Question

The general ledger of the Karlin Company, a consulting company, at January 1, 2018, contained the following account balances:

Account Title	Debits		Credits
Cash	30,000
Accounts receivable	15,000
Equipment	20,000
Accumulated depreciation			6,000
Salaries payable			9,000
Common stock			40,500
Retained earnings			9,500
Total	65,000		65,000

The following is a summary of the transactions for the year:

a. Sales of services, $100,000, of which $30,000 was on credit.

b. Collected on accounts receivable, $27,300.

c. Issued shares of common stock in exchange for $10,000 in cash.

d. Paid salaries, $50,000 (of which $9,000 was for salaries payable).

e. Paid miscellaneous expenses, $24,000.

f. Purchased equipment for $15,000 in cash.

g. Paid $2,500 in cash dividends to shareholders.

1. Accrued salaries at year-end amounted to $1,000.

2. Depreciation for the year on the equipment is $2,000.

Required:
2., 5, & 8. Prepare the summary, adjusting and closing entries for each of the transactions listed.
3. Post the transactions, adjusting and closing entries into the appropriate t-accounts.
4. Prepare an unadjusted trial balance.
6. Prepare an adjusted trial balance.
7-a. Prepare an income statement for 2018.
7-b. Prepare a balance sheet as of December 31, 2018.
9. Prepare a post-closing trial balance.

Answer 1

2,5 & 8 :

2. In the books of Karlin Company :

Transaction / Event	Account Titles	Debit	Credit
		$	$
a.	Cash	70,000
	Accounts Receivable	30,000
	Service Revenue		100,000
b.	Cash	27,300
	Accounts Receivable		27,300
c.	Cash	10,000
	Common Stock		10,000
d.	Salaries Payable	9,000
	Salaries Expense	41,000
	Cash		50,000
e.	Miscellaneous Expense	24,000
	Cash		24,000
f.	Equipment	15,000
	Cash		15,000
g.	Dividends	2,500
	Cash		2,500

5. Adjusting Entries:

Adjustment	Account Titles	Debit	Credit
December 31, 2018		$	$
1.	Salaries Expense	1,000
	Salaries Payable		1,000
2.	Depreciation Expense	2,000
	Accumulated Depreciation		2,000

8. Closing Entries:

Date	Account Titles	Debit	Credit
December 31, 2018		$	$
a.	Service Revenue	100,000
	Income Summary		100,000
b.	Income Summary	68,000
	Salaries Expense		42,000
	Depreciation Expense		2,000
	Miscellaneous Expense		24,000
c.	Income Summary	32,000
	Retained Earnings		32,000
d.	Retained Earnings	2,500
	Dividends		2,500

3. T-accounts:

Cash

Beginning bal.	30,000	d.	50,000
a.	70,000	e.	24,000
b.	27,300	f.	15,000
c.	10,000	g.	2,500
Ending bal.	45,800

Accounts Receivable:

Beginning bal	15,000	b.	27,300
a.	30,000
Ending bal	17,700

Equipment:

Beginning bal.	20,000
f.	15,000
Ending bal	35,000

Accumulated Depreciation:

		Beginning bal.	6,000
		a.2	2,000
		Ending bal.	8,000

Salaries Payable:

d.	9,000	Beginning bal.	9,000
		a.1	1,000
		Ending bal.	1,000

Common Stock :

		Beginning bal.	40,500
		c.	10,000
		Ending bal.	50,500

Retained Earnings:

Dividends	2,500	Beginning Bal.	9,500
		Income Summary	32,000
		Ending bal.	39,000

Service Revenue:

		a.	100,000
		Income Summary	100,000

Salaries Expense:

d.	41,000
a.1	1,000
Income Summary	42,000

Micellaneous Expense:

e.	24,000
Income Summary	24,000

Depreciation Expense:

a.2	2,000
Income Summary	2,000

4.

Karlin Company
Unadjusted Trial Balance
December 31, 2018
Account Titles	Debit	Credit
	$	$
Cash	45,800
Accounts Receivable	17,700
Equipment	35,000
Accumulated Depreciation		6,000
Common Stock		50,500
Retained Earnings		9,500
Dividends	2,500
Service Revenue		100,000
Salaries Expense	41,000
Miscellaneous Expense	24,000
Totals	$ 166,000	$ 166,000