Question

The Accounting Cycle Statements and Closing Entries Chapter 6 Case Study CS-1 LO 1234 Grindstone Paving provides residential and commercial paving services. Its balance sheet at the end of June 2018 is shown below, along with its chart of accounts. Grindstone Paving Balance Sheet As at June 30, 2018 Assets Liabilities Cash $7.580 Accounts Payable $15,800 Accounts Receivable 6,000 Unearned Revenue 6,200 Prepaid Insurance 1,800 Notes Payable 22.000 Equipment 55.000 Total Liabilities 44,000 Owner's Equity Stone, Capital 26,380 Total Assets $20.380 Total Liabilities and Owner's Equity $70,380 Account Account 400 101 105 110 120 125 Account Description ASSETS Cash Accounts Receivable Prepaid Insurance Equipment Accumulated Depreciation--Equipment LABILITIES Accounts Payable Interest Payable Salary Parable Uneamed Revenue Notes Pyyable OWNER'S EQUITY Stone, Capital Stone, Withdrawals Income Summary Account Description REVENUE Service Revenue EXPENSES Advertising Expense Depreciation Expense Insurance Expense Interest Expense Salaries Expense Telephone Expense 500 510 515 520 545 $50 200 205 210 215 220 300 310 315 For the month of July 2018, Grindstone Paving had the following transactions. The owner invested $8,000 cash into the business Jul 2 Received $2.530 cash for work that will be provided in August Jul Received an advertising bill for $600, which will be pald next month Jul Pald the $350 telephone bill with cash Jul 10 Provided $4,680 worth of services to customers who will pay later Jul 14 Purchased equipment with $8,200 cash Jul 20 Received $2,350 In payment from customers paying their accounts Jul 22 Pald $1,970 toward accounts payable Jul 24 Paid $1.300 toward principal of the note payable Jul 28 Pald salary of $2.400 to an employee Jul 30 The owner withdrew $2,200 cash for personal use 259

Answer 1

Prepare closing entries as follows:

Date	Account Titles	Debit	Credit
Jul. 31	Service revenue	$5,300
	Income Summary		$5,300
Jul. 31	Income Summary	$4,475
	Salaries Expense		2900
	Advertising expense		600
	Telephone expense		350
	Depreciation expense		450
	Insurance expense		100
	Interest expense		75
Jul. 31	Income Summary	$825
	Stone, capital		$825
Jul. 31	Stone, capital	$2,200
	Stone, withdrawals		$2,200

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Prepare Balance Sheet as follows:

Balance Sheet
Aseets:
Cash		$4,040
Accounts receivable		$8,330
Prepaid Insurance		$1,700
Equipment	$63,200
Accumulated depreciation	($450)	$62,750
Total Assets		$76,820
Liabilities:
Accounts payable	$14,430
Unearned revenue	$8,110
Notes payable, short-term	$5,000
Interest payable	$75
Salary payable	$500
Total current liabilities	$28,115
Notes payable, long-term [$20700 - $5000]	$15,700
Total Liabilities		$43,815
Owners' Equity		$33,005
Total Liabilities and owners' equity		$76,820

_________________________________________________________

Prepare post-closing trial balance:

Post closing Trial Balance
Account Title	DR	CR
Cash	$4,040
Accounts receivable	$8,330
Prepaid Insurance	$1,700
Equipment	$63,200
Accumulated depreciation		$450
Accounts payable		$14,430
Unearned revenue		$8,110
Note payable		$20,700
Interest payable		$75
Salary payable		$500
Stone, capital		$33,005
	$77,270	$77,270