Chapter 3, Problem 3.20E

On January 1, 2018, Red Flash Photography had the following balances: Cash, $12,000; Supplies, $8,000; Land, $60,000; Deferred Revenue, $5,000; Common Stock $50,000; and Retained Earnings, $25,000. During 2018, the company had the following transactions:

1.    February    15    Issue additional shares of common stock, S20,000.

2.    May    20    Provide services to customers for cash, $35,000, and on account, $30,000.

3.    August    31    Pay salaries to employees for work in 2018, $23,000.

4.    October    1    Purchase rental space for one year, $12,000.

5.    November    17    Purchase supplies on account, $22,000.

6.    December    30    Pay dividends, $2,000.

The following information is available on December 31, 2018:

  1.    Employees are owed an additional $4,000 in salaries.

  2.    Three months of the rental space has expired.

  3.    Supplies of $5,000 remain on hand.

  4.    All of the services associated with the beginning deferred revenue have been performed.

  Required:

  1.    Record the transactions that occurred during the year.

  2.    Record the adjusting entries at the end of the year.

  3.    Prepare an adjusted trial balance.

  4.    Prepare an income statement, statement of stockholders’ equity, and classified balance sheet.

  5.    Prepare closing entries.