At the end of its first month of operations, Watson Answering Service has the following unadjusted trial balance.
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WATSON ANSWERING SERVICE |
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August 31, 2012 |
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Trial Balance |
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Debit |
Credit |
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Cash |
$ 5,400 |
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Accounts Receivable |
2,800 |
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Supplies |
1,300 |
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Prepaid Insurance |
2,400 |
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Equipment |
60,000 |
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Notes Payable |
$40,000 |
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Accounts Payable |
2,400 |
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Owner’s Capital |
30,000 |
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Owner’s Drawings |
1,000 |
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Service Revenue |
4,900 |
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Salaries and Wages Expense |
3,200 |
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Utilities Expense |
800 |
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Advertising Expense |
400 |
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$77,300 |
$77,300 |
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Other data:
1. Insurance expires at the rate of $200 per month.
2. $1,000 of supplies are on hand at August 31.
3. Monthly depreciation on the equipment is $900.
4. Interest of $500 on the notes payable has accrued during August.
Instructions
(a) Prepare a worksheet.
(b) Prepare a classified balance sheet assuming $35,000 of the notes payable are long term. (c) Journalize the closing entries.