Question & Answer: Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2014. The…..

Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2014. The annual reporting period ends December 31. The trial balance on January 1, 2015, appears below (amounts are rounded to thousands of dollars to simplify).

Account Titles	Debit		Credit
Cash	$	5
Accounts Receivable		4
Supplies		3
Equipment		6
Accumulated Depreciation			$	0
Software		12
Accumulated Amortization				3
Accounts Payable				7
Notes Payable (long-term)				0
Salaries and Wages Payable				0
Interest Payable				0
Income Tax Payable				0
Unearned Revenue				0
Common Stock				15
Retained Earnings				5
Service Revenue				0
Supplies Expense		0
Depreciation Expense		0
Salaries and Wages Expense		0
Amortization Expense		0
Interest Expense		0
Income Tax Expense		0

Totals	$	30	$	30

Transactions during 2015 (summarized in thousands of dollars) follow:
1.	Borrowed $28 cash on July 1, 2015, signing a six-month note payable.
2.	Purchased equipment for $16 cash on July 1, 2015.
3.	Issued additional shares of common stock for $4.
4.	Earned revenues for 2015 in the amount of $71, including $8 on credit and $63 received in cash.
5.	Recognized salaries and wages expenses for 2015 of $42, paid in cash.
6.	Purchased additional equipment, $4 cash.
7.	Collected accounts receivable, $7.
8.	Paid accounts payable, $10.
9.	Purchased on account supplies for future use, $9.
10.	Received a $3 cash deposit on work to start January 15, 2016.

Data for adjusting journal entries:

11.	Amortization for 2015, $3.
12.	Supplies of $5 were counted on December 31, 2015.
13.	Depreciation for 2015, $1.
14.	Accrued interest on notes payable of $1.
15.	Wages earned since the December 24 payroll not yet paid, $2.
	Income tax for 2015 was $3 and will be paid in 2016 Prepare balance sheet. Prepare the closing journal entry. Post the closing entry and prepare a post-closing trial balance

Expert Answer

Answer 1.

Trial Balance
Account Titles	Dr. Amt.	Cr. Amt.
Cash	38
Accounts Receivable	5
Supplies	5
Equipment	26
Accumulated Depreciation		1
Software	12
Accumulated Amortization		6
Accounts Payable		6
Notes Payable (Short-term)		28
Salaries and Wages Payable		2
Interest Payable		1
Income Tax Payable		3
Unearned Revenue		3
Common Stock		19
Retained Earnings		5
Service Revenue		71
Supplies Expense	7
Depreciation Expense	1
Salaries and Wages Expense	44
Amortization Expense	3
Interest Expense	1
Income Tax Expense	3

Totals	145	145

	–
Answer 1.

Income Statement
For the Period ended 2015
Revenue
Service Revenue		71

Less: Expenses
Supplies Expense	7
Depreciation Expense	1
Salaries and Wages Expense	44
Amortization Expense	3	55

Net Operating Income		16
Interest Expense		1
Net Income before Tax		15
Income Tax Expense		3
Net Income		12


Balance Sheet
As on 2015
Assets
Current Assets
Cash	38
Accounts Receivable	5
Supplies	5	48

Tangible Assets
Equipment	26
Accumulated Depreciation	1	25

Intangible Assets
Software	12
Accumulated Amortization	6	6

Total Assets		79

Liabilities & Stockholders’ Equity
Liabilities
Current Liabilities
Accounts Payable	6
Notes Payable (Short-term)	28
Salaries and Wages Payable	2
Interest Payable	1
Income Tax Payable	3
Unearned Revenue	3	43

Other Liabilities		–

Total Liabilities		43

Stockholders’ Equity
Common Stock	19
Retained Earnings	17

Total Stockholders’ Equity		36

Total Liabilities & Stockholders’ Equity		79


Answer 3.

Post Closing Trial Balance
Account Titles	Dr. Amt.	Cr. Amt.
Cash	38
Accounts Receivable	5
Supplies	5
Equipment	26
Accumulated Depreciation		1
Software	12
Accumulated Amortization		6
Accounts Payable		6
Notes Payable (Short-term)		28
Salaries and Wages Payable		2
Interest Payable		1
Income Tax Payable		3
Unearned Revenue		3
Common Stock		19
Retained Earnings		17

Totals	86	86

Answer 2.

Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.

1	Service Revenue Dr.	71
	To Income Summary		71

2	Income Summary Dr.	59
	To Supplies Expenses		7
	To Depreciation Expenses		1
	To Salaries & wages Expenses		44
	To Amortization Expenses		3
	To Interest Expenses		1
	To Income Tax Expenses		3

3	Income Summary Dr.	12
	To Retained Earnings		12

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