Question

Lubbock Recreation Incorporation. (LRI), a retail store selling gear and apparel for outdoor activities, began operation in 2020. The following transactions occurred during 2020:

1. June 1: Issued 20,000 shares of its own common stock with $2 par value in exchange for $10 cash per share;

2. June 2: Purchase equipment for use in operating the business at a cost of $60,000 by signing a 6-month 10% note payable. The equipment has an estimated 5-year useful life and no salvage value;

3. June 3: Paid $3,000 cash for a six-month insurance coverage. The coverage is effective immediately;

4. June 5: Purchased $100,000 of inventory on account;

5. June 10: Received a $1,000 cash advance from customer for training sessions scheduled for later this month;

6. June 25: Sold products at a selling price of $46,000 (cost of $25,000) on account;

7. June 26: Paid $20,000 cash to reduce the company’s accounts payable from inventory previously purchased on account;

Requirements: Please follow the practice example solution to answer the following questions.

Step 1 – Journalize the transactions

Step 2- Using T-accounts, post the entries from the journal(s) to the ledger(s).

Step 3 – Prepare an Unadjusted Trial Balance

Step 4 – Prepare Adjusting Entries and post the Adjusting Entries to the ledger(s). Prepare all necessary adjusting entries at June 30, 2020. Note that salaries earned by employees but not paid yet amounted to $3,000. The management determined that $1,950 receivables would become bad debt. Further, LRI has satisfied its performance obligations for $3,000 of unrecorded training revenue that has not been billed.

Step 5 – Prepare an Adjusted Trial Balance

Step 6 – Prepare Financial Statements for the period in good forms (Following the format used in the textbook example or practice problem).

Step 7 – Journalize Closing Entries and post the Closing Entries to ledger(s)

Step 8 – Prepare a Post-Closing Trial Balance

8. June 28: Received $10,000 cash as payment towards the company’s accounts receivable from sales previously made on account;

9. June 29: Paid $2,000 cash for rent of retail space for June;

10. June 30: Paid $2,500 cash dividends to company stockholders.

Answer 1