Chapter 4, Problem 1BPSB

To determine

Adjusting Entries:

The journal entries framed to realize the revenues and expense for the specified accounting period are called adjusting entries.

Income Statement:

The statement which shows the revenues earned and expenses incurred during a particular year is called Income statement.

Statement of Owner’s Equity:

The statement which shows changes in the owners’ equity due to net income or loss and owners’ withdrawal during the accounting period is called statement of owner’s equity.

Balance Sheet:

A financial statement which shows the financial position of a company during specified accounting period is called a balance sheet.

Closing Entries:

The journal entries prepare to close all the temporary accounts at the end of the accounting period is called closing entries.

To determine:

1. Open ledger accounts using the balance column format.

2. Journalize the transactions for July and post them to the ledger accounts.

3. Prepare an unadjusted trial balance as of July 31.

4. Prepare adjusting entries and post them to the ledger accounts.

5. Prepare the adjusted trial balance as of July 31. Prepare the income statement and the statement of owner’s equity for the month of July and the balance sheet at July 31, 2017.

6. Prepare journal entries to close the temporary accounts and post these entries to the ledger.

7. Prepare a post-closing trial balance.

Explanation of Solution

Explanation:

1.

Cash Account No. 101
Date	Debit	Credit	Balance

Accounts Receivable Account No. 106
Date	Debit	Credit	Balance

Office Supplies Account No. 124
Date	Debit	Credit	Balance

Prepaid Insurance Account No. 128
Date	Debit	Credit	Balance

Building Account No. 173
Date	Debit	Credit	Balance

Accumulated Depreciation – Buildings Account No. 174
Date	Debit	Credit	Balance

Salaries Payable Account No. 209
Date	Debit	Credit	Balance

L. Plume, Capital Account No. 301
Date	Debit	Credit	Balance

L. Plume, Withdrawals Account No. 302
Date	Debit	Credit	Balance

Storage Fees Earned Account No. 401
Date	Debit	Credit	Balance

Depreciation Expense – Buildings Account No. 606
Date	Debit	Credit	Balance

Salaries Expense Account No. 622
Date	Debit	Credit	Balance

Insurance Expense Account No. 637
Date	Debit	Credit	Balance

Rent Expense Account No. 640
Date	Debit	Credit	Balance

Office Supplies Expense Account No. 650
Date	Debit	Credit	Balance

Repairs Expense Account No. 684
Date	Debit	Credit	Balance

Telephone Expense Account No. 688
Date	Debit	Credit	Balance

Income Summary Account No. 901
Date	Debit	Credit	Balance

2.

Date	Accounts	Debit	Credit
Jul. 1	Cash	$30,000
	Building	$150,000
	L. Plume Capital		$180,000
2	Rent Expense	$2,000
	Cash		$2,000
5	Office Supplies	$2,400
	Cash		$2,400
10	Prepaid Insurance	$7,200
	Cash		$7,200
14	Salaries Expense	$1,000
	Cash		$1,000
24	Cash	$9,800
	Storage Fees Earned		$9,800
28	Salaries Expense	$1,000
	Cash		$1,000
29	Repair Expense	$950
	Cash		$950
30	Telephone Expense	$400
	Cash		$400
31	L. Plume, Withdrawals	$2,000
	Cash		$2,000

Cash Account No. 101
Date	Debit	Credit	Balance
July 1	$30,000		$30,000
2		$2,000	$28,000
5		$2,400	$25,600
10		$7,200	$18,400
14		$1,000	$17,400
24	$9,800		$27,200
28		$1,000	$26,200
29		$950	$25,250
30		$400	$24,850
31		$2,000	$22,850

Accounts Receivable Account No. 106
Date	Debit	Credit	Balance
July 31			$0

Office Supplies Account No. 124
Date	Debit	Credit	Balance
July 5	$2,400		$2,400

Prepaid Insurance Account No. 128
Date	Debit	Credit	Balance
July 10	$7,200		$7,200

Building Account No. 173
Date	Debit	Credit	Balance
July 1	$150,000		$150,000

Accumulated Depreciation – Buildings Account No. 174
Date	Debit	Credit	Balance
July 31			$0

Salaries Payable Account No. 209
Date	Debit	Credit	Balance
July 31			$0

L. Plume, Capital Account No. 301
Date	Debit	Credit	Balance
July 1		$180,000	$180,000

L. Plume, Withdrawals Account No. 302
Date	Debit	Credit	Balance
July 31	$2,000		$2,000

Storage Fees Earned Account No. 401
Date	Debit	Credit	Balance
July 24		$9,800	$9,800

Depreciation Expense – Buildings Account No. 606
Date	Debit	Credit	Balance
July 31			$0

Salaries Expense Account No. 622
Date	Debit	Credit	Balance
July 14	$1,000		$1,000
28	$1,000		$2,000

Insurance Expense Account No. 637
Date	Debit	Credit	Balance
July 31			$0

Rent Expense Account No. 640
Date	Debit	Credit	Balance
July 2	$2,000		$2,000

Office Supplies Expense Account No. 650
Date	Debit	Credit	Balance
July 31			$0

Repairs Expense Account No. 684
Date	Debit	Credit	Balance
July 29	$950		$950

Telephone Expense Account No. 688
Date	Debit	Credit	Balance
July 30	$400		$400

Income Summary Account No. 901
Date	Debit	Credit	Balance
July 31			$0

3.

SAFE STORAGE CO. Unadjusted Trial Balance July 31, 2017
Cash	$22,850
Accounts Receivable	$0
Office Supplies	$2,400
Prepaid Insurance	$7,200
Buildings	$150,000
Accumulated Depreciation – Buildings		$0
Salaries Payable		$0
L. Plume, Capital		$180,000
L. Plume, Withdrawals	$2,000
Storage Fees Earned		$9,800
Depreciation Expense – Buildings	$0
Salaries Expense	$2,000
Insurance Expense	$0
Rent Expense	$2,000
Office Supplies Expense	$0
Repairs Expense	$950
Telephone Expense	$400
Income Summary		$0
Total	$189,800	$189,800

4.

Date	Accounts	Debit	Credit
July 31 a.	Insurance Expense	$400
	Prepaid Insurance		$400
July 31 b.	Office Supplies Expense	$875
	Office Supplies		$875
July 31 c.	Depreciation Expense – Buildings	$1,500
	Accumulated Depreciation – Buildings		$1,500
July 31 d.	Salaries Expense	$100
	Salaries Payable		$100
July 31 e.	Accounts Receivable	$1,150
	Storage Fees Earned		$1,150

Cash Account No. 101
Date	Debit	Credit	Balance
July 31	$30,000		$22,850

Accounts Receivable Account No. 106
Date	Debit	Credit	Balance
July 31			$0
31. e	$1,150		$1,150

Office Supplies Account No. 124
Date	Debit	Credit	Balance
July 31			$2,400
31 b.		$875	$1,525

Prepaid Insurance Account No. 128
Date	Debit	Credit	Balance
July 31			$7,200
31 a.		$400	$6,800

Building Account No. 173
Date	Debit	Credit	Balance
July 31			$150,000

Accumulated Depreciation – Buildings Account No. 174
Date	Debit	Credit	Balance
July 31			$0
31 c.		$1,500	$1,500

Salaries Payable Account No. 209
Date	Debit	Credit	Balance
July 31			$0
31 d.		$100	$100

L. Plume, Capital Account No. 301
Date	Debit	Credit	Balance
July 31			$180,000

L. Plume, Withdrawals Account No. 302
Date	Debit	Credit	Balance
July 31			$2,000

Storage Fees Earned Account No. 401
Date	Debit	Credit	Balance
July 31			$9,800
31. e		$1,150	$10,950

Depreciation Expense – Buildings Account No. 606
Date	Debit	Credit	Balance
July 31			$0
31 c.	$1,500		$1,500

Salaries Expense Account No. 622
Date	Debit	Credit	Balance
July 31			$2,000
31 d.	$100		$2,100

Insurance Expense Account No. 637
Date	Debit	Credit	Balance
July 31			$0
31 a.	$400		$400

Rent Expense Account No. 640
Date	Debit	Credit	Balance
July 31			$2,000

Office Supplies Expense Account No. 650
Date	Debit	Credit	Balance
July 31			$0
31 b.	$875		$875

Repairs Expense Account No. 684
Date	Debit	Credit	Balance
July 31			$950

Telephone Expense Account No. 688
Date	Debit	Credit	Balance
July 31			$400

Income Summary Account No. 901
Date	Debit	Credit	Balance
July 31			$0

5.

SAFE STORAGE CO. Adjusted Trial Balance July 31, 2017
Cash	$22,850
Accounts Receivable	$1,150
Office Supplies	$1,525
Prepaid Insurance	$6,800
Buildings	$150,000
Accumulated Depreciation – Buildings		$1,500
Salaries Payable		$100
L. Plume, Capital		$180,000
L. Plume, Withdrawals	$2,000
Storage Fees Earned		$10,950
Depreciation Expense – Buildings	$1,500
Salaries Expense	$2,100
Insurance Expense	$400
Rent Expense	$2,000
Office Supplies Expense	$875
Repairs Expense	$950
Telephone Expense	$400
Income Summary		$0
Total	$192,550	$192,550

SAFE STORAGE CO. Income Statement July 31, 2017
Revenues:
Storage Fees Earned		$10,950
Expenses:
Depreciation Expense – Buildings	$1,500
Salaries Expense	$2,100
Insurance Expense	$400
Rent Expense	$2,000
Office Supplies Expense	$875
Repairs Expense	$950
Telephone Expense	$400
Total Expense		$8,225
Net Income		$2,725

SAFE STORAGE CO. Statement of Owner’s Equity July 31, 2017
L. Plume, Capital, July 1.	$0
Owner’s contribution during the month	$180,000
Net income for the month	$2,725
Subtotal	$182,725
Owner’s withdrawal	($2,000)
L. Plume, Capital, July 31.	$180,725

SAFE STORAGE CO. Balance Sheet July 31, 2017
Assets
Current Asset:
Cash	$22,850
Accounts Receivable	$1,150
Office Supplies	$1,525
Prepaid Insurance	$6,800
Total Current Assets		$32,325
Plant, Property and Equipment:
Buildings	$150,000
Accumulated Depreciation – Buildings	$1,500	$148,500
Total Assets		$180,825
Liabilities
Current Liabilities:
Salaries Payable		$100
Owner’s Equity
L. Plume, Capital		$180,725
Total Liabilities and Owner’s Equity		$180,825

6.

Date	Accounts	Debit	Credit
Jul. 31	Storage Fees Earned	$10,950
	Income Summary		$10,950
	Income Summary	$8,225
	Depreciation Expense – Buildings		$1,500
	Salaries Expense		$2,100
	Insurance Expense		$400
	Rent Expense		$2,000
	Office Supplies Expense		$875
	Repairs Expense		$950
	Telephone Expense		$400
	Income Summary	$2,725
	L. Plume, Capital		$2,725
	L. Plume, Capital	$2,000
	L. Plume, Withdrawals		$2,000

L. Plume, Capital Account No. 301
Date	Debit	Credit	Balance
Adj. Bal.			$180,000
Clos. 3		$2,725	$182,725
Clos. 4	$2,000		$180,725

L. Plume, Withdrawals Account No. 302
Date	Debit	Credit	Balance
Adj. Bal.			$2,000
Clos. 4		$2,000	$0

Storage Fees Earned Account No. 401
Date	Debit	Credit	Balance
Adj. Bal.			$10,950
Clos. 1	$10,950		$0

Depreciation Expense – Buildings Account No. 606
Date	Debit	Credit	Balance
Adj. Bal.			$1,500
Clos. 2		$1,500	$0

Salaries Expense Account No. 622
Date	Debit	Credit	Balance
Adj. Bal.			$2,100
Clos. 2		$2,100	$0

Insurance Expense Account No. 637
Date	Debit	Credit	Balance
Adj. Bal.			$400
Clos. 2		$400	$0

Rent Expense Account No. 640
Date	Debit	Credit	Balance
Adj. Bal.			$2,000
Clos. 2		$2,000	$0

Office Supplies Expense Account No. 650
Date	Debit	Credit	Balance
Adj. Bal.			$875
Clos. 2		$875	$0

Repairs Expense Account No. 684
Date	Debit	Credit	Balance
Adj. Bal.			$950
Clos. 2		$950	$0

Telephone Expense Account No. 688
Date	Debit	Credit	Balance
Adj. Bal.			$400
Clos. 2		$400	$0

Income Summary Account No. 901
Date	Debit	Credit	Balance
July 31			$0
Clos. 1		$10,950	$10,950
Clos. 2	$8,225		$2,725
Clos. 3	$2,725		$0

7.

SAFE STORAGE CO. Post-Closing Trial Balance July 31, 2017
Cash	$22,850
Accounts Receivable	$1,150
Office Supplies	$1,525
Prepaid Insurance	$6,800
Buildings	$150,000
Accumulated Depreciation – Buildings		$1,500
Salaries Payable		$100
L. Plume, Capital		$180,725
Total	$182,325	$182,325

Conclusion

Conclusion:

Safe Storage Co.’s net income for the month ended July 31, 2017 is $2,725 and total assets, liabilities and owner’s equity is $180,825.