Baker City Well Drilling, Inc. of Baker City, Oregon started in business June 1, 2018. The company sold common stock, purchased a shop, high tech drilling equipment, various supplies, and immediately started advertising their well drilling services. The business of drilling wells took off fast due in part due to the companys adverting and also because there was very little competition in Eastern Oregon. After two months had passed by, the company CFO hired your team to provide accounting services for their first two months of business operations.

The accounting services youre to provide are as follows: 7(A). Prepare the following reports with proper headings and dates: -Income Statement for the 2 months of June through July. -Retained Earnings Statement for the same 2 month period. -Classified Balance Sheet as of July 31, 2018. 7(B). Prepare closing journal entries (omit explanations).

Baker City Well Drilling, Inc.

6/1 Issued Common Stock for cash in the amount of $100,000. 6/2 Purchased a small building to be used as a shop. The price was $80,000: $16,000 paid with cash, the remaining balance was a 5 year Note Payable in the amount of $64,000. The purchase price of $80,000 was allocated to land in the amount of $20,000 and the remaining amount of $60,000 to the shop building. Loan payments are made quarterly, the first payment is due on 9/2. 6/3 A Super Heavy Duty Ford Truck was purchased with special No Money Down and No Interest through Ford Credit Corporation. Purchase price was $45,000 and the first payment is due on 8/3. 6/4 Well Drilling Equipment was purchased for $20,000 cash. 6/4 Prepaid a 12 month insurance policy. The policy was effective as of June 1 st and cost $2,400. 6/5 Well Drilling Supplies were purchased on a 30 day credit account in the amount of $3,750. 6/6 Advertised in the weekly Baker City Farm News. Total cost was $1,500 with payment due by July 10 th . 6/7 Hired an employee at $3,000 per month. 6/9 A drilling bid of $9,500 was accepted by their first customer for a job to start on 6/12, the contract was signed on 6/9. 6/19 Bid a second job for $14,800 and received a $4,800 cash payment in advance (job to start on 6/25) contract was signed 6/19.

6/21 Completed the well drilling job started on 6/12 and billed the customer the contract price of $9,500. 6/28 Paid the advertising bill of $1,500 from Baker City Farm News. 7/1 Paid employees wages for June. Note: since it was for a short Month (6/8 6/30) total paid was prorated in the amount of $2,250. 7/3 Paid the account payable related to supplies purchased on 6/5. 7/6 Completed the well drilling job started on 6/25 and billed customer for the remaining balance due. 7/12 Bid a third job for a contract price of $15,750 and started the job immediately. 7/16 While working on the third job, a repair to equipment was required, the cost of the repair was $210 and was paid in cash. 7/18 Received a partial payment from the first job completed and billed last month on 6/21; partial payment received was $5,000. 7/27 Completed the third job that was started on 7/12. Billed the customer for the contract price.

Information for adjusting entries covering the two months ended July 31 st is provided on the next page.

Adjusting Entry Information 7/31 A count of drilling supplies on hand indicated unused supplies still on hand totaled $1,580. 7/31 Employee wages of $3,000 for the month of July are scheduled to be paid on August 2nd. 7/31 Depreciation expense on the building for 2 months amounts to $1,000. Depreciation expense on drilling equipment for 2 months amounts to $400. Depreciation expense on the truck for 2 months amounts to $600. 7/31 Interest expense has accrued on the note payable for the shop building and land in the amount of $740. Financing the Ford Super Heavy Duty Truck was a zero interest financing offer, therefore, no interest has accrued. 7/31 2 months of the prepaid insurance policy has now expired