On May 1, 2011, Conrad Sayer opened Conrad’s Repair Service. During the month, he completed the following transactions for the company:
May 1 Began business by depositing $5,000 in a bank account in the
name of the company.
1 Paid the rent for the store for current month, $425.
1 Paid the premium on a one-year insurance policy, $480.
2 Purchased repair equipment from Chmura Company, $4,200.
Terms were $600 down and $300 per month for one year. First
payment is due June 1.
5 Purchased repair supplies from Brown Company on credit,
$468.
8 Paid cash for an advertisement in a local newspaper, $60.
15 Received cash repair revenue for the first half of the month,
$400.
21 Paid Brown Company on account, $225.
31 Received cash repair revenue for the last half of May, $975.
31 Made a withdrawal, $300.
Required for May
1. Prepare journal entries to record the May transactions.
2. Open the following accounts: Cash (111); Prepaid Insurance (117);
Repair Supplies (119); Repair Equipment (144); Accumulated Depreciation–
Repair Equipment (145); Accounts Payable (212); C. Sayer, Capital (311);
C. Sayer, 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:
a. One month’s insurance has expired.
b. The remaining inventory of unused repair supplies is $169.
c. The estimated depreciation on repair equipment is $70.
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 May.
6. Prepare and post closing entries.
7. Prepare a post-closing trial balance.