3. Journal Entries - external events Buka and Margot began operations of The Tail That Wags the Dog, a doggie day care, on January 1, 2020. The annual reporting period ends December 31. The trial balance on January 1, 2021 was as follows: Credit Cash Accounts Receivable Supplies Other current assets Equipment Accounts Payable Common Stock Retained Earnings Debit 5,000 4,000 2,000 9,000 6,000 7,000 7,000 12,000 Total 26,000 26,000 Record each of the following transactions that occurred during 2021: a. Borrowed $20,000 cash on July 1, 2021, signing a 10 percent note payable. Interest and the note are due on July 1, 2023. Accounts Debit Credit Purchased equipment for $18,000 cash on July 1, 2021. Accounts Debit Credit b. Sold 5,000 additional shares of common stock for $1 cash per share. Accounts Debit Credit c. Provided day care to puppies during the year. Total amount for these services is $65,000. $9,000 of this was paid with credit, the rest was received in cash. Accounts Debit Credit d. Paid salaries of $22,000 cash for employees that worked throughout the year. Accounts Debit Credit e. Incurred $8,000 in rent. All was paid in cash. Accounts Debit Credit f. Purchased on account supplies for future use, $10,000. Accounts Debit Credit g. Paid accounts payable of $11,000. Accounts Debit Credit h. Received a $3,000 deposit for one customer's dog that will begin day care in January 2022. Accounts Debit Credit - i. Declared and paid a cash dividend of $10,000. Accounts Debit Credit 4. Adjusting Entries- internal events Record the following adjusting entries for The Tail that Wags the Dog: j. Supplies of $4,000 were counted on December 31, 2021. Accounts Debit Credit k. Depreciation for 2021 was $2,000. Accounts Debit Credit 1. Interest has accrued on the notes payable. There is enough information above to calculate. Accounts Debit Credit m. Income tax expense was $4.000 payable in 2022. Accounts Debit Credit 5. Posting Post each of the beginning balances to a separate T-account, post each of the journal entries, and determine the ending balances for each account. Cash Accounts Rec. Supplies 20,000 13,000 Oth. Curr. Assets Equipment Accounts Pay. 9,000 24,000 | 6,000 Common Stock Retained Earnings | 12000 | 12000 11 1- 1- 1- 6. Trial Balance Prepare the trial balance for The Tail that Wags the Dog at December 31, 2021 using the above ending balances. | Debit Credit 7. Prepare the financial statements Prepare the income statement, statement of retained earnings, and balance sheet for The Tail that Wags the Dog for the year ended December 31, 2021. Income Statement The Tail That Wags the Dog Income Statement Day Care Revenue 65,000 Operating Expenses Salaries Expense Rent Expense Supplies Accumulated Deprecation Total Operating Expenses Total Operating Income 22,000 8,000 4,000 2,000 36,000 29,000 1,000 Other Revenues and Expenses Interest Expenses Net Income Before Income Taxes Income Tax Payable Net Income 28.000 4,000 24.000 Retained Earnings The Tail That Wags the Dog Statement of Retained Earnings For the Year Ended December 31, 2021 Beginning Retained Earnings Add: Net Income 12,000 24,000 Ending Retained Earnings 36.000 Balance Sheet The Tail That Wags the Dog Balance Sheet December 31, 2021 ASSETS Cash Accounts Receivable Supplies expense 20,000 13,000 8,000 41,000 Total Current Assets Equipment Less: Depreciation expense Net Equipment 24,000 (2,000) 22,000 Total Assets 63.000 LIABILITIES Accounts Payable Income Tax expense 6,000 4,000 Total Current Liabilities 10,000 Interest Payable Notes Payable 1,000 20,000 Total Liabilities 31,000 OWNERS' EQUITY Common Stock Retained Earnings Total Owners' Equity 12,000 36,000 48,000 Total Liabilities and Owners' Equity 79.000 8. Closing Entries Prepare the closing entries for The Tail that Wags the Dog on December 31, 2021. Retained Earnings