Mario and Luigi began operations of their plumbing supplies shop (M & L PS Co.) on January 1, 2010. The annual reporting period ends December 31. The trial balance on January 1, 2018, appears below (the amounts are rounded to thousands of dollars to simplify).
Transactions during 2018 (summarized in thousands of dollars) follow (no particular date sequence):
- Borrowed $12 cash on a short-term note payable.
- Purchased land for future building site, paid cash, $9.
- Earned revenues for 2018, $160, including $40 on credit and $120 collected in cash.
- Issued additional shares for $3.
- Recognized operating expenses for 2018, $85, including $15 on credit and $70 paid in cash.
- Collected accounts receivable, $24.
- Purchased other assets, $10 cash.
- Paid accounts payable, $13.
- Purchased supplies on account for future use, $18.
- Signed a $25 service contract to start February 1, 2019.
- Declared and paid a cash dividend, $17.
Data for adjusting journal entries:
- Supplies counted on December 31, 2018, $10.
- Equipment cost was $60 has a useful life of 9 years with a residual value of $6.
- The notes payable of $12 in transaction (a) was taken out on September 1, 2018 at an interest rate of 25% per year. (round to the nearest month)
- Wages earned since the December 24 payroll not yet paid, $12.
- Income tax for the year was $8. It will be paid in 2019.
- Set up T-accounts for the accounts on the trial balance and enter beginning balances.
- Record journal entries for transactions (a) through (k), and post them to the T-accounts.
- Prepare an unadjusted trial balance.
- Record and post the adjusting journal entries (l) through (p).
- Prepare an adjusted trial balance.
- Prepare an income statement, statement of retained earnings, and balance sheet.
- Prepare and post the closing journal entries.
- Prepare a post-closing trial balance.
Account Titles Debit Credit Accounts Receivable Equipment Accumulated Depreciation (on Equipment) Other Assets Accounts Payable Notes Payable Wages Payable Interest Payabe Income Tax Payable Retained Ea Service Revenue Depreciation Expense Income Tax Expense Supplies and Operating Expenses Totals 8 8 4