Question

On July 1, 2017, Lula Plume created a new self-storage business, Safe Storage Co. The following transactions

occurred during the company’s first month.

July 1 Plume invested \(30,000 cash and buildings worth \)150,000 in the company in exchange for

common stock.

2 The company rented equipment by paying \(2,000 cash for the first month’s (July) rent.

5 The company purchased \)2,400 of office supplies for cash.

10 The company paid \(7,200 cash for the premium on a 12-month insurance policy. Coverage begins

on July 11.

14 The company paid an employee \)1,000 cash for two weeks’ salary earned.

24 The company collected \(9,800 cash for storage fees from customers.

28 The company paid \)1,000 cash for two weeks’ salary earned by an employee.

29 The company paid \(950 cash for minor repairs to a leaking roof.

30 The company paid \)400 cash for this month’s telephone bill.

31 The company paid \(2,000 cash in dividends.

The company’s chart of accounts follows:

101 Cash 401 Storage Fees Earned

106 Accounts Receivable 606 Depreciation Expense—Buildings

124 Office Supplies 622 Salaries Expense

128 Prepaid Insurance 637 Insurance Expense

173 Buildings 640 Rent Expense

174 Accumulated Depreciation—Buildings 650 Office Supplies Expense

209 Salaries Payable 684 Repairs Expense

307 Common Stock 688 Telephone Expense

318 Retained Earnings 901 Income Summary

319 Dividends

Required

1. Use the balance column format to set up each ledger account listed in its chart of accounts.

2. Prepare journal entries to record the transactions for July and post them to the ledger accounts. Record

prepaid and unearned items in balance sheet accounts.

3. Prepare an unadjusted trial balance as of July 31.

4. Use the following information to journalize and post adjusting entries for the month:

a. Two-thirds of one month’s insurance coverage has expired.

b. At the end of the month, \)1,525 of office supplies are still available.

c. This month’s depreciation on the buildings is \(1,500.

d. An employee earned \)100 of unpaid and unrecorded salary as of month-end.

e. The company earned $1,150 of storage fees that are not yet billed at month-end.

5. Prepare the adjusted trial balance as of July 31. Prepare the income statement and the statement of

retained earnings for the month of July and the balance sheet at July 31, 2017.

6. Prepare journal entries to close the temporary accounts and post these entries to the ledger.

7. Prepare a post-closing trial balance.

Short answer

The total adjusted trial balance is $192,550

Step-by-step solution

Definition of adjusted trial balance

Adjusted trial balance is the trial balance that is prepared after adjustment entries.

Adjusted trial balance

Safe Storage Co.
Adjusted Trial Balance
July 31, 2017
	Debit	Credit
Cash	$22,850
Accounts Receivable	$1,150
Office Supplies	$1,525
Prepaid Insurance	$6,800
Building	$150,000
Accumulated Depreciation- Building		$1,500
Salaries Payable		$100
Common Stock		$180,000
Dividends	$2,000
Commission Earned		$10,950
Depreciation Expense- Equipment	$1,500
Salaries Expense	$2,100
Insurance Expense	$400
Rent Expense	$2,000
Office Supplies Expense	$875
Repairs Expense	$950
Telephone Expense	$400
Totals	$192,550	$192,550

Income Statement

Safe Storage Company
Income Statement
July 31, 2017
Commission Earned		$10,950
Less:
Depreciation Expense- Building	$1,500
Salaries Expense	$2,100
Insurance Expense	$400
Rent Expense	$2,000
Office Supplies Expense	$875
Repairs Expense	$950
Telephone Expense	$400	$8,225
Net Income		$2,725

Statement of retained earnings

Safe Storage Co.
Statement of Retained Earnings
July 31, 2017
Retained Earning:
Add: Net Income	$2,725
Less: Withdrawal	-$2,000
Retained Earnings	$725

Balance Sheet

Safe Storage Co.
Balance Sheet
July 31, 2017
Assets
Current Assets:
Cash	$22,850
Accounts Receivable	$1,150
Prepaid Insurance	$6,800
Office Supplies	$1,525
Non-Current Assets
Building	$150,000
Accumulated Depreciation	-$1,500
Total Assets		$180,825
Liabilities
Current Liabilities
Salaries Payable	$100
Stockholder’s Equity
Common Stock		$180,000
Retained Earnings		$725
Total liabilities & Stockholder’s Equity		$180,825