Question

Can you please answer questions 5 & 6 below?

Listed below are the transactions for Ajayi Art, Inc. for the month of July: July 1 Ajayi Art, Inc. is started with an investment of $275,000 cash. July 1 Ajayi purchases office equipment for $22,500 by signing a 10% note (interest and principal to be paid over the next 12 months). July 6 Pays rent for the art gallery in advance for the next three months with a check for $3,030. July 8 Purchases art supplies from Wacky Art Co. on credit for $10,500. July 9 Receipt of $3,850 from a customer who has commissioned a piece of custom art to be completed by the end of the year. July 11 Pays miscellaneous office expenses totaling $415 in cash. July 13 Bills customers $4,730 for art classes provided in June. July 15 Pays $3,850 to Wacky Art Co. July 20 Receives $2,090 from customers on account. July 30 Ajayi records $4,180 in salaries for the month of July. Paychecks will be disbursed to employees on August 2nd.

1. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies on Hand, Office Equipment, Accumulated Depreciation, Accounts Payable, Common Stock, Service Revenue, Rent Expense, Miscellaneous Office Expense, Office Salaries Expense, Supplies Expense, Depreciation Expense, and Income Summary.

2. Prepare an unadjusted trial balance.

3. Record depreciation using a 5-year life on the office equipment, the straight-line method, and no salvage value. Round to whole numbers. Also, record an adjustment for art supplies used in the amount of $1,660 and record interest expense for the note.

4. Prepare an adjusted trial balance.

5. Prepare an income statement, a statement of retained earnings, and an unclassified balance sheet.

6. Prepare closing entries.

Answer 1

4.

Ajayi Art Inc.
Adjusted Trial Balance
July 31
Account Titles	Debit	Credit
	$	$
Cash	273,645
Accounts Receivable	2,640
Supplies on Hand	8,840
Prepaid Rent	2,020
Equipment	22,500
Accumulated Depreciation : Equipment		375
Accounts Payable		6,650
Office Salaries Payable		4,180
Interest Payable		188
Unearned Revenue		3,850
Note Payable		22,500
Common Stock		275,000
Service Revenue		4,730
Office Salaries Expense	4,180
Rent Expense	1,010
Supplies Expense	1,660
Depreciation Expense	375
Miscellaneous Office Expense	415
Interest Expense	188
Totals	$ 317,473	$ 317,473

5.

Ajayi Arts Inc.
Income Statement
For the month ended July 31
Account Titles	Debit	Credit
	$	$
Service Revenue		4,730
Less: Expenses
Office Salaries Expense	4,180
Rent Expense	1,010
Supplies Expense	1,660
Miscellaneous Office Expense	415
Depreciation Expense	375
Interest Expense	188
Total Expenses		7,828
Net Income ( loss)		$ ( 3,098)

Statement of Retained Earnings:

Balance, July 1	$ 0
Net income ( loss)	(3,098)
Less: Dividends	Nil
Balance, July 31	(3,098)

Balance Sheet:

Assets	$	Liabilities and Stockholders' Equity	$
Cash	273,645	Accounts Payable	6,650
Accounts Receivable	2,640	Office Salaries Payable	4,180
Supplies on Hand	8,840	Unearned Revenue	3,850
Prepaid Rent	2,020	Interest Payable	188
Equipment, net	22,125	Note Payable	22,500
		Common Stock	275,000
		Retained Earnings	(3,098)
Total Assets	$ 309,270	Total Liabilities and Stockholders' Equity	$ 309,270

6. Closing Entries:

Date	Account Titles	Debit	Credit
July 31		$	$
1.	Service Revenue	4,730
	Income Summary		4,730
	To close revenue account
2.	Income Summary	7,828
	Office Salaries Expense		4,180
	Rent Expense		1,010
	Supplies Expense		1,660
	Miscellaneous Expense		415
	Depreciation Expense		375
	Interest Expense		188
	To close expense accounts
3.	Retained Earnings	3,098
	Income Summary		3,098
	To close income summary