Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (amounts are rounded to thousands of dollars to simplify).

Transactions during 2018 (summarized in thousands of dollars) follow:

a. Borrowed $21 cash on July 1, 2018, signing a six-month note payable.

b. Purchased equipment for $18 cash on July 2.

c. Issued additional shares of common stock on July 3 for $5.

d. Purchased additional equipment on August 4, $3 cash.

e. Purchased, on account, supplies on September 5 for future use, $10.

f. On December 6, recorded revenues in the amount of $65, including $9 on credit and $56 received in cash.

g. Paid salaries and wages expenses on December 7, $35.

h. Collected accounts receivable on December 8, $8.

i. Paid accounts payable on December 9, $11.

j. Received a $3 deposit on December 10 for work to start January 15, 2019.

Data for adjusting journal entries on December 31:

k. Amortization for 2018, $3.

l. Supplies of $4 were counted on December 31, 2018.

m. Depreciation for 2018, $2.

n. Accrued interest on notes payable of $1.

o. Wages earned but not yet paid, $3.

p. Income tax for 2018 was $4 and will be paid in 2019.

Required:

1. Set up T-accounts for the accounts on the trial balance and enter beginning balances. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you.

2. Record journal entries for transactions (a) through (j).

3. Post the journal entries from requirement 2 to T-accounts and prepare an unadjusted trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your answers to requirement 2.

4. Record adjusting journal entries (k) through (p).

5. Post the adjusting entries from requirement 4 and prepare an adjusted trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your previous answers.

6. Prepare an income statement, statement of retained earnings, and balance sheet. 

7. Prepare the closing journal entry.

8. Post the closing entry from requirement 7 and prepare a post-closing trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your previous answers.

9. How much net income did Lazy Sofa Furniture, Inc., generate during 2018? Is the company financed primarily by liabilities or stockholders’ equity?

Transcribed Image Text:

Debit Account Titles Credit $ 5 Cash Accounts Receivable 4 Supplies Equipment Accumulated Depreciation Software 12 Accumulated Amortization 3 Accounts Payable Notes Payable (long-term) Salaries and Wages Payable Interest Payable Income Tax Payable Deferred Revenue Common Stock 15 Retained Earnings 4 Service Revenue Supplies Expense Depreciation Expense Salaries and Wages Expense Amortiz ation Expense Interest Expense Income Tax Expense $29 $29 Totals