Author Question: Adjustments at the end of the period are not formally entered in the journal or posted to the ... (Read 88 times)

charchew · **on:** Jul 5, 2018

Adjustments at the end of the period are not formally entered in the journal or posted to the accounts.
a. True
b. False
Indicate whether the statement is true or false

Question 2

(Preparation of financial statements)
(This problem is based on the transactions for problem 35 .)

Following is a trial balance for Ricardo Sanchez's Auto Repair as of January 31, 2013 .

Prepare an (1) income statement and a (2) statement of changes in owner's equity for the month ended January 31, 2013, and a (3) balance sheet as of January 31, 2013 .

Debits Credits
Cash 7,400
Investments 10,000
Accounts receivable 23,000
Accrued interest receivable 25
Allowance for uncollectible accounts 2,100
Repair parts inventory 20,000
Prepaid rent 4,000
Equipment 65,000
Accumulated depreciation, equipment 25,500
Accounts payable 13,000
Salaries payable 1,200
R. Sanchez, Capital 80,000
Repair revenue 35,000
Parts expense 13,000
Salaries expense 9,200
Rent expense 4,000
Bad debts expense 700
Depreciation expense 500
Interest revenue 25
Totals 156,825 156,825

What will be an ideal response?

HandsomeMarc · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

False

Answer to Question 2

Ricardo Sanchez Auto Repair
Income Statement
For the Month Ended January 31, 2013
Repair revenue 35,000
Expenses:
Parts expense 13,000
Salaries expense 9,200
Rent expense 4,000
Bad debts expense 700
Depreciation expense 500 27,400
Operating Income 7,600
Interest revenue 25
Net Income 7,625

Ricardo Sanchez Auto Repair
Statement of Changes in Owner's Equity
For the Month Ended January 31, 2013

Ricardo Sanchez, Capital, January 1, 2013 80,000
Net income for January 7,625
Ricardo Sanchez, Capital, January 31, 2013 87,625

Ricardo Sanchez Auto Repair
Balance Sheet
January 31, 2013

Assets:
Cash 7,400
Investments 10,000
Accounts receivable 23,000
Less, allowance for uncollectible accounts 2,100 20,900
Repair parts inventory 20,000
Prepaid rent 4,000
Accrued interest receivable 25
Equipment 65,000
Less, accumulated depreciation 25,500 39,500 Total Assets 101,825

Liabilities and Equity:
Liabilities:
Accounts payable 13,000
Salaries payable 1,200
Total Liabilities 14,200
Ricardo Sanchez, Capital 87,625
Total Liabilities and Equity 101,825