Question

The balance sheet of Rybowiak’s Building Supplies on June 30, Year 12, appears nearby.
RYBOWIAK’S BUILDING SUPPLIES
Balance Sheet
June 30, Year 12
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,200
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,250
Merchandise Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,150
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $140,000
Equipment—At Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $210,000
Less Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . (84,000)
Equipment—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $126,000
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $266,000
Liabilities and Shareholders’ Equity
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,100
Note Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Salaries Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250
Total Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,350
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,650
Total Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . $226,650
Total Liabilities and Shareholders’ Equity . . . . . . . . . . . . . . . . $266,000
The following transactions occurred during the month of July.
(1) Sold merchandise on account for a total selling price of $85,000.
(2) Purchased merchandise inventory on account from various suppliers for $46,300.
(3) Paid rent for the month of July of $11,750.
(4) Paid salaries to employees during July of $20,600.
(5) Collected accounts receivable of $34,150.
(6) Paid accounts payable of $38,950.
Information affecting adjusting entries at the end of July is as follows:
(7) The firm paid the premium on a one-year insurance policy on March 1, Year 12, with coverage beginning on that date. This is the only insurance policy in force on June 30, Year 12.
(8) The firm depreciates its equipment over a 10-year life. Estimated salvage value of the equipment is negligible.
(9) Employees earned salaries of $1,600 during the last two days of July but were not paid. These are the only unpaid salaries at the end of July.
(10) The note payable is a 90-day, 6% note issued on June 30, Year 12.
(11) Merchandise inventory on hand on July 31, Year 12, totals $77,950. The cost of goods sold for July equals merchandise inventory on June 30, Year 12, plus purchases of merchandise during July minus merchandise inventory on July 31, Year 12.
a. Prepare journal entries to reflect the transactions and other events during July. The firm classifies expenses by their nature (that is, insurance, depreciation). Revenues and expenses should appear in the Retained Earnings account but with an indication of the specific revenue or expense account debited or credited. Be sure to indicate whether each entry increases or decreases assets, liabilities, or shareholders’ equity.
b. Enter the amounts from the June 30, Year 12, balance sheet and the effects of the 11 items above in T-accounts.
c. Prepare an income statement for the month of July. Ignore income taxes.
d. Enter closing entries in the T-accounts from part b.
e. Prepare a comparative balance sheet as of June 30, and July 31, Year 12.



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  • CreatedMarch 04, 2014
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