The following is Elbow Cycle Repair Shop’s trial balance at January 31, 2024, the company’s fiscal year end:

Additional information:
1. The 12-month insurance policy was purchased on June 1, 2023.
2. A physical count of supplies shows $1,310 on hand on January 31, 2024.
3. The building has an estimated useful life of 50 years. The equipment has an estimated useful life of nine years.
4. The mortgage payable has a 5% interest rate. Interest is paid on the first day of each month for the previous month’s interest.
5. By January 31, 2024, $1,300 of services related to the unearned revenue have been provided.
6. During the next fiscal year, $4,500 of the mortgage payable is to be paid.

Instructions
a. Prepare the adjusting entries.
b. Prepare an adjusted trial balance.
c. Prepare an income statement, statement of owner’s equity, and classified balance sheet. The owner, Henry Dude, invested $5,000 cash in the business on November 17, 2023. (The investment has been recorded and it is included in the capital account.)
d. Prepare the closing entries.

Taking It Further

Henry Dude is concerned because he had to invest cash in the business this year. Based on the information in the financial statements, what do you suggest to Henry?

Transcribed Image Text:

Cash Accounts receivable Prepaid insurance Supplies Land Building Accumulated depreciation-building Equipment Accumulated depreciation-equipment Accounts payable Unearned revenue Mortgage payable H. Dude, capital H. Dude, drawings Service revenue ELBOW CYCLE REPAIR SHOP Trial Balance January 31, 2024 Salaries expense Utilities expense Interest expense Debit $ 3,200 6,630 6,420 5,240 50,000 190,000 27,000 101,100 115,200 12,000 5,610 $522,400 Credit $ 11,000 4,500 6,400 21,950 182,000 61,000 235,550 $522,400