P 4. At the end of the fiscal year, the trial balance of Reed Delivery Service a

Question

P 4. At the end of the fiscal year, the trial balance of Reed Delivery Service appeared as shown above

a. Expired insurance, $3,060.

b. Inventory of unused delivery supplies, $1,430.

c. Inventory of unused office supplies, $186.

d. Estimated depreciation on the building, $14,400.

e. Estimated depreciation on the trucks, $15,450.

f. Estimated depreciation on the office equipment, $2,700.

g. The company credits the lockbox fees of customers who pay in advance to the Unearned Lockbox Fees account. Of the amount credited to this account during the year, $5,630 had been earned by August 31.

h. Lockbox fees earned but unrecorded and uncollected at the end of the accounting period, $816.

i. Accrued but unpaid truck drivers' wages at the end of the year, $1,920.

2. Prepare an income statement, a statement of owner's equity, and a balance sheet for the company. Assume the owner, Natalie Reed, made no additional investments.

Explanation / Answer

Reed Delivery Service
Income Statement
For year ended, August 31, 2010

Delivery Service Revenue     (283,470)
Lockbox Fees Earned            (35,246)                               (318,716)
Less: Expenses
Truck Driver's Wages Expense        122,520
Office Salaries Expense                   44,400
Gas, Oil and Truck Repairs Expense 31,050
Interest Expense                               7,200
Insurance Expense                            3,060
Delivery Supplies Expense                 13,270
Office Supplies Expense                     2,274
Depreciation Expense Building           14,400
Depreciation Expense Trucks             15,450
Depreciation Expense Office Equipment 2,700                   256,324
Net Income                                                                      (62,392)


Reed Delivery Service
Balance Sheet
August 31, 2010

ASSETS
Cash 10,072
Accounts Receivable 29,314
Lockbox Fees Receivable 816
Prepaid Insurance 2,280
Delivery Supplies 1,430
Office Supplies 186
Land 15,000
Building 196,000
Accumulated Depreciation - Building (67,800)
Trucks 103,800
Accumulated Depreciation - Trucks (46,350)
Office Equipment 15,900
Accumulated Depreciation - Office Equipment (13,500)
TOTAL ASSETS 247,148

LIABILITIES AND OWNER'S CAPITAL
Account Payable (9,396)
Unearned Lockbox Fees (2,710)
Truck Driver's Wages Payable (1,920)
Mortgage Payable (72,000)
TOTAL LIABILITIES (86,026)

OWNER'S CAPITAL
N Reed Capital (128,730)
Add: Net Income (62,392)
N Reed Withdrawals 30,000
TOTAL OWNER'S CAPITAL (161,122)
TOTAL LIABILITIES AND OWNERS CAPITAL (247,148)

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