Ken Cascioli and Bill Ryder ( see E15- 10 and E15- 11) want to know the net income for their first month activities. Post the journal entries prepared for E15- 10 and E15- 11 to general ledger T accounts, and prepare a trial balance. From the trial balance, prepare an income statement, a statement of changes in owners equity, and a balance sheet.
In E15- 10
1. Ken and Bill each invested $ 3,000 in the business.
2. Ken and Bill acquired the following items of equipment for use in the business:
a. Ladders and other equipment, for which they paid $ 1,800 in cash. They estimated that the equipment would have an average useful life of 6 years.
b. A pickup truck, which they bought for $ 10,000. They paid $ 2,000 in cash as a down payment and signed a note for the remainder, agreeing to pay $ 1,000 a month for the next 8 months, together with interest at the rate of 5 percent per annum on the unpaid balance of the loan. They estimated the truck would have a useful life of 4 years.
3. They took out a 3 year insurance policy related to their business activities, paying $ 1,200 cash.
4. They paid $ 380 for paint and other supplies, all of which was consumed on the various painting jobs they did during the month.
5. They paid $ 80 for gasoline for the pickup truck.
6. Ken and Bill expect payment from their customers every Friday for work done during the week. During the month they collected $ 9,380 in cash for their work.
In E15- 11
1. Record depreciation for 1 month on the ladders and other equipment.
2. Record depreciation for 1 month on the pickup truck.
3. Accrue interest for 1 month on the note referred to in transaction 2b.
4. Record the cost of insurance for 1 month.
5. Ken and Bill worked on the last 2 days of the month and earned a total of $ 850, but they did not collect cash because the last day of the month fell on a Tuesday. Make an accrual for their earnings.