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Andy’s Autobody Shop has the following balances at the beginning of September: Cash, $9,800; Accounts Receivable, $1,300; Equipment, $44,900; Accounts Payable, $2,100; Common Stock, $20,000; and Retained Earnings, $33,900. Signed a long-term note and received a $123,800 loan from a local bank. Billed a customer $2,300 for repair services just completed. Payment is expected in 45 days. Wrote a check for $740 of rent for the current month. Received $360 cash on account from a customer for work done last month. The company incurred $350 in advertising costs for the current month and is planning to pay these costs next month. Required: Prepare journal entries for the above transactions, which occurred during a recent month. Prepare an income statement. Prepare a statement of retained earnings. Prepare a classified balance sheet.

User Peter Lea
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Answer:

Andy's Autobody Shop

1. Journal Entries:

Debit Cash Account $123,800

Credit Long-term Note Payable $123,800

To record the receipt of bank loan.

Debit Accounts Receivable $2,300

Credit Service Revenue $2,300

To record repair services completed.

Debit Rent Expense $740

Credit Cash Account $740

To record rent expense for the month.

Debit Cash Account $360

Credit Accounts Receivable $360

To record cash received from a customer.

Debit Advertising Expense $350

Credit Advertising Payable $350

To record advertising expense for the month.

2. Income Statement:

Service Revenue $2,300

Expenses:

Rent $740

Advertising 350 1,090

Net Income 1,210

3. Statement of Retained Earnings:

Net Income $1,210

Retained Earnings, 33,900

Dividends 0

Retained Earnings, $35,110

4. Classified Balance Sheet:

Assets:

Cash $133,220

Accounts Receivable 3,240

Total current assets $136,460

Equipment, 44,900

Total assets $181,360

Accounts Payable, $2,100

Advertising Payable 350

Total current liabilities $2,450

Long-term Note 123,800

Total Liabilities $126,250

Common Stock, 20,000

Retained Earnings, 35,110

Total Liabilities + Equity $181,360

Step-by-step explanation:

a) Data:

Andy's Autobody Shop

Trial balance, September 1:

Accounts Debit Credit

Cash, $9,800

Accounts Receivable, $1,300

Equipment, $44,900

Accounts Payable, $2,100

Common Stock, $20,000

Retained Earnings, $33,900

Total $56,000 $56,000

b) Cash Account

Description Debit Credit

Balance $9,800

Long-term Note 123,800

Rent $740

Accounts Receivable 360

Balance 133,220

c) Accounts Receivable

Description Debit Credit

Balance $1,300

Service Revenue 2,300

Cash $360

Balance 3,240

User Miszczu
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