Exercise 3-20A Record transactions and prepare adjusting entries, adjusted trial balance, financial statements, and closing entries (LO3-3, 3-4, 3-5, 3-6, 3-7) (GL) On January 1, 2021, Red Flash Photography had the following balances: Cash, $20,000; Supplies, $8,800; Land, $68,000; Deferred Revenue, $5,800; Common Stock $58,000; and Retained Earnings, $33,000. During 2021, the company had the following transactions:

1. February 15 Issue additional shares of common stock, $28,000.
2. May 20 Provide services to customers for cash, $43,000, and on account, $38,000.
3. August 31 Pay salaries to employees for work in 2021, $31,000.
4. October 1 Purchase rental space for one year, $20,000.
5. November 17 Purchase supplies on account, $30,000.
6. December 30 Pay dividends, $2,800.
The following information is available on December 31, 2021:

Employees are owed an additional $4,800 in salaries.
Three months of the rental space has expired.
Supplies of $5,800 remain on hand.
All of the services associated with the beginning deferred revenue have been performed.
Requirement
General Journal
General Ledger
Trial Balance
Income Statement
Statement of SE
Balance Sheet
1. Record each of the transactions listed above in the 'General Journal' tab. Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances.

2. Record the adjusting entries in the 'General Journal' tab.

3. Review the adjusted 'Trial Balance' as of December 31, 2021.

4. Prepare an income statement for the year ended December 31, 2021, in the 'Income Statement' tab.

5. Prepare the statement of Stockholder's Equity for the year ended December 31, 2021, in the 'Income Statement' tab.

6. Prepare a classified balance sheet as of December 31, 2021 in the 'Balance Sheet' tab.

7. Record the closing entries in the 'General Journal' tab.

Red Flash Photography

1. General Journal

January 1, 2021:

Debit Cash,             $20,000

        Supplies,           $8,800

        Land,              $68,000

Credit: Deferred Revenue,   $5,800

           Common Stock       $58,000

           Retained Earnings, $33,000

To record opening balances.

Feb. 15 Debit Cash $28,000

Credit Common Stock $28,000

To record additional shares issued.

May 20 Debit Cash, $43,000,

Debit Accounts receivable $38,000

Credit Service revenue $81,000

To record provision of services for cash and on account.

August 31 Debit Salaries Expense $31,000

Credit Cash $31,000

To record payment of salaries.

October 1 Debit Prepaid Rent $20,000

Credit Cash $20,000

To record prepayment of rent for one year.

November 17 Debit Supplies $30,000

Credit Accounts payable $30,000

To record the purchase of supplies on account.

December 30 Debit Dividends $2,800

Credit Cash $2,800

To record payment of cash dividends.

Analysis of Adjustments at December 31, 2021:

1. Debit Salaries Expense $4,800

Credit Salaries Payable $4,800

To accrue salaries.

2. Debit Rent Expense $5,000

Credit Prepaid Rent $5,000

To record rent expense for the year.

3. Debit Supplies Expense $33,800

Credit Supplies $33,800

To record supplies expense.

4. Debit Deferred Revenue $5,800

Credit Service Revenue $5,800

To record services performed.

3. Adjusted Trial Balance as of December 31, 2021

Account Titles               Debit       Credit

Cash                           $37,200

Accounts receivable   38,000

Supplies                        5,000

Prepaid Rent               15,000

Land                           68,000

Accounts Payable                      $30,000

Salaries Payable                             4,800

Common Stock                            86,000

Retained Earnings                       33,000

Dividends                    2,800

Service Revenue                        86,800

Salaries Expense      35,800

Rent Expense             5,000

Supplies Expense    33,800

Totals                  $240,600   $240,600

4. Income Statement for the year ended December 31, 2021

Service Revenue                       $86,800

Salaries Expense      35,800

Rent Expense             5,000

Supplies Expense    33,800     $74,600

Net Income                                $12,200

5. Statement of Stockholders Equity for the year ended December 31, 2021

Retained Earnings                         $33,000

Net Income                                       12,200

Dividends                                          (2,800)

Retained earnings, Dec. 31, 2021 $42,400

Common stock                                86,000

Total equity                                  $128,400

6. Classified Balance Sheet as of December 31, 2021

Assets

Current Assets:

Cash                           $37,200

Accounts receivable   38,000

Supplies                        5,000

Prepaid Rent               15,000     $95,200

Long-term assets:

Land                                            $68,000

Total assets                               $163,200

Liabilities and Equity:

Accounts Payable                      $30,000

Salaries Payable                             4,800

Total liabilities                            $34,800

Equity:

Common Stock                            86,000

Retained Earnings                       42,400

Total equity                              $128,400

Total liabilities and equity       $163,200

7. General Journal

Debit Service Revenue $86,800

Credit Income Summary $86,800

To close revenue income summary.

Debit Income Summary $74,600

Credit Salaries Expense $35,800

Credit Rent Expense $5,000

Credit Supplies Expense $33,800

To close expenses to income summary

Debit Income Summary $12,200

Credit Retained Earnings $12,200

To close income summary to retained earnings.

Debit Retained Earnings $2,800

Credit Dividends $2,800

To close dividends to retained earnings.

Explanation:

a) Data and Analysis:

January 1, 2021 balances:

Cash, $20,000

Supplies, $8,800

Land, $68,000

Deferred Revenue, $5,800

Common Stock $58,000

Retained Earnings, $33,000

Transactions:

Feb. 15 Cash $28,000 Common Stock $28,000

May 20 Cash, $43,000, Accounts receivable $38,000 Service revenue $81,000

August 31 Salaries Expense $31,000 Cash $31,000

October 1 Prepaid Rent $20,000 Cash $20,000

November 17 Supplies $30,000 Accounts payable $30,000

December 30 Dividends $2,800 Cash $2,800

Analysis of Adjustments at December 31, 2021:

1. Salaries Expense $4,800 Salaries Payable $4,800

2. Rent Expense $5,000 Prepaid Rent $5,000

3. Supplies Expense $33,800 Supplies $33,800

4. Deferred Revenue $5,800 Service Revenue $5,800

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