Question

The following transactions pertain to Smith Training Company for Year 1:

Jan.	30		Established the business when it acquired $48,000 cash from the issue of common stock.
Feb.	1		Paid rent for office space for two years, $17,400 cash.
Apr.	10		Purchased $880 of supplies on account.
July	1		Received $28,000 cash in advance for services to be provided over the next year.
	20		Paid $660 of the accounts payable from April 10.
Aug.	15		Billed a customer $9,300 for services provided during August.
Sept.	15		Completed a job and received $2,600 cash for services rendered.
Oct.	1		Paid employee salaries of $31,000 cash.
	15		Received $8,700 cash from accounts receivable.
Nov.	16		Billed customers $31,500 for services rendered on account.
Dec.	1		Paid a dividend of $1,100 cash to the stockholders.
	31		Adjusted records to recognize the services provided on the contract of July 1.
	31		Recorded $2,500 of accrued salaries as of December 31.
	31		Recorded the rent expense for the year. (See February 1.)
	31		Physically counted supplies; $80 was on hand at the end of the period.

f. Prepare a post-closing trial balance for Year 1. (Round your final answers to the nearest whole dollar amount.)

	SMITH TRAINING COMPANY Post-Closing Trial Balance December 31, Year 1 Account Titles Debit Credit Totals $0 $0

Answer 1

Solution

Smith Training Company

Post-Closing Trial Balance

Post-closing trial balance is prepared after closing the income and expenses accounts to the income summary and the net income/ (loss) to the retained earnings. Also, the retained earnings account is adjusted for dividends paid.

Smith Training Company
Post-Closing Trial Balance
Account Titles	Debit	Credit
Cash	37,140
Accounts Receivable	32,100
supplies	80
Prepaid Rent	9,425
Accounts Payable		220
Salaries payable		2,500
unearned revenue		14,000
Common Stock		48,000
Retained Earnings		14,025
Totals	78,745	78,745

Computations:

Cash
Description	Amount	Description	Amount
common stock	48,000	prepaid rent	17,400
Unearned Revenue	28,000	Accounts payable	660
Service Revenue	2,600	Salaries expense	31,000
Accounts receivable	8,700	Dividends	1,100
Ending balance	37,140

Accounts Receivable
Description	Amount	Description	Amount
Service Revenue	9,300	cash	8,700
Service Revenue	31,500
Ending balance	32,100

Prepaid Rent
Description	Amount	Description	Amount
Cash	17,400	Rent Expense	7,975
Ending balance	9,425

Rent expense = 17,400 x 11/24 months = 7,975

Service Revenue
Description	Amount			Description				Amount
				Accounts Receivable				9,300
				Cash				2,600
				Accounts Receivable				31,500
				Unearned Revenue				14,000
				Ending balance				57,400
Accounts Payable
Description		Amount		Description			Amount
Cash		660		Supplies			880
				Ending balance			220
Salaries Expense
Description			Amount		Description	Amount
Cash			31,000
Salaries Payable			2,500
Ending balance			33,500

Income Statement
Service Revenue		57,400
expenses:
salaries expense	33,500
Supplies expense	800
rent expense	7,975
total expenses		42,275
net income		15,125

Retained Earnings –

Beg. Balance   nil

Add: net income 15,125

Less: dividends 1,100

Retained earnings ending balance = 14,025