Chapter 4, Problem 10AP

On June 1, 2014, Bob Lutz opened Lutz Repair Service. During the month, he

June 1 Began business by depositing $20,000 in a bank account in the name of the company.

1 Paid the rent for the store for current month, $1,700.

1 Paid the premium on a one-year insurance policy, $1,920.

2 Purchased repair equipment from Bilbao Company, $16,800. Terms were $2,400 down and $1,200 per month for one year. First payment is due June 1.

5 Purchased repair supplies from Rusin Company on credit, $1,872.

8 Paid cash for an advertisement in a local newspaper, $240.

15 Received cash repair revenue for the first half of the month, $1,600.

30 Paid Rusin Company on account, $900.

30 Received cash repair revenue for the last half of May, $3,900.

30 Made a withdrawal, $1,200.

REQUIRED FOR JUNE

1. Prepare journal entries to record the June transactions. Include the Post. Ref. column and fill in using the account numbers listed in requirement 2.

2. Open the following accounts: Cash (111); Prepaid Insurance (117); Repair Supplies (119); Repair Equipment (144); Accumulated Depreciation—Repair Equipment (145); Accounts Payable (212); B. Lutz, Capital (311); B. Lutz, Withdrawals (313); Income Summary (314); Repair Revenue (411); Store Rent Expense (511); Advertising Expense (512); Insurance Expense (513); Repair Supplies Expense (514); and Depreciation Expense—Repair Equipment (515). Post the May journal entries to the ledger accounts.

3. Using the following information, record adjusting entries in the general journal and post to the ledger accounts:

d. One month’s insurance has expired.

e. The remaining inventory of unused repair supplies is $676.

f. The estimated depreciation on repair equipment is $280.

4. From the accounts in the ledger, prepare an adjusted trial balance.

(Note: Normally, a trial balance is prepared before adjustments but is omitted here to save time.)

5. From the adjusted trial balance, prepare an income statement, a statement of owner’s equity, and a balance sheet for June.

6. Prepare and post closing entries.

7. Prepare a post-closing trial balance.

(Optional)

During July, Bob Lutz completed these transactions for Lutz Repair Service:

July 1 Paid the monthly rent, $1,700.

1 Made the monthly payment to Bilbao Company, $1,200.

6 Purchased additional repair supplies on credit from Rusin Company, $3,452.

15 Received cash repair revenue for the first half of the month, $3,656.

20 Paid cash for an advertisement in the local newspaper, $240.

23 Paid Rusin Company on account, $2,400.

30 Received cash repair revenue for the last half of the month, $3,268.

30 Recorded a withdrawal by owner, $1,200.

8. Prepare and post journal entries to record the July transactions.

9. Using the following information, record adjusting entries in the general journal and post to the ledger accounts.

d. One month’s insurance has expired.

e. The inventory of unused repair supplies is $1,652.

f. The estimated depreciation on repair equipment is $280.

10. From the accounts in the ledger, prepare an adjusted trial balance.

11. From the adjusted trial balance, prepare the July income statement, statement of owner’s equity, and balance sheet.

12. Prepare and post closing entries.

13. Prepare a post-closing trial balance.