On July 1, 2014, Melanie Thornhill began her third month of operating an electronics repair shop called MT Repairs out of her dad's garage. The following occurred during the third month of operations:
July 1 collected $3,600 as a deposit for work to be done at the local college in the fall.
1 Melanie Thornhill withdrew $4,000 cash for personal expenses.
2 Paid $2,200 for repair supplies purchased on account last month.
3 Did work for a client and immediately collected $1,400.
4 Performed services for a customer and collected $3,600.
7 Hired a new technician to start next week on a casual basis at $400 per day.
15 Melanie withdrew cash of $1,000 for personal use.
22 Purchased repair supplies for cash; $1,600.
31 Paid wages of $2,800.
Required
1. Prepare General Journal entries to record the July transactions.
2. Set up the following T-accounts with June 30 adjusted balances: Cash (101), $6,400; Repair Supplies (131), $3,000; Tools (161), $16,800; Accumulated Depreciation, Tools (162), $560; Accounts Payable (201), $3,200; Unearned Revenue (233), $700; Melanie Thornhill, Capital (301) $?; Melanie Thornhill, Withdrawals (302), $0; Revenue (401), $25,800; Depreciation Expense, Tools (602), $560; Wages Expense (623), $1,960; Rent Expense (640), $8,000; and Repair Supplies Expense (696), $2,700.
3. Post the entries to the accounts; calculate the ending balance in each account.
4. Prepare an unadjusted trial balance at July 31, 2014.
5. Use the following information to prepare and post adjusting entries for the month of July:
a. The tools have an estimated life of five years with no residual value.
b. One-quarter of the repair supplies balance remained on hand at July 31.
c. Accrued the July rent expense of $4,000; it will be paid in August.
d. $3,800 of the unearned revenues remained unearned as at July 31.
6. Prepare an adjusted trial balance.
7. Prepare an income statement and a statement of changes in equity for the three months ended July 31, 2014, and a July 31, 2014, balance sheet.
Analysis Component: When a company shows expenses on its income statement, does this mean that cash equal to the expenses was paid during the period in which the expenses were reported?