Question

On July 1, 2017, Keti S. created a new self-storage business, Shenakhuli Co. The following transactions occurred during the company's first month.

July 1 Keti invested $30,000 cash and building worth $150,000 in the company.

2 The company rented equipment by paying $2,000 cash for the first month's (July) rent.

5 The company purchased $2,400 of office supplies for cash.

10 The company paid $7,200 cash for the premium on a 12-month insurance policy. Coverage begins on July 11.

14 The company paid an employee $1,000 cash for two weeks' salaries earned.

24 The company collected $9,800 cash for storage fees from customers.

28 The company paid $1,000 cash for two weeks' salaries earned by employees.

29 The company paid $950 cash for minor repairs to a leaking roof.

30 The company paid $400 cash for this month's telephone bill.

31 Keti withdrew $2,000 cash from the company for personal use.

Here are the company's accounts:

Cash Accumulated Depreciation - Building Depreciation Expense Repairs Expense

Account Receivables Salaries Payable Salaries Expense Telephone Expense

Office Supplies Keti S., Capital Insurance Expense Income Summary

Prepaid Insurance Keti S., Withdrawal Rent Expense

Buildings Storage Fees Earned Office supplies Expense

Required:

1.Prepare journal entries to record the transactions for July.

2. Prepare an unadjusted trial balance as of July 31.

3. Use the following information to journalize adjusting entries for the month:

a. Two-thirds of one month's insurance coverage has expired.

b. At the end of the month, $1,525 of office supplies are still available.

c. This month's depreciation on the buildings is $1,500

d. An employee earned $100 of unpaid and unrecorded salaries as of month-end.

e. The company earned $1,150 of commissions that are not yet billed at month-end.

4. Prepare an adjusted trial balance as of July 31.

5. Prepare Income Statement and Balance Sheet for the period.

6. Prepare journal entries to close the temporary accounts.

I need the answer of the 6th question thanks in advance

Answer 1

SOLUTION

Part 2

Transactions for July

July   1      Cash.............................................................................. 101          30,000

                  Buildings...................................................................... 173        150,000

                           Keti S, Capital................................................ 301                                       180,000

                     Owner invested in the business.

          2      Rent Expense................................................................ 640            2,000

                           Cash..................................................................... 101                                       2,000

                     Paid one month’s rent.

          5      Office Supplies............................................................. 124            2,400

                           Cash..................................................................... 101                                       2,400

                     Acquired office supplies.

       10       Prepaid Insurance......................................................... 128            7,200

                           Cash..................................................................... 101                                       7,200

                     Paid 12 months’ premium in advance.

       14       Salaries Expense........................................................... 622            1,000

                           Cash..................................................................... 101                                       1,000

                     Paid two weeks’ salary.

       24       Cash.............................................................................. 101            9,800

                           Storage Fees Earned............................................ 401                                       9,800

                     Collected fees from customers.

       28       Salaries Expense........................................................... 622            1,000

                           Cash..................................................................... 101                                       1,000

                     Paid two weeks’ salary.

       29       Repairs Expense........................................................... 684               950

                           Cash..................................................................... 101                      950

                     Repaired the roof.

       30       Telephone Expense...................................................... 688               400

                           Cash..................................................................... 101                      400

                     Paid the telephone bill.

       31       Keti S, Withdrawals................................................ 302            2,000

                           Cash..................................................................... 101                                       2,000

                     Owner withdrew cash for personal use.

Part 3

Keti S

Unadjusted Trial Balance

July 31, 2017

No.      Account Title                                                                               Debit                   Credit

101      Cash......................................................................................     $ 22,850

106      Accounts receivable.............................................................                  0            

124      Office supplies.....................................................................           2,400            

128      Prepaid insurance.................................................................           7,200            

173      Buildings..............................................................................       150,000            

174      Accumulated depreciation–Buildings..................................                               $           0

209      Salaries payable...................................................................                               0

301    Keti S., Capital.................................................................                                180,000

302    Keti S., Withdrawals........................................................           2,000            

401      Storage fees earned..............................................................                        9,800

606      Depreciation expense–Buildings.........................................                  0            

622      Salaries expense...................................................................           2,000            

637      Insurance expense................................................................                  0

640      Rent expense........................................................................           2,000            

650      Office supplies expense.......................................................                  0            

684      Repairs expense...................................................................              950            

688      Telephone expense...............................................................              400                          

            Totals....................................................................................     $189,800             $189,800

Part 4

Adjusting entries

July 31 Insurance Expense................................................................ 637               400

                           Prepaid Insurance................................................... 128                                       400

                     To record expired insurance

                     (2/3 x $7,200/12 per month).

        31 Office Supplies Expense...................................................... 650               875

                           Office Supplies....................................................... 124                                       875

                     To record the cost of consumed

                     supplies ($2,400 - $1,525).

        31 Depreciation Expense—Buildings....................................... 606            1,500

                           Accum. Depreciation—Buildings.......................... 174                                       1,500

                     To record depreciation.

        31 Salaries Expense................................................................... 622               100

                           Salaries Payable..................................................... 209                                       100

                     To record accrued salaries.

        31 Accounts Receivable............................................................ 106            1,150

                           Storage Fees Earned............................................... 401                                       1,150

                     To record accrued storage fees.

Keti S.

Adjusted Trial Balance

July 31, 2017

No.      Account Title                                                                                 Debit              Credit

101      Cash......................................................................................     $ 22,850

106      Accounts receivable.............................................................           1,150            

124      Office supplies.....................................................................           1,525            

128      Prepaid insurance.................................................................           6,800            

173      Buildings..............................................................................       150,000            

174      Accumulated depreciation–Buildings..................................                               $    1,500

209      Salaries payable...................................................................                           100

301     Keti S., Capital.................................................................                                180,000

302     Keti S. Withdrawals........................................................           2,000            

401      Storage fees earned..............................................................                      10,950

606      Depreciation expense–Buildings.........................................           1,500            

622      Salaries expense...................................................................           2,100            

637      Insurance expense................................................................              400

640      Rent expense........................................................................           2,000            

650      Office supplies expense.......................................................              875            

684      Repairs expense...................................................................              950            

688      Telephone expense...............................................................              400                          

            Totals....................................................................................     $192,550             $192,550

Part 5

Keti S.

Income Statement

For Month Ended July 31, 2017

Storage fees earned....................................................                      $10,950

Expenses

Depreciation expense–Buildings.............................         $1,500

Salaries expense......................................................           2,100

Insurance expense....................................................              400

Rent expense............................................................           2,000

Office supplies expense...........................................              875

Repairs expense.......................................................              950

Telephone expense..................................................              400

Total expenses.........................................................                          8,225

Net income................................................................                               $ 2,725

Keti S.

Statement of Owner’s Equity

For Month Ended July 31, 2017

Keti S., Capital, July 1, 2017.................................                             $           0

Add:     Owner’s investment.....................................    $180,000

              Net income...................................................          2,725

                                                                                                                  182,725

Less:     Withdrawals.................................................                                (2,000)

Keti S., Capital, July 31, 2017...............................                             $180,725

Keti S.

Balance Sheet

July 31, 2017

                                                        Assets

Cash...........................................................................                     $ 22,850

Accounts receivable..................................................                           1,150

Office supplies...........................................................                           1,525

Prepaid insurance......................................................                           6,800

Buildings...................................................................     $150,000

Accumulated depreciation--Buildings.......................          (1,500)               148,500

Total assets................................................................                     $180,825

                                                     Liabilities

Salaries payable.........................................................                     $       100

                                                        Equity

Keti S.Capital.......................................................                     180,725

Total liabilities and equity.........................................                             $180,825

Part 6

Closing entries

July 31          Storage Fees Earned.................................................. 401          10,950

                           Income Summary................................................ 901                                       10,950

                        To close the revenue account.

        31         Income Summary...................................................... 901            8,225

                           Depreciation Exp—Buildings............................. 606                                       1,500

                           Salaries Expense.................................................. 622                                       2,100

                           Insurance Expense............................................... 637                      400

                           Rent Expense....................................................... 640                                       2,000

                           Office Supplies Expense..................................... 650                      875

                           Repairs Expense.................................................. 684                      950

                           Telephone Expense............................................. 688                      400

                        To close the expense accounts.

      31          Income Summary...................................................... 901            2,725

                         Keti S. Capital................................................ 301                                       2,725

                        To close the Income Summary.

       31       Keti S., Capital...................................................... 301            2,000

                          Keti S., Withdrawals....................................... 302                                       2,000

                        To close the withdrawals account.