Andy’s Autobody Shop has the following balances at the beginning of September: Cash, $9,800; Accounts Receivable, $1,300; Equipment, $44,900; Accounts Payable, $2,100; Common Stock, $20,000; and Retained Earnings, $33,900. Signed a long-term note and received a $123,800 loan from a local bank. Billed a customer $2,300 for repair services just completed. Payment is expected in 45 days. Wrote a check for $740 of rent for the current month. Received $360 cash on account from a customer for work done last month. The company incurred $350 in advertising costs for the current month and is planning to pay these costs next month. Required: Prepare journal entries for the above transactions, which occurred during a recent month. Prepare an income statement. Prepare a statement of retained earnings. Prepare a classified balance sheet.

Andy's Autobody Shop

1. Journal Entries:

Debit Cash Account $123,800

Credit Long-term Note Payable $123,800

To record the receipt of bank loan.

Debit Accounts Receivable $2,300

Credit Service Revenue $2,300

To record repair services completed.

Debit Rent Expense $740

Credit Cash Account $740

To record rent expense for the month.

Debit Cash Account $360

Credit Accounts Receivable $360

To record cash received from a customer.

Debit Advertising Expense $350

Credit Advertising Payable $350

To record advertising expense for the month.

2. Income Statement:

Service Revenue               $2,300

Expenses:

Rent                     $740

Advertising            350        1,090

Net Income                           1,210

3. Statement of Retained Earnings:

Net Income                          $1,210

Retained Earnings,            33,900

Dividends                                0

Retained Earnings,           $35,110

4. Classified Balance Sheet:

Assets:

Cash                                $133,220

Accounts Receivable           3,240

Total current assets       $136,460

Equipment,                         44,900

Total assets                     $181,360

Accounts Payable,             $2,100

Advertising Payable               350

Total current liabilities      $2,450

Long-term Note               123,800

Total Liabilities              $126,250

Common Stock,                20,000

Retained Earnings,             35,110

Total Liabilities + Equity $181,360

Explanation:

a) Data:

Andy's Autobody Shop

Trial balance, September 1:

Accounts                   Debit         Credit

Cash,                          $9,800

Accounts Receivable, $1,300

Equipment,              $44,900

Accounts Payable,                    $2,100

Common Stock,                     $20,000

Retained Earnings,                $33,900

Total                       $56,000 $56,000

b) Cash Account

Description                  Debit       Credit

Balance                      $9,800

Long-term Note       123,800

Rent                                                $740

Accounts Receivable     360

Balance                                      133,220

c) Accounts Receivable

Description                  Debit       Credit

Balance                      $1,300

Service Revenue         2,300

Cash                                              $360

Balance                                         3,240

c

explanation:

c because the item on a bank statement is also referred to as an account statement. in addition, it provides the beginning balance, ending balance, statement date, transaction date for each transaction, payee, customer name and address, statement period, the account holder's account number, and the bank's customer service number