Information: At the first month of operations, the Smart Touch Leaming (STL) INC. has the following transactions: Transaction Description of transactions December 1: STL received $890,000 cash from Regan Taylor and issued 1 common stock. December 1: STL received $750,000 in cash from Sheena Bright and issued 2 common stock December 1: STL purchased a building and the land it is on for $311,000 to house its repair facilities and to store computer equipment. The land which the 3 building is located is valued at $108,000. The balance of the cost is to be allocated to the building. December 2: A down payment of $30,100 in cash was made on office furniture that was purchased for $120,000. A one-year, 9% note payable was executed by STL for the balance. December 3: A one-year insurance was purchased by STL for $1,800 in cash. 5 Put the total amount into the Prepaid Insurance account. December 4: Office supplies costing $800 was purchased in cash. December 6: STL purchase of $10,500 worth of computers on account from 7 Sanders LTD, terms of 3/10. n/30. STL also pays a $200 freight charge. Paid salaries $11,200 to employees for the week ending December 5. December 10: STL sold 5 computers for $600 each, making a $3,000 sale on 8 account with terms of 2/10, n/30. The goods cost $ 2.200. December 11: Received a bill of $390 from the local newspaper for advertising. 9 Returned 2 computers valued at a total of $700 to Sanders LTD. 10 December 13: Paid Sanders LTD. less return. Paid salaries $11,200 to employees for the week ending December 12. December 20: A customer returned one computer purchased on account with a 11 sales price of $500. The cost of the goods was $350. 12 December 22: Paid salaries $11,200 to employees for the week ending December 19. 13 December 22: Paid the advertising bill that was received on December 11. 8 14 15 16 December 23: Cash in the amount of $19,500 was received on computer consultation service provided. December 25: Purchased office supplies for $1,140 on account. December 28: Billed $6.700 to customers for services performed to December 25. December 30: Received a utility bill for the amount of $290 from Ward Oil and Gas Co. December 31: Paid a cash dividend of $6,300 to stockholder. Regan Taylor; Paid a cash dividend of $5,100 to stockholder, Sheena Bright. 17 18 19 20 21 22 Adjusting Entries A physical inventory showed that only $650 worth of office supplies remained on hand as of December 31. The rent insurance payment made on December 23 was for next six months one year. Expense the amount associated with one month's rent insurance. The office furniture that was purchased with note payable. Record the accrued interest expense associated with one month's interest. A review of STL worksheets shows that there are uncollectible receivable in the amount of $400 for the period of December. Applying the allowance method to account for uncollectible. Each Monday, STL pays employees for the previous week's work. The amount of weekly payroll is $11,200 for a seven-day workweek (Monday to Sunday). This year, December 31 falls on Friday. The fixed assets have estimated useful lives as follows: Building - 50 years Office Furniture - 10 years Use the straight-line method of depreciation. Management has decided that assets purchased during a month are treated as if purchased on the first day of the month. The building's residual value is $0. The office equipment has a scrap value of $100. 23 24 25 26 27 28 Closing Entries Close the revenue accounts. Close the expense accounts. Close the income summary account. Close the dividends account. Instruction: (1) Record each transaction in the journal. Explanations are not required. Date GENERAL JOURNAL Account Titles and Explanations 1 Cash Ref. Debit Credit Dec. 890,000 890,000 Common stock Received cash in exchange for common stock Cash Common stock 1 750,000 750,000 (2) Joumalize the adjusting entries on December 31. Account Titles STL INC. Work Sheet For the Month of December 31 Trial Adjustment Adjusted Balance Trial Balance Dr. Cr. Dr. Cr. Dr. Cr. Income Statement Balance Sheet Dr. Cr. Dr. Cr. (3) Prepare an Income Statement and a Retained Earnings Statement for the month, and a classified Balance Sheet. STL INC. Income Statement For the Month of December 31 STL INC. Retained Earnings Statement For the Month of December 31 * STL INC. Balance Sheet December 31 Assets + Liabilities and Stockholders' Equity (4) Prepare the adjusting entries for the month. Date GENERAL JOURNAL Account Titles and Explanation Adjusting entries Ref. Debit Credit (5) Prepare the closing entries for the month. Date GENERAL JOURNAL Account Titles and Explanation Closing entries Ref. Debit Credit (6) Prepare a post-closing trial balance for the month (Assume all the adjusting entries and closing entries have been posted). STL INC. Post-closing Trial Balance December 31 Account Title Debit Credit + Total +