The Accounting Cycle Statements and Closing Entries Chapter 6 Case Study CS-1 LO 1234 Grindstone Paving provides residential and commercial paving services. Its balance sheet at the end of June 2018 is shown below, along with its chart of accounts. Grindstone Paving Balance Sheet As at June 30, 2018 Assets Liabilities Cash $7.580 Accounts Payable $15,800 Accounts Receivable 6,000 Unearned Revenue 6,200 Prepaid Insurance 1,800 Notes Payable 22.000 Equipment 55.000 Total Liabilities 44,000 Owner's Equity Stone, Capital 26,380 Total Assets $20.380 Total Liabilities and Owner's Equity $70,380 Account Account 400 101 105 110 120 125 Account Description ASSETS Cash Accounts Receivable Prepaid Insurance Equipment Accumulated Depreciation--Equipment LABILITIES Accounts Payable Interest Payable Salary Parable Uneamed Revenue Notes Pyyable OWNER'S EQUITY Stone, Capital Stone, Withdrawals Income Summary Account Description REVENUE Service Revenue EXPENSES Advertising Expense Depreciation Expense Insurance Expense Interest Expense Salaries Expense Telephone Expense 500 510 515 520 545 $50 200 205 210 215 220 300 310 315 For the month of July 2018, Grindstone Paving had the following transactions. The owner invested $8,000 cash into the business Jul 2 Received $2.530 cash for work that will be provided in August Jul Received an advertising bill for $600, which will be pald next month Jul Pald the $350 telephone bill with cash Jul 10 Provided $4,680 worth of services to customers who will pay later Jul 14 Purchased equipment with $8,200 cash Jul 20 Received $2,350 In payment from customers paying their accounts Jul 22 Pald $1,970 toward accounts payable Jul 24 Paid $1.300 toward principal of the note payable Jul 28 Pald salary of $2.400 to an employee Jul 30 The owner withdrew $2,200 cash for personal use 259 Chapter 6 The Accounting Cycle: Statements and Closing Entries At the end of July, the following adjustments had to be Journalized to properly report the balances of the company's accounts Jul 31 One month of prepaid insurance worth $100 has been used Jul 31 Monthly depreciation on the equipment was $450 Jul 31 Unearned revenue worth $620 has now been earned Jul 31 Interest of $75 has accrued on the of the note payable Jul 31 Accrued salary expense of $500 for an employee Note: of the remaining balance of the note payable, $5,000 will be paid within the next year. The Accounting Cyde: Statements and closing Entries Chapter 6 f) Prepare the classified balance sheet. g) Prepare the journal entries for the adjustments and post them to the appropriate general ledger accounts. Date Account Title and Explanation PR Debit Credit The Accounting Cycle: Statements and Closing Entries Chapter 6 h) Prepare the journal entries to close the books for the month of July 2018 (use the income summary account), and post the journal entries to the appropriate general ledger accounts, which start on the next page. JOURNAL Date Account Title and Explanation PR Page 3 Credit Debit i) Create the post-closing trial balance. book (Student Edition) pages: 264 265 / 826 The Accounting Cyde Statements and Closing Entries Oplero GENERAL LEDGER Account Date Description GL NO Balance PR DR CR Accounti Date GL Nos Description PR DR CR Account Date Description PR DR CR GL NO Balance Account: Date Description PR DR CR GL No: Balance Account Date Description PR DR CR GL Nes Balance Account: Date Description PR DR GL NO: Balance 264