Question

Following is the unadjusted trial balance of Baltimore Rentals Corporation at the end of its first year of operations, December 31, 20X5:

Account	Debit	Credit
Cash	3,300
Accounts receivable	4,000
Supplies	500
Truck	8,000
Acc. dep. – truck		0
Accounts payable		5,000
Unearned rent revenue		2,400
Income taxes payable		0
Capital Stock		7,000
Dividends	1,000
Rent earned		16,000
Commissions expense	1,000
Depreciation expense-truck	0
Supplies expense	0
Salaries expense	7,000
Telephone expense	0
Income tax expense	0
Rent expense	5,600
	30,400	30,400

The following additional information is available:

A physical count indicates that $300 of supplies is still on hand at December 31.

The truck was purchased on July 1; it has an estimated useful life of 4 years.

One day of salaries for December 31 is unpaid; the unpaid amount of $200 will be included in the first Friday payment in January.

The balance in the Unearned Rent Revenue account represents six months’ rental of warehouse space, effective October 1.

A $100 bill for December telephone charges has not yet been recorded.

Income taxes expense for the year is $300. This amount will be paid in the next fiscal year.

Required:

Prepare all necessary adjusting entries at December 31, 20x5.

Prepare an adjusted trial balance at December 31, 20x5.

Prepare an income statement, statement of retained earnings, and a balance sheet.

Prepare and record closing entries including descriptions.

		BALTIMORE RENTALS CORP                                                                    Work Sheet                                                                                                                        For Month Ended December 31, 201X
Account	Unadjusted                                   Trial balance		Adjusting entries (1)		Adjusted trial balance (2)		Income statement (3)		Statement of Retained Earnings (3)		Balance Sheet (3)
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	3,300
Accounts receivable	4,000
Supplies	500
Truck	8,000
Acc. Dep. - Truck		0
Accounts payable		5,000
Unearned rent revenue		2,400
Income taxes payable		0
Capital Stock		7,000
Dividends	1,000
Rent earned		16,000
Commissions expense	1,000
Depreciation expense-truck	0
Supplies expense	0
Salaries expense	7,000
Telephone expense	0
Income tax expense	0
Rent expense	5,600
Totals	30,400	30,400			0	0	0	0			0	0
Net income							0					0
Totals							0	0			0	0

Answer 1

BALTIMORE RENTALS CORP
Work Sheet
For Month Ended December 31, 201X
Account Title	Unadjusted Trial Balance		Adjusting Entries		Adjusted Trial Balance		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	3300				3300				3300
Accounts receivable	4000				4000				4000
Supplies	500			200	300				300
Truck	8000				8000				8000
Acc. Dep. - Truck		0		1000		1000				1000
Accounts payable		5000		300		5300				5300
Unearned rent revenue		2400	1200			1200				1200
Income taxes payable		0		300		300				300
Capital stock		7000				7000				7000
Dividends	1000				1000				1000
Rent earned		16000		1200		17200		17200
Commissions expense	1000				1000		1000
Depreciation exp.-truck	0		1000		1000		1000
Supplies expense	0		200		200		200
Salaries expense	7000		200		7200		7200
Telephone expense	0		100		100		100
Income tax expense	0		300		300		300
Rent expense	5600				5600		5600
Totals	30400	30400	3000	3000	32000	32000	15400	17200	16600	14800
Net income							1800			1800
Totals							17200	17200	16600	16600

Note: Unpaid salaries should ideally be credited to the salaries payable account. However, in absence of such an account, the salaries payable of $200 and unpaid telephone bill of $100 have both been included under accounts payable in the adjusting entries credit column.

Closing entries:

No.	General Journal	Debit	Credit
1	Rent earned	17200
	Income summary		17200
	(To close revenue account)
2	Income summary	15400
	Commissions expense		1000
	Depreciation exp.-truck		1000
	Supplies expense		200
	Salaries expense		7200
	Telephone expense		100
	Income tax expense		300
	Rent expense		5600
	(To close expense accounts)
3	Income summary	1800
	Retained earnings		1800
	(To close income summary to retained earnings)
4	Retained earnings	1000
	Dividends		1000
	(To close dividends to retained earnings)