Tudor Services Ltd., a private company following ASPE, has an August 31 fiscal year end. The company?s trial balance prior to adjustments follows:

Additional data:

1. The equipment has an expected useful life of 10 years. The vehicles? expected useful life is eight years.

2. A physical count showed $2,000 of supplies on hand at August 31, 2020.

3. Accrued salaries payable at August 31, 2020, were $2,550.

4. Interest on the 5.5% note payable is payable at the end of each month and $10,000 of the principal must be paid on December 31 each year. Interest payments are up to date as at July 31, 2020.

5. During 2020, additional common shares were issued for $3,000 cash.

Instructions

a. Enter the trial balance on a work sheet and complete the work sheet. (Hint: Consider writing out the adjusting journal entries at August 31, 2020.) Ignore income taxes.

b. Prepare an income statement and a statement of retained earnings for the year ended August 31, 2020, and a balance sheet as at August 31, 2020.

c. Prepare closing entries.

d. Explain how the financial statements in part (b) would change if Tudor operated as a sole proprietorship, rather than a corporation.

Transcribed Image Text:

Tudor Services Ltd. Trial Balance August 31, 2020 Debit Credit $ 35,420 Cash Supplies Equipment Accumulated depreciation-equipment 6,000 140,000 $ 42,000 Vehicles 110,000 Accumulated depreciation-vehicles Accounts payable Notes payable 48,125 7,950 60,000 Common shares 20,000 55,750 Retained earnings Dividends 36,000 Service revenue 200,525 Supplies expense Insurance expense 28,038 9,500 Interest expense Rent expense Salaries expense 3,392 21,000 45,000 $434,350 $434,350