On March 1, Carl Caldwell started Caldwell Fumiture Repair Company. He invested $2,000 of his own money, borrowed $16,000 from his father-in-law at 9% annual interest, and obtained
an additional $3,000, 12% loan from Maxi Bank. He purchased $15,000 of tools and equipment
(some new, some used) and bought $5,200 of supplies such as paints, resins, and glue, all for
cash. He rented a shop at a local business park by paying $3,600 in advance for the months of
March, April, and May. During March he performed repairs totaling $7,600 and used up $2,400
of supplies.
Of the repair services performed, 75% were paid for in cash by the end of the month and the
balance was expected to be collected in April. Carl estimated that wear and tear (i. e.
depreciation) on the equipment and tools during March was $250. On March 31, he owed $332
to the electric company and $78 to the water company for services consumed. Also on that
date, he paid interest totaling $150 on the two loans.
Required:
1. Prepare Journal entries, T-accounts, and Trial Balance from the above-given details (for
the month of March only).
[5 marks]
2. Prepare an Income Statement and a Classified Balance Sheet for the month of March.
[4 marks]