Being revenue booked for the services provided which amount were received in advance)
6.	No Entry		0
	(No entry will be passed in the current financial year as this belongs to next financial year)
	Total		13,295	13,295

Adjusted Trial Balance (As on 31st Jan, 2021)

Particular Amount (Dr) Amount (Cr) Cash 4,200 Accounts receivable 6,640 Prepaid insurance 2,140 Supplies 5,240 Land 52,000 Building 190,000 Accumulated depreciation—building 14,800 Equipment 27,000 Accumulated depreciation—equipment 7,500 Accounts payable 6,700 Unearned revenue 20,660 Mortgage payable 183,000 H. Dude, capital 61,000 H. Dude, drawings 99,100 Service revenue 240,850 Salaries expense 119,200 Utilities expense 12,000 Interest expense 6,825 Outstanding Interest 915 Depreciation 6,800 Insurance 4,280 Total 535,425 535,425

Income Statement (For the year ending Jan 31, 2021)

Expenditure	Amount	Income	Amount
To Salaries Expenses	119,200	By Service Revenue	240,850
To Utilities expense	12,000
To Interest expense	6,825
To Depreciation	6,800
To Insurance	4,280
To Net Profit (Tranferred to Owner's Capital)	91,745
	240,850		240,850

Owner's Equity Accounts

Particular	Amount	Particular	Amount
To Balance b/d )	61,000	By Drawing	99,100
To Net Profits	91,745	By Balance c/d	53,645
	147,745		147,745

Balance Sheet (As on Jan 31, 2021)

Liabilities	Amounts	Assets	Amounts
Capital	53,645	Fixed Assets
Mortgage Loan	183,000	Land	52,000
Accounts Payable	6,700	Building	190,000
Unearned revenue	20,660	Equipement	27,000
Outstanding Interest	915	Current Assets
Accumulated Depreciation	22,300	Cash	4,200
(14,800 + 7,500)		Accounts Receivable	6,640
		Prepaid Insurance	2,140
		Supplies	5,240
Total	287,220	Total	287,220