Question

Transactions for Blackberry Mountain Inc for the month of January is as follows:

1/1 Company issued common stock for $21,000

1/2 a Supplies are purchased for $3,000.

1/2 b Insurance is paid for 6 months beginning January 1: $5,400 (record as an asset)

1/2 c Rent is paid for 3 months beginning in January: $4,500 (record as an asset)

1/3 Blackberry Mountain Inc borrows $45,000 from 1st State Bank at 12% annual interest.

1/6 An equipment is purchased for $22,500 cash. It will be used for 3 years and will be depreciated

monthly using straight-line depreciation with no salvage value. A full month of depreciation

will be charged in January. (Depreciation Expense= 22,500/3*1/12=635)

1/9 Services are performed for customers on account. Invoices totaling $9,800 are mailed.

1/10 Services are performed for cash customers: $7,600.

1/15 Blackberry Mountain Inc borrows $16,000 from 2nd State Bank at 9% annual interest.

1/16 Wages for the first half of the month are paid on January 16: $4,200

1/20 The company receives $3,000 from a customer for an advance order for services to be

provided in January and February.

1/25 Collections from customers on account (see January 9 transaction): $4,500.

1/30 A $3,100 utility bill for January arrived. It is due on February 15.

Additional information for the adjusting entries at January 31:

a. The company completed 60% of the deliveries for the customer that paid in advance on

January 20th.

b. Interest is accrued for the two bank loans (assume a full month for the 1st State Bank loan and

½ month for the 2nd State Bank loan).

c. The last 2 weeks’ wages earned by employees are $4,200 and will be paid on February 3rd.

d. Record January depreciation.

e. Adjust the prepaid asset accounts as needed.

Instructions

5. Prepare Adjusting Trial Balance.

6. Prepare Income Statement, Balance sheet, and Statement of Retained Earnings.

7. Prepare closing Entries.

Answer 1

Adjusted Trial Balance
Account Title	Debit	Credit
Cash	$             57,500
Accounts Receivable	$               5,300
Supplies	$               3,000
Prepaid Insurance	$               4,500
Prepaid Rent	$               3,000
Equipment	$             22,500
Accumulated Depreciation		$                625
Utilities Payable		$             3,100
Interest Payable		$                510
Wages payable		$             4,200
Unearned Service Revenue		$             1,200
12% Bank Loan		$          45,000
9% Bank Loan		$          16,000
Common Stock		$          21,000
Service Revenue		$          19,200
Wages	$               8,400
Utilities	$               3,100
Interest	$                   510
Depreciation	$                   625
Insurance	$                   900
Rent	$               1,500
	$         1,10,835	$       1,10,835

--

Closing Entries
	Debit	Credit
Service Revenue	$                19,200
Income Summary		$             19,200
Income Summary	$                15,035
Wages		$               8,400
Utilities		$               3,100
Interest		$                   510
Depreciation		$                   625
Insurance		$                   900
Rent		$               1,500
Income Summary	$                  4,165
Retained Earnings		$               4,165

--

Interest
12% Bank Loan	$                         450	45000*12%*1/12
9% Bank Loan	$                           60	16000*9%*0.5/12
	$                         510
Depreciation	$                         625	22500/3*1/12
Insurance Expense	$                         900	(5400/6)
Rent Expense	$                     1,500	4500/3

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Hope you Understood.---

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Thank you.