Refer to the work sheet in Problem 6-7A for Megaffin's Repairs. The trial balance amounts (before adjustments) have been entered in the ledger accounts provided in the working papers. If you are not using the working papers that accompany this book, set up ledger accounts and enter these balances as of January 31, 20--. A chart of accounts is provided below.
REQUIRED
1. Journalize (page 10) and post the adjusting entries.
2. Journalize (page 11) and post the closing entries.
3. Prepare a post-closing trialbalance.

Complete Question:

Refer to the work sheet in Problem 6-7A for Megaffin's Repairs. The trial balance amounts (before adjustments) have been entered in the ledger accounts provided in the working papers. If you are not using the working papers that accompany this book, set up ledger accounts and enter these balances as of January 31, 20--. A chart of accounts is provided below.

Assets

101           Cash

122        Accounts Receivable

141          Supplies

145        Prepaid Insurance

185         Delivery Equipment

185.1      Accum. Depr.—Delivery Equip

Revenues

401          Repair Fees

Liabilities

202       Accounts Payable

219        Wages Payable

Owner's Equity

311             Don Megaffin, Capital

312            Don Megaffin, Drawing

313            Income Summary

Expenses

511           Wages Expense

512           Advertising Expense

521           Rent Expense

523         Supplies Expense

525         Phone Expense

535         Insurance Expense

538         Gas and Oil Expense

541          Dept. Exp.—Delivery Equip. Owner's Equity

549         Miscellaneous Expense  

Solution:

Adjustment of entries: Adjusting entries are those reported at the end of the year, in order to update revenue and expense (money) reports and balances (accounts, commitments and equity) in order to retain the documents in accordance with the concept of accrual basis.

Prepare adjusting entries at January 31:  

Date     Account Title and Explanation    Post. Ref   Debit ($)   Credit ($) Jan31      Supplies expense (SE-)                  593         300

                   Supplies (A-)                                 141                           300

           (To record cost of supplies used)

Jan31           Insurance Expense (SE-)            535          230

                    Prepaid Insurance (A-)                145                           230\

           (To record expired  Insurance)