Question

Abbot Equipment Repair has a September 30 year end. The company adjusts and closes its accounts on an annual basis. On August 31, 2021, the account balances of Abbot Equipment Repair were as follows:

ABBOT EQUIPMENT REPAIR

Trial Balance

August 31, 2021

​​​​​​​​Debit ​​Credit

Cash ​ ​​​​​​​$ 2,790 ​ ​

Accounts receivable ​​​​​​ 7,910 ​

Supplies ​​​​​​​ 8,500 ​

Equipment ​​​​​​​ 9,000 ​

Accumulated depreciation—equipment ​​​​​​$ 1,800

Accounts payable ​​​​​​​​ 3,100

Unearned revenue ​​​​​​​​ 400

J. Abbot, capital ​​​​​​​​ 21,200

J. Abbot, drawings ​​​​​​ 15,600 ​

Service revenue ​​​​​​​​ 49,600

Rent expense ​​​​​​​ 5,500 ​

Salaries expense ​​​​​​ 24,570 ​

Telephone expense ​​​​​​ 2,230 ​​

​​​Totals​​​​​$76,100 ​$76,100

During September, the following transactions were completed:

Sept. 1 Borrowed $10,000 from the bank and signed a two-year, 5% note payable.

2 ​Paid September rent, $500.

8 ​Paid employee salaries, $1,050.

12 ​Received $1,500 cash from customers on account.

15 ​Received $5,700 cash for services performed in September.

17 ​Purchased additional supplies on account, $1,300.

20 ​Paid creditors $2,300 on account.

21 ​Paid September telephone bill, $200.

22 ​Paid employee salaries, $1,050.

27 ​Performed services on account and billed customers for services provided, $900.

29 ​Received $550 from customers for services to be provided in the future.

30 ​Paid J. Abbot $800 cash for personal use.

Adjustment data consist of the following:

Supplies on hand at September 30 cost $1,000.

Accrued salaries payable at September 30 total $630.

The equipment has an expected useful life of five years.

Unearned revenue of $450 is still not earned at September 30.

Interest is payable on the first of each month.

Instructions

e. Journalize and post adjusting entries.

f. Prepare an adjusted trial balance at September 30.

g. Prepare an income statement and a statement of owner's equity, and a classified balance sheet.

h. Prepare and post-closing entries.

i. Prepare post-closing trial balance at September 30.

Answer 1

e) Journal Entries:
Date	Acc Titles	Dr. $	Cr. $
1-Sep	Cash	10000
	5% Note payable		10000
	(borrowed from bank to sign two years)
2-Sep	Rent exp.	500
	Cash		500
	(rent paid)
8-Sep	Salaries exp.	1050
	Cash		1050
	(salaries paid)
12-Sep	Cash	1500
	Acc Receivable		1500
	(cash collected)
15-Sep	Cash	5700
	Service revenue		5700
	(cash services made)
17-Sep	supplies	1300
	Acc Payable		1300
	(supplies purchased on account)
20-Sep	Acc Payable	2300
	Cash		2300
	(creditors paid)
21-Sep	Telephone exp.	200
	Cash		200
	(telephone bill paid)
22-Sep	Salaries exp.	1050
	Cash		1050
	(salaries paid)
27-Sep	Acc Receivable	900
	Service revenue		900
	(credit services made & billed)
29-Sep	Cash	550
	Unearned revenue		550
	(cash reced. For future services)
30-Sep	J.Abbot drawings	800
	Cash		800
	(withdrawals for personal use)
Adjusting entries:
30-Sep	supplies exp.	8800
	supplies		8800
	(supplies exp. Booked)
30-Sep	Salaries exp.	630
	Salaries payable		630
	(accrued salaries booked)
30-Sep	Dep. Exp.	1800
	Acc dep.		1800
	(depreciation booked on equip.)
30-Sep	Unearned revenue	500
	Service revenue		500
	(unearned revenue earned)
30-Sep	Interest exp.	42		(10000*5%/12)
	Interest payable		42
	(interest made payable)

f) Adjusted Trial Balance
Acc Titles	Dr. $	Cr. $	Calculations:
Cash	14640		2790+10000-500-1050+1500+5700-2300-200-1050+550-800
Acc Receivable	7310		7910-1500+900
supplies	1000		8500+1300-8800
Equipment	9000		9000
Acc Dep-equip		3600	1800+1800
Acc Payable		2100	3100+1300-2300
Salaries payable		630	630
Interest payable		42	42
Unearned revenue		450	400+550-500
Note payable		10000	10000
J. Abbot Capital		21200	21200
J.Abbot drawings	16400		15600+800
Service revenue		56700	49600+5700+900+500
Rent exp.	6000		5500+500
Salaries exp.	27300		24570+1050+1050+630
Telephone expn	2430		2230+200
supplies exp.	8800		8800
Dep exp.	1800		1800
Interest exp.	42		42
Total	94722	94722
g) Income Statement:
	Amount $
Service revenue	56700
Less:Expenses:
Rent exp.	6000
Salaries exp.	27300
Telephone expn	2430
supplies exp.	8800
Dep exp.	1800
Interest exp.	42
Total expenses	46372
Net Income	10328
Statement of Equity owners:
opening balance	21200
add: Net Income	10328
less: Withdrawal	16400
closing balance	15128
Balance Sheet:
Assets:
Cash	14640
Acc Receivable	7310
supplies	1000
Current assets	22950
Equipment	9000
Acc Dep-equip	-3600
Total Assets	28350
Liabilities & Equity:
Acc Payable	2100
Salaries payable	630
Interest payable	42
Unearned revenue	450
Current liabilities	3222
Note payable	10000
J. Abbot Capital	15128
Total Liabi. & Equity	28350

h) Post closing entries:
30-Sep	Service Revenue	56700
	Income summary		56700
	(revenues transferred to income summary)
30-Sep	Income summary	46372
	Rent exp.		6000
	Salaries exp.		27300
	Telephone expn		2430
	supplies exp.		8800
	Dep exp.		1800
	Interest exp.		42
	(expense transferred to income summary)
i) Post closing trial balance:
	Acc Titles	Dr. $	Cr. $
	Cash	14640
	Acc Receivable	7310
	supplies	1000
	Equipment	9000
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