On July 1, 2011, Lucinda Fogle created a new self-storage business, KeepSafe Co. The following transactions occurred during the company’s first month.
July | 1 | Fogle invested $20,000 cash and buildings worth $120,000 in the company in exchange for common stock. |
| 2 | The company rented equipment by paying $1,800 cash for the first month’s (July) rent. |
| 5 | The company purchased $2,300 of office supplies for cash. |
| 10 | The company paid $5,400 cash for the premium on a 12-month insurance policy. Coverage begins on July 11. |
| 14 | The company paid an employee $900 cash for two weeks’ salary earned. |
| 24 | The company collected $8,800 cash for storage fees from customers. |
| 28 | The company paid $900 cash for two weeks’ salary earned by an employee. |
| 29 | The company paid $850 cash for minor repairs to a leaking roof. |
| 30 | The company paid $300 cash for this month’s telephone bill. |
| 31 | The company paid $1,600 cash for dividends. |
The company’s chart of accounts follows:
101 | Cash | 401 | Storage Fees Earned |
106 | Accounts Receivable | 606 | Depreciation Expense—Buildings |
124 | Office Supplies | 622 | Salaries Expense |
128 | Prepaid Insurance | 637 | Insurance Expense |
173 | Buildings | 640 | Rent Expense |
174 | Accumulated Depreciation—Buildings | 650 | Office Supplies Expense |
209 | Salaries Payable | 684 | Repairs Expense |
307 | Common Stock | 688 | Telephone Expense |
318 | Retained Earnings | 901 | Income Summary |
319 | Dividends |
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Required
1. Use the balance column format to set up each ledger account listed in its chart of accounts.
2. Prepare journal entries to record the transactions for July and post them to the ledger accounts. Record prepaid and unearned items in balance sheet accounts.
3. Prepare an unadjusted trial balance as of July 31.
4. Use the following information to journalize and post adjusting entries for the month:
a. Two-thirds of one month’s insurance coverage has expired.
b. At the end of the month, $1,550 of office supplies are still available.
c. This month’s depreciation on the buildings is $1,200.
d. An employee earned $180 of unpaid and unrecorded salary as of month-end.
e. The company earned $950 of storage fees that are not yet billed at month-end.
5. Prepare the income statement and the statement of retained earnings for the month of July and the balance sheet at July 31, 2011.
6. Prepare journal entries to close the temporary accounts and post these entries to the ledger.
7. Prepare a post-closing trial balance.
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