Question

In: Accounting

The general ledger of the Karlin Company, a consulting company, at January 1, 2021, contained the...

The general ledger of the Karlin Company, a consulting company, at January 1, 2021, contained the following account balances:

   

Account Title Debits Credits
Cash 28,400
Accounts receivable 18,500
Equipment 32,000
Accumulated depreciation 9,600
Salaries payable 10,250
Common stock 49,500
Retained earnings 9,550
Total 78,900 78,900

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

  1. Service revenue, $136,000, of which $40,800 was on account and the balance was received in cash.
  2. Collected on accounts receivable, $27,100.
  3. Issued shares of common stock in exchange for $16,500 in cash.
  4. Paid salaries, $49,750 (of which $10,250 was for salaries payable at the end of the prior year).
  5. Paid miscellaneous expense for various items, $26,800.
  6. Purchased equipment for $19,000 in cash.
  7. Paid $3,300 in cash dividends to shareholders.
  1. Accrued salaries at year-end amounted to $995.
  2. Depreciation for the year on the equipment is $3,200.


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 2021.
7-b. Prepare a balance sheet as of December 31, 2021.
9. Prepare a post-closing trial balance.

Solutions

Expert Solution

2,5 & 8 Summary entries:
Ref. General journal Debit Credit
a. Cash (plug) 95200
Accounts receivable 40800
Service revenue 136000
(Service revenue earned)
b. Cash 27100
Accounts receivable 27100
(Collected on accounts receivable)
c. Cash 16500
Common stock 16500
(Issued shares)
d. Salaries expense (plug) 39500
Salaries payable 10250
Cash 49750
(Salaries paid)
e. Miscellaneous expense 26800
Cash 26800
(Miscellaneous expense paid)
f. Equipment 19000
Cash 19000
(Purchased equipment)
g. Dividends 3300
Cash 3300
(Dividend paid)
Adjusting entries:
Ref. General journal Debit Credit
1 Salaries expense 995
Salaries payable 995
(Salaries accrued)
2 Depreciation expense 3200
Accumulated depreciation 3200
(Depreciation recorded)
Clsong entries:
Ref. General journal Debit Credit
Cl-1. Income summary 70495
Miscellaneous expense 26800
Depreciation expense 3200
Salaries expense 40495
(Expense accounts closed)
Cl-2. Service revenue 136000
Income summary 136000
(Revenue account closed)
Cl-3. Income summary (136000-70495) 65505
Retained earnings 65505
(Income summary closed)
Cl-4. Retained earnings 3300
Dividends 3300
(Dividend account closed)


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