Question

The following are the trial balance and the other information related to Bruce Sheffield, who operates a construction hauling business.

SHEFFIELD TRIAL BALANCE DECEMBER 31, 2020
		Debit			Credit
Cash		$35,500
Accounts Receivable		50,800
Allowance for Doubtful Accounts					$2,650
Supplies		3,080
Prepaid Insurance		1,400
Equipment		34,500
Accumulated Depreciation—Equipment					4,500
Notes Payable					8,400
Owner’s Capital					45,700
Service Revenue					103,610
Rent Expense		6,500
Salaries and Wages Expense		30,900
Utilities Expenses		1,320
Office Expense		860
		$164,860			$164,860

1.		Fees received in advance from clients $4,400.
2.		Services performed for clients that were not recorded by December 31, $4,300.
3.		Equipment is being depreciated at 8% per year.
4.		Bad debt expense for the year is $1,490.
5.		Insurance expired during the year $500.
6.		Sheffield gave the bank a 90-day, 5% note for $8,400 on December 1, 2020.
7.		Rent of the building is $500 per month. The rent for 2020 has been paid, as has that for January 2021.
8.		Office salaries and wages earned but unpaid December 31, 2020, $1,440.

Sheffield withdrew $14,000 cash for personal use during the year.

1-From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2020.

2-Prepare an income statement for 2020.

3-Prepare a statement of owner’s equity for 2020.

4-Prepare a classified balance sheet for 2020.

Answer 1

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Adjusting Entries
Account	Debit $	Credit $
Service Revenue	4,400.00
Unearned Revenue		4,400.00
Accounts Receivable	4,300.00
Service Revenue		4,300.00
Accumulated Depreciation	2,760.00
Depreciation Expense- Equipment		2,760.00
(This is $ 34,500*8%.)
Allowance for doubtful accounts	1,490.00
Accounts Receivable		1,490.00
(Bad debt expense of $ 1,490.)
Insurance Expense	500.00
Prepaid Insurance		500.00
Interest Expense	35.00
Interest Payable		35.00
(This is $ 8,400*5%/12 months.)
Prepaid Rent	500.00
Rent Expense		500.00
Salaries & Wages Expense	1,440.00
Salaries & Wages Payable		1,440.00

Income Statement	Amount $
Service Revenue	103,510.00
Less:
Depreciation Expense	2,760.00
Salaries & Wages Expense	32,340.00
Interest Expense	35.00
Insurance Expense	500.00
Rent Expense	6,000.00
Office Expense	860.00
Utilities Expense	1,320.00
Net Income	59,695.00
Statement of Owners Equity	Amount $
Opening Balance	45,700.00
Add: Net Income	59,695.00
Closing Balance	105,395.00

Balance Sheet	Amount $	Amount $
Current Assets
Cash		35,500.00
Accounts Receivable	53,610.00
Allowance for doubtful accounts	(1,160.00)	52,450.00
Supplies		3,080.00
Prepaid Insurance		900.00
Prepaid Rent		500.00
Total Current Assets		92,430.00
Non Current Assets
Equipment	34,500.00
Less: Accumulated Depreciation	7,260.00
Fixed Assets		27,240.00
Total Assets		119,670.00
Liabilities & Owner's Equity
Liabilities	Amount $	Amount $
Current Liabilities
Unearned Revenue	4,400.00
Interest Payable	35.00
Salaries & Wages Payable	1,440.00
Current Liabilities		5,875.00
Non- Current Liabilities
Notes Payable	8,400.00
Non- Current Liabilities		8,400.00
Total Liabilities		14,275.00
Owner's Equity
Owner's Capital		105,395.00
Total Liabilities & Owner's Equity		119,670.00