Judy Kroll, owner of A+ Fire \& Safety, is selling the business. Kroll offers the following trial balance to prospective buyers. Your best friend is considering buying the company. He seeks your advice in interpreting this information.

Requirements 

Help your friend decide whether to buy A+ Fire & Safety by answering the following questions.

1. How much are the firm's total assets? total liabilities? net income or net loss? 

2. Suppose A+ earned all the service revenue on account. Make a single journal entry to record the revenue, set up the two T-accounts affected, and post to those accounts.

3. In your own words, describe the accounting process that results in A+'s $7.000 balance for Cash. Use the following terms in your explanation: account, balance, journal, ledger, post, and trial balance.

4. If your friend were to join Judy Kroll as a co-owner of A+ Fire & Safety, what form of business organization would the firm then take? If necessary.

Transcribed Image Text:

A+ FIRE & SAFETY Trial Balance December 31, 2007 Balance Account Title Cash Accounts receivable Debit Credit $ 7,000 6,000 Prepaid expenses Equipment 4,000 130,000 Accounts payable $ 31,000 Note payable 45.000 Judy Kroll, capital 33,000 Judy Kroll, withdrawals 21,000 Service revenue 112,000 Wage expense 38,000 Rent expense Supplies expense Total $221,000 $221.000 8,000 7,000