On August 1, 2020, the following were the account balances of B&B Repair Services.
During August, the following summary transactions were completed.
Aug. 1 Paid $400 cash for advertising in local newspapers. Advertising flyers will be included with newspapers delivered during August and September.
3 Paid August rent $380.
5 Received $1,200 cash from customers in payment on account.
10 Paid $3,120 for salaries due employees, of which $1,700 is for August and $1,420 is for July salaries payable.
12 Received $2,800 cash for services performed in August.
15 Purchased store equipment on account $2,000.
20 Paid creditors $2,000 of accounts payable due.
22 Purchased supplies on account $800.
25 Paid $2,900 cash for employees’ salaries.
27 Billed customers $3,760 for services performed.
29 Received $780 from customers for services to be performed in the future.
Adjustment data:
- A count shows supplies on hand of $960.
- Accrued but unpaid employees’ salaries are $1,540.
- Depreciation on equipment for the month is $320.
- Services were performed to satisfy $800 of unearned service revenue
- One month’s worth of advertising services has been received.
- One month of interest revenue related to the $4,000 note receivable has accrued. The 4-month note has a 6% annual interest rate. Use the formula from Illustration 3-17 to compute interest.
Instructions
a. Enter the August 1 balances in the ledger accounts. (Use T-accounts.)
b. Journalize the August transactions.
c. Post to the ledger accounts. B&B’s chart of accounts includes Prepaid Advertising, Interest Receivable,Service Revenue, Interest Revenue, Advertising Expense, Depreciation Expense, Supplies Expense, Salaries and Wages Expense, and Rent Expense.
d. Prepare a trial balance at August 31.
e. Journalize and post adjusting entries.
f. Prepare an adjusted trial balance.
g. Prepare an income statement and a retained earnings statement for August and a classified at August 31.
h. Journalize and post closing entries and complete the closing process.
i. Prepare a post-closing trial balance at August 31.
