Warren SM Ch.04 Final
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Transcript of Warren SM Ch.04 Final
CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE
EYE OPENERS
1. The end-of-period spreadsheet (work sheet) illustrates flow of accounting information from the unadjusted trial balance into the adjusted trial balance and into the financial statements. In doing so, the spreadsheet (work sheet) illustrates the impact of the ad-justments on the financial statements.
2. No. The end-of-period spreadsheet (work sheet) is a device used by the accountant to facilitate the preparation of statements.
3. A net income of $240,350 ($915,800 – $675,450) would be reported. When the Credit column exceeds the Debit column, net income is reported. If the Debit column of the Income Statement columns is more than the Credit column, a net loss is reported.
4. a. Current assets are composed of cash and other assets that may reasonably be expected to be realized in cash or sold or consumed in the near future through the normal operations of the business.
b. Property, plant, and equipment is com-posed of assets used in the business that are of a permanent or relatively fixed nature.
5. Current liabilities are liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets. Liabilities that will not be due for a comparatively long time (usually more than one year) are called long-term liabilities.
6. Revenue, expense, and drawing accounts are generally referred to as temporary accounts.
7. Closing entries are necessary at the end of an accounting period (1) to transfer the bal-ances in temporary accounts to permanent accounts and (2) to prepare the temporary accounts for use in accumulating data for the following accounting period.
8. Adjusting entries bring the accounts up to date, while closing entries reduce the rev-enue, expense, and drawing accounts to zero balances for use in accumulating data for the following accounting period.
9. (1) Debit each revenue account for its bal-ance and credit Income Summary for the total revenue.
(2) Credit each expense account for its bal-ance and debit Income Summary for the total expenses.
(3) Debit Income Summary for its balance and credit the owner’s capital account.
(4) Debit the owner’s capital account for the balance of the drawing account and credit the drawing account.
10. The purpose of the post-closing trial balance is to make sure that the ledger is in balance at the beginning of the next period.
11. a. The financial statements are the most important output of the accounting cy-cle.
b. Yes, all companies have an accounting cycle that begins with analyzing and journalizing transactions and ends with a post-closing trial balance. However, companies may differ in how they imple-ment the steps in the accounting cycle. For example, while most companies use computerized accounting systems, some companies may use manual sys-tems.
12. The natural business year is the fiscal year that ends when business activities have reached the lowest point in the annual oper-ating cycle.
13. January is more likely to have a lower level of business activity than is December for a department store. Therefore, the additional work to adjust and close the accounts and prepare the financial statements can more easily be performed at the end of January than at the end of December.
14. All the companies listed are general mer-chandisers whose busiest time of the year is during the holiday season, which extends through most of December. Traditionally, the lowest point of business activity for general
merchandisers will be near the end of Janu-ary and the beginning of February. Thus, these companies have chosen their natural business year for their fiscal years.
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PRACTICE EXERCISES
PE 4–1A
1. Balance Sheet column 5. Balance Sheet column
2. Balance Sheet column 6. Balance Sheet column
3. Income Statement column 7. Balance Sheet column
4. Income Statement column 8. Income Statement column
PE 4–1B
1. Balance Sheet column 5. Income Statement column
2. Income Statement column 6. Income Statement column
3. Balance Sheet column 7. Balance Sheet column
4. Balance Sheet column 8. Balance Sheet column
PE 4–2A
A net income of $47,200 ($233,400 – $186,200) would be reported. When the Credit column exceeds the Debit column, net income is reported. If the Debit col-umn of the Income Statement columns is more than the Credit column, a net loss is reported.
PE 4–2B
A net loss of $130,200 ($505,200 – $375,000) would be reported. When the Credit column exceeds the Debit column, a net loss is reported. If the Debit column of the Balance Sheet columns is more than the Credit column, a net income is re-ported.
PE 4–3A
4U Delivery ServicesStatement of Owner’s Equity
For the Year Ended December 31, 2009
Meg Ostermiller, capital, January 1, 2009........................... $900,500Net loss.................................................................................. $24,900Add withdrawals.................................................................... 60,000 Decrease in owner’s equity.................................................. 84,900 Meg Ostermiller, capital, December 31, 2009..................... $815,600
PE 4–3B
Steuben Advertising ServicesStatement of Owner’s Equity
For the Year Ended December 31, 2009
Rod Zoot, capital, January 1, 2009...................................... $475,000Additional investment during 2009..................................... 75,000
Total.................................................................................. $550,000Net income............................................................................. $110,000Less withdrawals.................................................................. 30,000 Increase in owner’s equity................................................... 80,000 Rod Zoot, capital, December 31, 2009................................ $630,000
PE 4–4A
1. Current liability 5. Owner’s equity
2. Current asset 6. Long-term liability
3. Property, plant, and equipment 7. Current asset
4. Current asset 8. Current liability
PE 4–4B
1. Property, plant, and equipment 5. Current liability
2. Owner’s equity 6. Current asset
3. Long-term liability 7. Current liability
4. Current asset 8. Current liability
PE 4–5A
Nov. 30 Fees Earned......................................................... 779,000Income Summary............................................ 779,000
30 Income Summary................................................. 467,600Wages Expense.............................................. 389,000Rent Expense.................................................. 60,000Supplies Expense........................................... 7,200Miscellaneous Expense................................. 11,400
30 Income Summary................................................. 311,400Brett Maxim, Capital....................................... 311,400
30 Brett Maxim, Capital............................................ 50,000Brett Maxim, Drawing..................................... 50,000
PE 4–5B
July 31 Fees Earned......................................................... 515,000Income Summary............................................ 515,000
31 Income Summary................................................. 571,100Wages Expense.............................................. 480,000Rent Expense.................................................. 75,000Supplies Expense........................................... 12,100Miscellaneous Expense................................. 4,000
31 Sherry Kerney, Capital........................................ 56,100Income Summary............................................ 56,100
31 Sherry Kerney, Capital........................................ 20,000Sherry Kerney, Drawing................................. 20,000
PE 4–6A
The following two steps are missing: (1) assembling and analyzing adjustment data and (2) journalizing and posting the closing entries. The adjustment data should be assembled and analyzed after step (c). The closing entries should be journalized and posted to the ledger after step (g).
PE 4–6B
The following two steps are missing: (1) posting the transactions to the ledger and (2) the preparation of the financial statements. Transactions should be posted to the ledger after step (a). The financial statements should be prepared after step (f).
EXERCISES
Ex. 4–1
a. Income statement: 5, 8, 9
b. Balance sheet: 1, 2, 3, 4, 6, 7, 10
Ex. 4–2
a. Asset: 2, 5, 6, 10
b. Liability: 1, 9, 12
c. Revenue: 3, 7
d. Expense: 4, 8, 11
Ex. 4–3
ALPINE CONSULTINGIncome Statement
For the Year Ended March 31, 2010
Fees earned........................................................................... $43,800Expenses:
Salary expense................................................................. $17,450Supplies expense............................................................ 1,850Depreciation expense...................................................... 1,200Miscellaneous expense................................................... 1,850
Total expenses........................................................... 22,350 Net income............................................................................. $ 21,450
ALPINE CONSULTINGStatement of Owner’s Equity
For the Year Ended March 31, 2010
Scott Young, capital, April 1, 2009...................................... $22,600Net income............................................................................. $21,450Less withdrawals.................................................................. 3,000 Increase in owner’s equity................................................... 18,450 Scott Young, capital, March 31, 2010.................................. $ 41,050
ALPINE CONSULTINGBalance Sheet March 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash............................ $ 9,500 Accounts payable. . . $6,100Accounts receivable. . 22,500 Salaries payable...... 200 Supplies...................... 550 Total liabilities............ $ 6,300
Total current assets $32,550Property, plant, and
equipment:Office equipment........ $18,500Less accum. depr....... 3,700 Owner’s Equity
Total property, plant, Scott Young, capital. . 41,050 and equipment. . . 14,800 Total liabilities and
Total assets................... $ 47,350 owner’s equity......... $ 47,350
Ex. 4–4
AARDVARK CONSULTINGIncome Statement
For the Year Ended November 30, 2010
Fees earned........................................................................... $60,000Expenses:
Salary expense................................................................. $32,400Supplies expense............................................................ 2,250Depreciation expense...................................................... 900Miscellaneous expense................................................... 1,500
Total expenses........................................................... 37,050 Net income............................................................................. $ 22,950
AARDVARK CONSULTINGStatement of Owner’s Equity
For the Year Ended November 30, 2010
Jan Sullivan, capital, December 1, 2009............................. $27,200Net income............................................................................. $22,950Less withdrawals.................................................................. 2,000 Increase in owner’s equity................................................... 20,950 Jan Sullivan, capital, November 30, 2010........................... $ 48,150
AARDVARK CONSULTINGBalance Sheet
November 30, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash............................ $ 7,500 Accounts payable. . . $3,300Accounts receivable. . 18,500 Salaries payable...... 400 Supplies...................... 750 Total liabilities............ $ 3,700
Total current assets $26,750Property, plant, and
equipment:Office equipment........ $30,500 Owner’s EquityLess accum. depr....... 5,400 Jan Sullivan,
Total property, plant, capital....................... 48,150 and equipment...... 25,100 Total liabilities and
Total assets................... $ 51,850 owner’s equity......... $ 51,850
Ex. 4–5
3 RIVERS MESSENGER SERVICEIncome Statement
For the Year Ended September 30, 2010
Fees earned........................................................................ $425,000Expenses:
Salaries expense......................................................... $213,800Rent expense............................................................... 60,500Utilities expense.......................................................... 23,200Depreciation expense................................................. 8,000Supplies expense........................................................ 2,750Insurance expense...................................................... 1,500Miscellaneous expense.............................................. 3,250
Total expenses......................................................... 313,000 Net income.......................................................................... $112,000
Ex. 4–6
INFINET SERVICES CO.Income Statement
For the Year Ended January 31, 2010
Service revenue.................................................................. $233,900Expenses:
Wages expense........................................................... $184,300Rent expense............................................................... 49,300Utilities expense.......................................................... 18,750Depreciation expense................................................. 12,200Insurance expense...................................................... 6,000Supplies expense........................................................ 2,875Miscellaneous expense.............................................. 4,750
Total expenses......................................................... 278,175 Net loss............................................................................... $ 44,275
Ex. 4–7
a.
FEDEX CORPORATIONIncome Statement
For the Year Ended May 31, 2007(in millions)
Revenues............................................................................ $22,527Expenses:
Salaries and employee benefits................................. $8,051Fuel............................................................................... 2,946Rentals and landing fees............................................ 1,598Maintenance and repairs............................................ 1,440Purchased transportation........................................... 1,097Depreciation................................................................. 845Provision for income taxes........................................ 733Other expense (income) net....................................... 4,566
Total expenses......................................................... 21,276 Net income.......................................................................... $ 1,251
b. The income statements are very similar. The actual statement includes some additional expense and income classifications. For example, the actual state-ment reports Income Before Income Taxes and Provision for Income Taxes separately. In addition, the “Other expense (income) net” in the text is a sum-mary of several items from the Web site, including Intercompany charges, In-terest expense, and Interest income.
Ex. 4–8
JACKRABBIT SYSTEMS CO.Statement of Owner’s Equity
For the Year Ended March 31, 2010
Terry Collins, capital, April 1, 2009................................... $611,900Net income for year............................................................ $320,000Less withdrawals................................................................ 32,000 Increase in owner’s equity................................................ 288,000 Terry Collins, capital, March 31, 2010.............................. $899,900
Ex. 4–9
PICASSO SPORTSStatement of Owner’s Equity
For the Year Ended June 30, 2010
Margarita Castillo, capital, July 1, 2009............................ $237,600Net loss for year................................................................. $32,300Plus withdrawals................................................................ 4,000 Decrease in owner’s equity............................................... 36,300 Margarita Castillo, capital, June 30, 2010........................ $201,300
Ex. 4–10
a. Current asset: 1, 3, 5, 6
b. Property, plant, and equipment: 2, 4
Ex. 4–11
Since current liabilities are usually due within one year, $24,000 ($2,000 × 12 months) would be reported as a current liability on the balance sheet. The re-mainder of $336,000 ($360,000 – $24,000) would be reported as a long-term liabil-ity on the balance sheet.
Ex. 4–12
OPTIMUM WEIGHT CO.Balance SheetJune 30, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $ 9,375 Accounts payable............. $8,625Accounts receivable................... 20,780 Salaries payable................ 3,375Supplies........................................ 520 Unearned fees................... 2,500 Prepaid insurance....................... 4,800 Total liabilities..................... $ 14,500Prepaid rent.................................. 3,000
Total current assets.................. $ 38,475Property, plant, and equipment:
Land.............................................. $100,000Equipment.................................... $75,000 Owner’s EquityLess accumulated depreciation. 25,975 49,025 Carlos Kiser, capital............ 173,000
Total property, plant, andequipment............................... 149,025 Total liabilities and
Total assets...................................... $187,500 owner’s equity................... $187,500
Ex. 4–13
1. The date of the statement should be “August 31, 2010” and not “For the Year Ended August 31, 2010.”
2. Accounts payable should be a current liability.
3. Land should be classified as property, plant, and equipment.
4. “Accumulated depreciation” should be deducted from the related fixed asset.
5. An adding error was made in determining the amount of the total property, plant, and equipment.
6. Accounts receivable should be a current asset.
7. Net income should be reported on the income statement.
8. Wages payable should be a current liability.
A corrected balance sheet would be as follows:
Ex. 4–13 Concluded
CABANA SERVICES CO.Balance Sheet
August 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $15,840 Accounts payable.............. $20,370Accounts receivable................... 41,250 Wages payable................... 4,020 Supplies........................................ 4,950 Total liabilities....................... $ 24,390Prepaid insurance....................... 14,400
Total current assets.................. $ 76,440Property, plant, and equipment:
Land.............................................. $180,000 Owner’s EquityBuilding........................................ $470,100 Hector Delgado, capital........ 515,610 Less accumulated depreciation. 260,100 210,000
Equipment.................................... $129,000Less accumulated depreciation. 55,440 73,560
Total property, plant, andequipment.............................. 463,560 Total liabilities and
Total assets...................................... $540,000 owner’s equity................... $540,000
Ex. 4–14
c. Depreciation Expense—Equipment
g. Fees Earned
j. Supplies Expense
k. Wages Expense
Note: Erin Dowley, Drawing is closed to Erin Dowley, Capital rather than to In-come Summary.
Ex. 4–15
The income summary account is used to close the revenue and expense ac-counts, and it aids in detecting and correcting errors. The $432,200 represents expense account balances, and the $572,600 represents revenue account bal-ances that have been closed.
Ex. 4–16
a. Income Summary............................................................ 65,200Laurie Engan, Capital............................................... 65,200
($258,600 – $193,400).
Laurie Engan, Capital..................................................... 25,000Laurie Engan, Drawing............................................. 25,000
b. $340,200 ($300,000 + $65,200 – $25,000)
Ex. 4–17
July 31 Fees Earned......................................................... 215,000Income Summary............................................ 215,000
31 Income Summary................................................. 251,300Wages Expense.............................................. 190,000Rent Expense.................................................. 45,000Supplies Expense........................................... 11,200Miscellaneous Expense................................. 5,100
31 John O’Neil, Capital............................................. 36,300Income Summary............................................ 36,300
31 John O’Neil, Capital............................................. 30,000John O’Neil, Drawing..................................... 30,000
Ex. 4–18
a. Accounts Payable
b. Accumulated Depreciation
c. Bo Erath, Capital
e. Cash
h. Office Equipment
j. Salaries Payable
k. Supplies
Ex. 4–19
LA JOLLA BILLIARDS CO.Post-Closing Trial Balance
October 31, 2010
Debit CreditBalances Balances
Cash..................................................................................... 13,200Accounts Receivable......................................................... 29,350Supplies.............................................................................. 1,850Equipment........................................................................... 130,600Accumulated Depreciation—Equipment.......................... 43,500Accounts Payable.............................................................. 15,800Salaries Payable................................................................. 1,500Unearned Rent.................................................................... 6,000Trisha Valentino, Capital................................................... 108,200
175,000 175,000
Ex. 4–20
1. c
2. b
3. a
4. h
5. d
6. j
7. e
8. f
9. i
10. g
CHAPTER 5 Appendix Ex. 4–21
1. i
2. a
3. g
4. d
5. c
6. f
7. j
8. e
9. h
10. b
Appendix Ex. 4–22
A B C D E1 HOMELAND SECURITY SERVICES CO.2 End-of-Period Spreadsheet (Work Sheet)3 For the Year Ended October 31, 2010
4 Unadjusted Trial Balance Adjustments
Adjusted Trial Balance5
6 Account Title Debit Credit Debit Credit Debit Credit7 Cash 6 68 Accounts Receivable 40 (a) 4 449 Supplies 4 (b) 3 1
10 Prepaid Insurance 6 (c) 5 111 Land 50 5012 Equipment 20 2013 Accum. Depr.—Equipment 2 (d) 2 414 Accounts Payable 18 1815 Wages Payable 0 (e) 2 216 Gloria Millard, Capital 85 8517 Gloria Millard, Drawing 4 418 Fees Earned 45 (a) 4 4919 Wages Expense 10 (e) 2 12
20 Rent Expense 6 6
21 Insurance Expense 0 (c) 5 522 Utilities Expense 3 323 Depreciation Expense 0 (d) 2 224 Supplies Expense 0 (b) 3 325 Miscellaneous Expense 1 ___ __ __ 1 ___26 Totals 150 150 16 16 158 158
Appendix Ex. 4–23
A B C D E1 HOMELAND SECURITY SERVICES CO.2 End-of-Period Spreadsheet (Work Sheet)3 For the Year Ended October 31, 2010
4 Adjusted Trial Balance
Income Statement
BalanceSheet5
6 Account Title Debit Credit Debit Credit Debit Credit7 Cash 6 68 Accounts Receivable 44 449 Supplies 1 1
10 Prepaid Insurance 1 111 Land 50 5012 Equipment 20 2013 Accum. Depr.—Equipment 4 414 Accounts Payable 18 1815 Wages Payable 2 216 Gloria Millard, Capital 85 8517 Gloria Millard, Drawing 4 418 Fees Earned 49 4919 Wages Expense 12 12
20 Rent Expense 6 6
21 Insurance Expense 5 522 Utilities Expense 3 323 Supplies Expense 3 324 Depreciation Expense 2 2 25 Miscellaneous Expense 1 ___ _1 __ _ ___26 Totals 158 158 32 49 126 10927 Net income (loss) 17 __ ___ 17 28 49 49 126 126
Appendix Ex. 4–24
HOMELAND SECURITY SERVICES CO.Income Statement
For the Year Ended October 31, 2010
Fees earned........................................................................ $49Expenses:
Wages expense........................................................... $12Rent expense............................................................... 6Insurance expense...................................................... 5Utilities expense.......................................................... 3Supplies expense........................................................ 3Depreciation expense................................................. 2Miscellaneous expense.............................................. 1
Total expenses......................................................... 32 Net income.......................................................................... $ 17
HOMELAND SECURITY SERVICES CO.Statement of Owner’s Equity
For the Year Ended October 31, 2010
Gloria Millard, capital, November 1, 2009........................ $85Net income for the year..................................................... $17Less withdrawals................................................................ 4 Increase in owner’s equity................................................ 13 Gloria Millard, capital, October 31, 2010.......................... $98
HOMELAND SECURITY SERVICES CO.Balance Sheet
October 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash............................... $ 6 Accounts payable......... $18Accounts receivable..... 44 Wages payable.............. 2 Supplies......................... 1 Total liabilities................... $ 20Prepaid insurance......... 1
Total current assets... $ 52Property, plant, and
equipment:Land............................... $ 50Equipment..................... $20Less accum. depr......... 4 16 Owner’s Equity
Total property, plant, Gloria Millard, capital. . . 98 and equipment...... 66 Total liabilities and
Total assets....................... $118 owner’s equity............ $118
Appendix Ex. 4–25
2010Oct. 31 Accounts Receivable.......................................... 4
Fees Earned.................................................... 4Accrued fees.
31 Supplies Expense................................................ 3Supplies.......................................................... 3
Supplies used ($4 – $1).
31 Insurance Expense.............................................. 5Prepaid Insurance.......................................... 5
Insurance expired.
31 Depreciation Expense......................................... 2Accumulated Depreciation—Equipment...... 2
Equipment depreciation.
31 Wages Expense................................................... 2Wages Payable............................................... 2
Accrued wages.
Appendix Ex. 4–26
2010Oct. 31 Fees Earned......................................................... 49
Income Summary............................................ 49
31 Income Summary................................................. 32Wages Expense.............................................. 12Rent Expense.................................................. 6Insurance Expense......................................... 5Utilities Expense............................................. 3Supplies Expense........................................... 3Depreciation Expense.................................... 2Miscellaneous Expense................................. 1
31 Income Summary................................................. 17Gloria Millard, Capital.................................... 17
31 Gloria Millard, Capital.......................................... 4Gloria Millard, Drawing.................................. 4
Ex. 4–27
a.
December 31, 2007 2006
Current assets.......... $322,245 $244,952Current liabilities...... 95,699 71,563 Working capital........ $226,546 $173,389
Current ratio..... 3.37 ($322,245/$95,699) 3.42 ($244,952/$71,563)
b. Under Armour’s working capital increased by $53,157 ($226,546 – $173,389) during 2007. The current ratio decreased slightly, from 3.42 to 3.37, in 2007. However, a current ratio of 3.37 still indicates a strong solvency position. Thus, short-term creditors should not be concerned about receiving payment from Under Armour.
Ex. 4–28
a.
Sept. 30, 2007 Oct. 1, 2006
Current assets.......... $1,696,487 $1,529,700Current liabilities...... 2,155,566 1,935,620 Working capital........ $ (459,079 ) $ (405,920 )
Current ratio............. 0.79 0.79 ($1,696,487/$2,155,566) ($1,529,700/$1,935,620)
b. Starbucks Corporation has negative (deficit) working capital of $459,079 and $405,920 for 2007 and 2006. Starbucks’ working capital decreased by $53,159 ($459,079 – $405,920) during 2007; however, the current ratio of 0.79 remained the same. Normally, a negative working capital would be of concern to short-term creditors. However, in notes to its financial statements, Starbucks indi-cates that it has unused credit with banks of $1 billion through 2011. Thus, short-term creditors can be assured of receiving payment even though Star-bucks has negative working capital and a current ratio below 1.
PROBLEMS
Prob. 4–1A
1.
PRISON WATCH COMPANYIncome Statement
For the Year Ended June 30, 2010
Revenues:Fees revenue............................................................... $281,200Rent revenue................................................................ 4,000
Total revenues......................................................... $285,200Expenses:
Salaries and wages expense...................................... $147,000Advertising expense................................................... 86,800Utilities expense.......................................................... 30,000Travel expense............................................................ 18,750Depreciation expense—equipment........................... 6,000Depreciation expense—building............................... 2,500Supplies expense........................................................ 1,525Insurance expense...................................................... 900Miscellaneous expense.............................................. 5,875
Total expenses......................................................... 299,350 Net loss............................................................................... $ 14,150
2.
PRISON WATCH COMPANYStatement of Owner’s Equity
For the Year Ended June 30, 2010
Cassandra Jaffee, capital, July 1, 2009............................ $311,300Net loss for the year........................................................... $14,150Add withdrawals................................................................. 20,000 Decrease in owner’s equity............................................... 34,150 Cassandra Jaffee, capital, June 30, 2010......................... $277,150
Prob. 4–1A Continued
3.
PRISON WATCH COMPANYBalance SheetJune 30, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $ 5,100 Accounts payable............. $9,750Accounts receivable................... 13,950 Salaries and wagesPrepaid insurance....................... 2,700 payable............................ 1,900Supplies........................................ 500 Unearned rent................... 500
Total current assets.................. $ 22,250 Total liabilities..................... $ 12,150Property, plant, and equipment:
Land.............................................. $ 80,000 Owner’s EquityBuilding........................................ $200,000 Cassandra Jaffee, capital. . . 277,150 Less accum. depreciation.......... 92,500 107,500
Equipment.................................... $140,000Less accum. depreciation.......... 60,450 79,550
Total property, plant, andequipment............................... 267,050 Total liabilities and
Total assets...................................... $289,300 owner’s equity................... $289,300
Prob. 4–1A Continued
4.
2010June30 Fees Revenue...................................................... 281,200
Rent Revenue....................................................... 4,000Income Summary............................................ 285,200
30 Income Summary................................................. 299,350Salaries and Wages Expense........................ 147,000Advertising Expense...................................... 86,800Utilities Expense............................................. 30,000Travel Expense............................................... 18,750Depreciation Expense—Equipment............. 6,000Depreciation Expense—Building.................. 2,500Supplies Expense........................................... 1,525Insurance Expense......................................... 900Miscellaneous Expense................................. 5,875
30 Cassandra Jaffee, Capital................................... 14,150Income Summary............................................ 14,150
30 Cassandra Jaffee, Capital................................... 20,000Cassandra Jaffee, Drawing........................... 20,000
Prob. 4–1A Concluded
5.PRISON WATCH COMPANYPost-Closing Trial Balance
June 30, 2010
Debit CreditBalances Balances
Cash....................................................................................... 5,100Accounts Receivable............................................................ 13,950Prepaid Insurance................................................................. 2,700Supplies................................................................................. 500Land........................................................................................ 80,000Building.................................................................................. 200,000Accumulated Depreciation—Building................................. 92,500Equipment.............................................................................. 140,000Accumulated Depreciation—Equipment............................. 60,450Accounts Payable................................................................. 9,750Salaries and Wages Payable................................................ 1,900Unearned Rent....................................................................... 500Cassandra Jaffee, Capital.................................................... 277,150
442,250 442,250
Prob. 4–2A
1.
THE HOMETOWN SERVICES COMPANYIncome Statement
For the Year Ended March 31, 2010
Revenues:Service fees................................................................. $475,000Rent revenue................................................................ 5,000
Total revenues......................................................... $480,000Expenses:
Salary expense............................................................ $340,600Depreciation expense—equipment........................... 18,500Rent expense............................................................... 15,500Supplies expense........................................................ 10,950Utilities expense.......................................................... 9,900Depreciation expense—buildings............................. 6,600Repairs expense.......................................................... 5,450Insurance expense...................................................... 3,000Miscellaneous expense.............................................. 5,100
Total expenses......................................................... 415,600 Net income.......................................................................... $ 64,400
THE HOMETOWN SERVICES COMPANYStatement of Owner’s Equity
For the Year Ended March 31, 2010
Jane Maines, capital, April 1, 2009................................... $427,600Net income for the year..................................................... $64,400Less withdrawals................................................................ 25,000 Increase in owner’s equity................................................ 39,400 Jane Maines, capital, March 31, 2010............................... $467,000
Prob. 4–2A Continued
THE HOMETOWN SERVICES COMPANYBalance SheetMarch 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $ 12,950 Accounts payable............. $33,300Accounts receivable................... 28,150 Salaries payable................ 3,300Supplies........................................ 4,400 Unearned rent................... 1,500 Prepaid insurance....................... 9,500 Total liabilities..................... $ 38,100
Total current assets.................. $ 55,000Property, plant, and equipment:
Land.............................................. $100,000 Owner’s EquityBuildings...................................... $360,000 Jane Maines, capital............ 467,000 Less accum. depreciation.......... 117,200 242,800
Equipment.................................... $260,000Less accum. depreciation.......... 152,700 107,300
Total property, plant, andequipment............................... 450,100 Total liabilities and
Total assets...................................... $505,100 owner’s equity................... $505,100
Prob. 4–2A Concluded
2.
2010Mar. 31 Service Fees......................................................... 475,000
Rent Revenue....................................................... 5,000Income Summary............................................ 480,000
31 Income Summary................................................. 415,600Salary Expense............................................... 340,600Depreciation Expense—Equipment............. 18,500Rent Expense.................................................. 15,500Supplies Expense........................................... 10,950Utilities Expense............................................. 9,900Depreciation Expense—Buildings................ 6,600Repairs Expense............................................ 5,450Insurance Expense......................................... 3,000Miscellaneous Expense................................. 5,100
31 Income Summary................................................. 64,400Jane Maines, Capital...................................... 64,400
31 Jane Maines, Capital........................................... 25,000Jane Maines, Drawing.................................... 25,000
3. $60,000 net income. The $35,000 increase is caused by the $25,000 with-drawals and a $60,000 net income.
Prob. 4–3A
1, 3, 6.Cash
Oct. 31 Bal. 4,350
Laundry Supplies
Oct. 31 Bal. 11,250 Oct. 31 Adj. 8,350
31 Adj. Bal. 2,900
Prepaid Insurance
Oct. 31 Bal. 7,200 Oct. 31 Adj. 6,000
31 Adj. Bal. 1,200
Laundry Equipment
Oct. 31 Bal. 163,500
Accumulated Depreciation
Oct. 31 Bal. 61,500
31 Adj. 9,500
31 Adj. Bal. 71,000
Accounts Payable
Oct. 31 Bal. 9,300
Wages Payable
Oct. 31 Adj. 1,250
Hilda Dinero, Capital
Oct. 31 Clos. 3,000 Oct. 31 Bal. 56,700
_____ 31 Clos. 36,700
31 Bal. 90,400
Hilda Dinero, Drawing
Oct. 31 Bal. 3,000 Oct. 31 Clos. 3,000
Prob. 4–3A Continued
Income Summary
Oct. 31 Clos. 210,800 Oct. 31 Clos. 247,500
31 Clos. 36,700
Laundry Revenue
Oct. 31 Clos. 247,500 Oct. 31 Bal. 247,500
Wages Expense
Oct. 31 Bal. 107,250 Oct. 31 Clos. 108,500
31 Adj. 1,250 ______
31 Adj. Bal. 108,500
Rent Expense
Oct. 31 Bal. 54,000 Oct. 31 Clos. 54,000
Utilities Expense
Oct. 31 Bal. 20,400 Oct. 31 Clos. 20,400
Depreciation Expense
Oct. 31 Adj. 9,500 Oct. 31 Clos. 9,500
Laundry Supplies Expense
Oct. 31 Adj. 8,350 Oct. 31 Clos. 8,350
Insurance Expense
Oct. 31 Adj. 6,000 Oct. 31 Clos. 6,000
Miscellaneous Expense
Oct. 31 Bal. 4,050 Oct. 31 Clos. 4,050
Prob. 4–3A Continued
2. Optional (Appendix)
A B C D E F G H I J K 1 SURF SUDS LAUNDRY 2 End-of-Period Spreadsheet (Work Sheet) 3 For the Year Ended October 31, 2010 4 Unadjusted
Trial Balance AdjustmentsAdjusted
Trial BalanceIncome
StatementBalance
Sheet 5 6 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 4,350 4,350 4,350 8 Laundry Supplies 11,250 (c) 8,350 2,900 2,900 9 Prepaid Insurance 7,200 (d) 6,000 1,200 1,20010 Laundry Equipment 163,500 163,500 163,50011 Accum. Depreciation 61,500 (b) 9,500 71,000 71,00012 Accounts Payable 9,300 9,300 9,30013 Wages Payable (a) 1,250 1,250 1,25014 Hilda Dinero, Capital 56,700 56,700 56,70015 Hilda Dinero, Drawing 3,000 3,000 3,00016 Laundry Revenue 247,500 247,500 247,50017 Wages Expense 107,250 (a) 1,250 108,500 108,50018 Rent Expense 54,000 54,000 54,00019 Utilities Expense 20,400 20,400 20,40020 Depreciation Expense (b) 9,500 9,500 9,50021 Laundry Supp. Expense (c) 8,350 8,350 8,35022 Insurance Expense (d) 6,000 6,000 6,00023 Misc. Expense 4,050 _______ 4,050 4,05024 375,000 375,000 25,100 25,100 385,750 385,750 210,800 247,500 174,950 138,25025 Net income 36,700 ______ ______ 36,700 26 247,500 247,500 174,950 174,950
Prob. 4–3A Continued
3.
Adjusting Entries2010Oct. 31 Wages Expense.................................................. 1,250
Wages Payable.............................................. 1,250Accrued wages.
31 Depreciation Expense........................................ 9,500Accumulated Depreciation........................... 9,500
Equipment depreciation.
31 Laundry Supplies Expense............................... 8,350Laundry Supplies.......................................... 8,350
Supplies used ($11,250 – $2,900).
31 Insurance Expense............................................. 6,000Prepaid Insurance......................................... 6,000
Insurance expired.
4.
SURF SUDS LAUNDRYAdjusted Trial Balance
October 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 4,350Laundry Supplies.................................................................. 2,900Prepaid Insurance................................................................. 1,200Laundry Equipment.............................................................. 163,500Accumulated Depreciation................................................... 71,000Accounts Payable................................................................. 9,300Wages Payable...................................................................... 1,250Hilda Dinero, Capital............................................................. 56,700Hilda Dinero, Drawing........................................................... 3,000Laundry Revenue.................................................................. 247,500Wages Expense..................................................................... 108,500Rent Expense........................................................................ 54,000Utilities Expense................................................................... 20,400Depreciation Expense........................................................... 9,500Laundry Supplies Expense.................................................. 8,350Insurance Expense............................................................... 6,000Miscellaneous Expense........................................................ 4,050
385,750 385,750
Prob. 4–3A Continued
5.SURF SUDS LAUNDRY
Income StatementFor the Year Ended October 31, 2010
Laundry revenue................................................................ $247,500Expenses:
Wages expense........................................................... $108,500Rent expense............................................................... 54,000Utilities expense.......................................................... 20,400Depreciation expense................................................. 9,500Laundry supplies expense......................................... 8,350Insurance expense...................................................... 6,000Miscellaneous expense.............................................. 4,050
Total expenses......................................................... 210,800 Net income.......................................................................... $ 36,700
SURF SUDS LAUNDRYStatement of Owner’s Equity
For the Year Ended October 31, 2010
Hilda Dinero, capital, November 1, 2009.......................... $56,700Net income for the year..................................................... $36,700Less withdrawals................................................................ 3,000 Increase in owner’s equity................................................ 33,700 Hilda Dinero, capital, October 31, 2010............................ $ 90,400
SURF SUDS LAUNDRYBalance Sheet
October 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash........................... $ 4,350 Accounts payable. . . $9,300Laundry supplies...... 2,900 Wages payable........ 1,250 Prepaid insurance..... 1,200 Total liabilities............ $ 10,550
Total current assets $ 8,450Property, plant, and
equipment: Owner’s EquityLaundry equipment. . $163,500 Hilda Dinero, capital. . 90,400 Less accum. depr..... 71,000
Total property, plant,and equipment..... 92,500 Total liabilities and
Total assets.................. $ 100,950 owner’s equity......... $ 100,950
Prob. 4–3A Concluded
6.
Closing Entries2010Oct. 31 Laundry Revenue............................................... 247,500
Income Summary.......................................... 247,500
31 Income Summary................................................ 210,800Wages Expense............................................. 108,500Rent Expense................................................ 54,000Utilities Expense........................................... 20,400Depreciation Expense.................................. 9,500Laundry Supplies Expense.......................... 8,350Insurance Expense....................................... 6,000Miscellaneous Expense............................... 4,050
31 Income Summary................................................ 36,700Hilda Dinero, Capital..................................... 36,700
31 Hilda Dinero, Capital.......................................... 3,000Hilda Dinero, Drawing................................... 3,000
7.
SURF SUDS LAUNDRYPost-Closing Trial Balance
October 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 4,350Laundry Supplies.................................................................. 2,900Prepaid Insurance................................................................. 1,200Laundry Equipment.............................................................. 163,500Accumulated Depreciation................................................... 71,000Accounts Payable................................................................. 9,300Wages Payable...................................................................... 1,250Hilda Dinero, Capital............................................................. 90,400
171,950 171,950
Prob. 4–4A
1. Optional (Appendix)A B C D E F G H I J K
1 MECHANICAL SERVICES CO.2 End-of-Period Spreadsheet (Work Sheet)3 For the Month Ended July 31, 2010
4 UnadjustedTrial Balance Adjustments
AdjustedTrial Balance
IncomeStatement
BalanceSheet5
6 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 26,870 26,870 26,8708 Accounts Receivable 10,900 (a) 3,000 13,900 13,9009 Supplies 3,050 (b) 1,575 1,475 1,475
10 Prepaid Insurance 4,800 (c) 1,200 3,600 3,60011 Land 50,000 50,000 50,00012 Building 57,500 57,500 57,50013 Acc. Depr.—Building 23,400 (d) 1,300 24,700 24,70014 Equipment 32,000 32,000 32,00015 Acc. Depr.—Equipment 10,200 (e) 1,250 11,450 11,45016 Accounts Payable 3,350 3,350 3,35017 Wages Payable (g) 500 500 50018 Unearned Rent 2,700 (f) 1,000 1,700 1,70019 Rafael Cagle, Capital 123,000 123,000 123,00020 Rafael Cagle, Drawing 2,000 2,000 2,00021 Service Revenue 35,000 (a) 3,000 38,000 38,00022 Rent Revenue (f) 1,000 1,000 1,00023 Wages Expense 5,000 (g) 500 5,500 5,50024 Supplies Expense (b) 1,575 1,575 1,57525 Rent Expense 2,500 2,500 2,50026 Depr. Exp.—Building (d) 1,300 1,300 1,30027 Utilities Expense 1,650 1,650 1,65028 Depr. Exp.—Equipment (e) 1,250 1,250 1,25029 Insurance Expense (c) 1,200 1,200 1,20030 Misc. Expense 1,380 1,380 1,380
31 197,650 197,650 9,825 9,825 203,700 203,700 16,355 39,000 187,345 164,70032 Net income 22,645 ______ _______ 22,645 33 39,000 39,000 187,345 187,345
Prob. 4–4A Continued
2.JOURNAL Page 26
Post.Date Ref. Debit Credit
2010 Adjusting EntriesJuly 31 Accounts Receivable................................... 12 3,000
Service Revenue..................................... 41 3,000Accrued revenue.
31 Supplies Expense........................................ 52 1,575Supplies.................................................. 13 1,575
Supplies used ($3,050 – $1,475).
31 Insurance Expense...................................... 57 1,200Prepaid Insurance.................................. 14 1,200
Insurance expired.
31 Depreciation Expense—Building............... 54 1,300Accumulated Depreciation—Building.. 17 1,300
Building depreciation.
31 Depreciation Expense—Equipment........... 56 1,250Accum. Depreciation—Equipment....... 19 1,250
Equipment depreciation.
31 Unearned Rent............................................. 23 1,000Rent Revenue......................................... 42 1,000
Rent revenue earned ($2,700 – $1,700).
31 Wages Expense............................................ 51 500Wages Payable....................................... 22 500
Accrued wages.
Prob. 4–4A Continued
3.
MECHANICAL SERVICES CO.Adjusted Trial Balance
July 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 26,870Accounts Receivable............................................................ 13,900Supplies................................................................................. 1,475Prepaid Insurance................................................................. 3,600Land........................................................................................ 50,000Building.................................................................................. 57,500Accumulated Depreciation—Building................................. 24,700Equipment.............................................................................. 32,000Accumulated Depreciation—Equipment............................. 11,450Accounts Payable................................................................. 3,350Wages Payable...................................................................... 500Unearned Rent....................................................................... 1,700Rafael Cagle, Capital............................................................. 123,000Rafael Cagle, Drawing.......................................................... 2,000Service Revenue................................................................... 38,000Rent Revenue........................................................................ 1,000Wages Expense..................................................................... 5,500Supplies Expense................................................................. 1,575Rent Expense........................................................................ 2,500Depreciation Expense—Building........................................ 1,300Utilities Expense................................................................... 1,650Depreciation Expense—Equipment.................................... 1,250Insurance Expense............................................................... 1,200Miscellaneous Expense........................................................ 1,380
203,700 203,700
Prob. 4–4A Continued
4.
MECHANICAL SERVICES CO.Income Statement
For the Month Ended July 31, 2010
Revenues:Service revenue........................................................... $38,000Rent revenue................................................................ 1,000
Total revenues......................................................... $39,000Expenses:
Wages expense........................................................... $ 5,500Rent expense............................................................... 2,500Utilities expense.......................................................... 1,650Supplies expense........................................................ 1,575Depreciation expense—building............................... 1,300Depreciation expense—equipment........................... 1,250Insurance expense...................................................... 1,200Miscellaneous expense.............................................. 1,380
Total expenses......................................................... 16,355 Net income.......................................................................... $ 22,645
MECHANICAL SERVICES CO.Statement of Owner’s Equity
For the Month Ended July 31, 2010
Rafael Cagle, capital, July 1, 2010.................................... $118,000Additional investment during the month......................... 5,000 Total..................................................................................... $123,000Net income for the month.................................................. $22,645Less withdrawals................................................................ 2,000 Increase in owner’s equity................................................ 20,645 Rafael Cagle, capital, July 31, 2010.................................. $ 143,645
Prob. 4–4A Continued
MECHANICAL SERVICES CO.Balance SheetJuly 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $26,870 Accounts payable................. $3,350Accounts receivable................... 13,900 Wages payable...................... 500Supplies........................................ 1,475 Unearned rent....................... 1,700 Prepaid insurance....................... 3,600 Total liabilities......................... $ 5,550
Total current assets.................. $ 45,845Property, plant, and equipment:
Land.............................................. $50,000 Owner’s EquityBuilding........................................ $57,500 Rafael Cagle, capital............... 143,645 Less accum. depreciation.......... 24,700 32,800
Equipment.................................... $32,000Less accum. depreciation.......... 11,450 20,550
Total property, plant, andequipment............................... 103,350 Total liabilities and
Total assets...................................... $ 149,195 owner’s equity....................... $ 149,195
Prob. 4–4A Continued
5.JOURNAL Page 27
Post.Date Ref. Debit Credit
2010 Closing EntriesJuly 31 Service Revenue.......................................... 41 38,000
Rent Revenue............................................... 42 1,000Income Summary................................... 33 39,000
31 Income Summary......................................... 33 16,355Wages Expense...................................... 51 5,500Supplies Expense.................................. 52 1,575Rent Expense......................................... 53 2,500Depreciation Expense—Building.......... 54 1,300Utilities Expense.................................... 55 1,650Depreciation Expense—Equipment..... 56 1,250Insurance Expense................................ 57 1,200Miscellaneous Expense......................... 59 1,380
31 Income Summary......................................... 33 22,645Rafael Cagle, Capital.............................. 31 22,645
31 Rafael Cagle, Capital................................... 31 2,000Rafael Cagle, Drawing............................ 32 2,000
Prob. 4–4A Continued
2. and 5.
Cash 11Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. 6,000 .............
3 ................................. 23 ............. 2,500 3,500 .............4 ................................. 23 5,000 ............. 8,500 .............5 ................................. 23 ............. 400 8,100 .............7 ................................. 23 3,200 ............. 11,300 .............8 ................................. 23 5,900 ............. 17,200 .............8 ................................. 23 ............. 4,500 12,700 .............8 ................................. 23 9,400 ............. 22,100 .............
10 ................................. 24 ............. 500 21,600 .............12 ................................. 24 ............. 2,400 19,200 .............15 ................................. 24 7,800 ............. 27,000 .............16 ................................. 24 ............. 1,000 26,000 .............19 ................................. 24 ............. 2,100 23,900 .............22 ................................. 24 ............. 1,200 22,700 .............22 ................................. 24 8,100 ............. 30,800 .............24 ................................. 25 ............. 800 30,000 .............26 ................................. 25 ............. 2,600 27,400 .............30 ................................. 25 ............. 350 27,050 .............30 ................................. 25 ............. 600 26,450 .............31 ................................. 25 ............. 1,000 25,450 .............31 ................................. 25 2,200 ............. 27,650 .............31 ................................. 25 ............. 780 26,870 .............
Accounts Receivable 12
2010July 1 Balance.................... ............. ............. 12,500 .............
7 ................................. 23 ............. 3,200 9,300 .............8 ................................. 23 ............. 5,900 3,400 .............
22 ................................. 24 7,500 ............. 10,900 .............31 Adjusting................. 26 3,000 ............. 13,900 .............
Prob. 4–4A Continued
Supplies 13Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. 1,750 .............
10 ................................. 24 500 ............. 2,250 .............27 ................................. 25 800 ............. 3,050 .............31 Adjusting................. 26 ............. 1,575 1,475 .............
Prepaid Insurance 14
2010July 1 Balance.................... ............. ............. 3,600 .............
22 ................................. 24 1,200 ............. 4,800 .............31 Adjusting................. 26 ............. 1,200 3,600 .............
Land 15
2010July 1 Balance.................... ............. ............. 50,000 .............
Building 16
2010July 1 Balance.................... ............. ............. 57,500 .............
Accumulated Depreciation—Building 17
2010July 1 Balance.................... ............. ............. ............. 23,400
31 Adjusting................. 26 ............. 1,300 ............. 24,700
Equipment 18
2010July 1 Balance.................... ............. ............. 29,250 .............
3 ................................. 23 2,750 ............. 32,000 .............
Accumulated Depreciation—Equipment 19
2010July 1 Balance.................... ............. ............. ............. 10,200
31 Adjusting................. 26 ............. 1,250 ............. 11,450
Prob. 4–4A Continued
Accounts Payable 21Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. ............. 6,300
3 ................................. 23 ............. 2,750 ............. 9,0508 ................................. 23 4,500 ............. ............. 4,550
19 ................................. 24 2,100 ............. ............. 2,45031 ................................. 25 ............. 900 ............. 3,350
Wages Payable 22
2010July 31 Adjusting................. 26 ............. 500 ............. 500
Unearned Rent 23
2010July 1 Balance.................... ............. ............. ............. 2,700
31 Adjusting................. 26 1,000 ............. ............. 1,700
Rafael Cagle, Capital 31
2010July 1 Balance.................... ............. ............. ............. 118,000
4 ................................. 23 ............. 5,000 ............. 123,00031 Closing.................... 27 ............. 22,645 ............. 145,64531 Closing.................... 27 2,000 ............. ............. 143,645
Rafael Cagle, Drawing 32
2010July 16 ................................. 24 1,000 ............. 1,000 .............
31 ................................. 25 1,000 ............. 2,000 .............31 Closing.................... 27 ............. 2,000 — —
Income Summary 33
2010July 31 Closing.................... 27 ............. 39,000 ............. 39,000
31 Closing.................... 27 16,355 ............. ............. 22,64531 Closing.................... 27 22,645 ............. — —
Prob. 4–4A Continued
Service Revenue 41Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 8 ................................. 23 ............. 9,400 ............. 9,400
15 ................................. 24 ............. 7,800 ............. 17,20022 ................................. 24 ............. 8,100 ............. 25,30022 ................................. 24 ............. 7,500 ............. 32,80031 ................................. 25 ............. 2,200 ............. 35,00031 Adjusting................. 26 ............. 3,000 ............. 38,00031 Closing.................... 27 38,000 ............. — —
Rent Revenue 42
2010July 31 Adjusting................. 26 ............. 1,000 ............. 1,000
31 Closing.................... 27 1,000 ............. — —
Wages Expense 51
2010July 12 ................................. 24 2,400 ............. 2,400 .............
26 ................................. 25 2,600 ............. 5,000 .............31 Adjusting................. 26 500 ............. 5,500 .............31 Closing.................... 27 ............. 5,500 — —
Supplies Expense 52
2010July 31 Adjusting................. 26 1,575 ............. 1,575 .............
31 Closing.................... 27 ............. 1,575 — —
Rent Expense 53
2010July 3 ................................. 23 2,500 ............. 2,500 .............
31 Closing.................... 27 ............. 2,500 — —
Prob. 4–4A Continued
Depreciation Expense—Building 54Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 31 Adjusting................. 26 1,300 ............. 1,300 .............
31 Closing.................... 27 ............. 1,300 — —
Utilities Expense 55
2010July 5 ................................. 24 400 ............. 400 .............
30 ................................. 25 350 ............. 750 .............31 ................................. 25 900 ............. 1,650 .............31 Closing.................... 27 ............. 1,650 — —
Depreciation Expense—Equipment 56
2010July 31 Adjusting................. 26 1,250 ............. 1,250 .............
31 Closing.................... 27 ............. 1,250 — —
Insurance Expense 57
2010July 31 Adjusting................. 26 1,200 ............. 1,200 .............
31 Closing.................... 27 ............. 1,200 — —
Miscellaneous Expense 59
2010July 30 ................................. 25 600 ............. 600 .............
31 ................................. 25 780 ............. 1,380 .............31 Closing.................... 27 ............. 1,380 — —
Prob. 4–4A Concluded
6.
MECHANICAL SERVICES CO.Post-Closing Trial Balance
July 31, 2010
Debit CreditBalances Balances
Cash..................................................................................... 26,870Accounts Receivable......................................................... 13,900Supplies.............................................................................. 1,475Prepaid Insurance.............................................................. 3,600Land..................................................................................... 50,000Building............................................................................... 57,500Accumulated Depreciation—Building.............................. 24,700Equipment........................................................................... 32,000Accumulated Depreciation—Equipment.......................... 11,450Accounts Payable.............................................................. 3,350Wages Payable................................................................... 500Unearned Rent.................................................................... 1,700Rafael Cagle, Capital.......................................................... 143,645
185,345 185,345
Prob. 4–5A
1., 3., and 6.
Cash 11Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Dec. 31 Balance.................... ............. ............. 1,825 .............
Supplies 13
2010Dec. 31 Balance.................... ............. ............. 4,820 .............
31 Adjusting................. 26 ............. 3,320 1,500 .............
Prepaid Insurance 14
2010Dec. 31 Balance.................... ............. ............. 7,500 .............
31 Adjusting................. 26 ............. 2,500 5,000 .............
Equipment 16
2010Dec. 31 Balance.................... ............. ............. 70,200 .............
Accumulated Depreciation—Equipment 17
2010Dec. 31 Balance.................... ............. ............. ............. 12,050
31 Adjusting................. 26 ............. 4,700 ............. 16,750
Trucks 18
2010Dec. 31 Balance.................... ............. ............. 50,000 .............
Accumulated Depreciation—Trucks 19
2010Dec. 31 Balance.................... ............. ............. ............. 27,100
31 Adjusting................. 26 ............. 3,100 ............. 30,200
Prob. 4–5A Continued
Accounts Payable 21Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Dec. 31 Balance.................... ............. ............. ............. 12,015
Wages Payable 22
2010Dec. 31 Adjusting................. 26 ............. 750 ............. 750
Reed Barmack, Capital 31
2010Dec. 31 Balance.................... ............. ............. ............. 27,885
31 Closing.................... 27 ............. 43,425 ............. 71,31031 Closing.................... 27 2,500 ............. ............. 68,810
Reed Barmack, Drawing 32
2010Dec. 31 Balance.................... ............. ............. 2,500 .............
31 Closing.................... 27 ............. 2,500 — —
Income Summary 33
2010Dec. 31 Closing.................... 27 ............. 120,950 ............. 120,950
31 Closing.................... 27 77,525 ............. ............. 43,42531 Closing.................... 27 43,425 ............. — —
Service Revenue 41
2010Dec. 31 Balance.................... ............. ............. ............. 120,950
31 Closing.................... 27 120,950 ............. — —
Wages Expense 51
2010Dec. 31 Balance.................... ............. ............. 48,010 .............
31 Adjusting................. 26 750 ............. 48,760 .............31 Closing.................... 27 ............. 48,760 — —
Prob. 4–5A Continued
Supplies Expense 52Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Dec. 31 Adjusting................. 26 3,320 ............. 3,320 .............
31 Closing.................... 27 ............. 3,320 — —
Rent Expense 53
2010Dec. 31 Balance.................... ............. ............. 7,600 .............
31 Closing.................... 27 ............. 7,600 — —
Depreciation Expense—Equipment 54
2010Dec. 31 Adjusting................. 26 4,700 ............. 4,700 .............
31 Closing.................... 27 ............. 4,700 — —
Truck Expense 55
2010Dec. 31 Balance.................... ............. ............. 5,350 .............
31 Closing.................... 27 ............. 5,350 — —
Depreciation Expense—Trucks 56
2010Dec. 31 Adjusting................. 26 3,100 ............. 3,100 .............
31 Closing.................... 27 ............. 3,100 — —
Insurance Expense 57
2010Dec. 31 Adjusting................. 26 2,500 ............. 2,500 .............
31 Closing.................... 27 ............. 2,500 — —
Miscellaneous Expense 59
2010Dec. 31 Balance.................... ............. ............. 2,195 .............
31 Closing.................... 27 ............. 2,195 — —
Prob. 4–5A Continued
2. Optional (Appendix)A B C D E F G H I J K
1 LOOSE LEAF CO.
2 End-of-Period Spreadsheet (Work Sheet)
3 For the Year Ended December 31, 2010
4 UnadjustedTrial Balance Adjustments
AdjustedTrial Balance
IncomeStatement
BalanceSheet5
6 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 1,825 1,825 1,825
8 Supplies 4,820 (a) 3,320 1,500 1,500
9 Prepaid Insurance 7,500 (b) 2,500 5,000 5,000
10 Equipment 70,200 70,200 70,200
11 Accum. Depr.—Equipment 12,050 (c) 4,700 16,750 16,750
12 Trucks 50,000 50,000 50,000
13 Accum. Depr.—Trucks 27,100 (d) 3,100 30,200 30,200
14 Accounts Payable 12,015 12,015 12,015
15 Wages Payable (e) 750 750 750
16 Reed Barmack, Capital 27,885 27,885 27,885
17 Reed Barmack, Drawing 2,500 2,500 2,500
18 Service Revenue 120,950 120,950 120,950
19 Wages Expense 48,010 (e) 750 48,760 48,760
20 Supplies Expense (a) 3,320 3,320 3,320
21 Rent Expense 7,600 7,600 7,600
22 Depr. Exp.—Equipment (c) 4,700 4,700 4,700
23 Truck Expense 5,350 5,350 5,350
24 Depr. Exp.—Trucks (d) 3,100 3,100 3,100
25 Insurance Expense (b) 2,500 2,500 2,500
26 Misc. Expense 2,195 2,195 2,195
27 200,000 200,000 14,370 14,370 208,550 208,550 77,525 120,950 131,025 87,600
28 Net income 43,425 ______ _______ 43,425
29 120,950 120,950 131,025 131,025
Prob. 4–5A Continued
3. JOURNAL Page 26Post.
Date Ref. Debit Credit
Adjusting Entries2010Dec. 31 Supplies Expense........................................ 52 3,320
Supplies.................................................. 13 3,320Supplies used ($4,820 – $1,500).
31 Insurance Expense...................................... 57 2,500Prepaid Insurance.................................. 14 2,500
Insurance expired.
31 Depreciation Expense—Equipment........... 54 4,700Accumulated Depreciation—Equip...... 17 4,700
Equipment depreciation.
31 Depreciation Expense—Trucks.................. 56 3,100Accumulated Depreciation—Trucks... . 19 3,100
Truck depreciation.
31 Wages Expense............................................ 51 750Wages Payable....................................... 22 750
Accrued wages.
Prob. 4–5A Continued
4.
LOOSE LEAF CO.Adjusted Trial Balance
December 31, 2010
Debit CreditBalances Balances
Cash..................................................................................... 1,825Supplies.............................................................................. 1,500Prepaid Insurance.............................................................. 5,000Equipment........................................................................... 70,200Accumulated Depreciation—Equipment.......................... 16,750Trucks.................................................................................. 50,000Accumulated Depreciation—Trucks................................. 30,200Accounts Payable.............................................................. 12,015Wages Payable................................................................... 750Reed Barmack, Capital....................................................... 27,885Reed Barmack, Drawing.................................................... 2,500Service Revenue................................................................. 120,950Wages Expense.................................................................. 48,760Supplies Expense............................................................... 3,320Rent Expense...................................................................... 7,600Depreciation Expense—Equipment.................................. 4,700Truck Expense.................................................................... 5,350Depreciation Expense—Trucks........................................ 3,100Insurance Expense............................................................. 2,500Miscellaneous Expense..................................................... 2,195
208,550 208,550
Prob. 4–5A Continued
5.
LOOSE LEAF CO.Income Statement
For the Year Ended December 31, 2010
Service revenue.................................................................. $120,950Expenses:
Wages expense........................................................... $48,760Rent expense............................................................... 7,600Truck expense............................................................. 5,350Depreciation expense—equipment........................... 4,700Supplies expense........................................................ 3,320Depreciation expense—trucks................................... 3,100Insurance expense...................................................... 2,500Miscellaneous expense.............................................. 2,195
Total expenses......................................................... 77,525 Net income.......................................................................... $ 43,425
LOOSE LEAF CO.Statement of Owner’s Equity
For the Year Ended December 31, 2010
Reed Barmack, capital, January 1, 2010............................. $27,885Net income for the year........................................................ $43,425Less withdrawals.................................................................. 2,500 Increase in owner’s equity................................................... 40,925 Reed Barmack, capital, December 31, 2010....................... $ 68,810
Prob. 4–5A Continued
LOOSE LEAF CO.Balance Sheet
December 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $ 1,825 Accounts payable................ $12,015Supplies........................................ 1,500 Wages payable.................... 750 Prepaid insurance....................... 5,000 Total liabilities........................ $12,765
Total current assets.................. $ 8,325Property, plant, and equipment:
Equipment.................................... $70,200 Owner’s EquityLess accumulated depr. ............ 16,750 $53,450 Reed Barmack, capital........... 68,810
Trucks........................................... $50,000Less accumulated depr. ............ 30,200 19,800
Total property, plant, andequipment............................... 73,250 Total liabilities and
Total assets...................................... $ 81,575 owner’s equity..................... $ 81,575
Prob. 4–5A Concluded
6. JOURNAL Page 27Post.
Date Ref. Debit Credit
Closing Entries2010Dec. 31 Service Revenue.......................................... 41 120,950
Income Summary................................... 33 120,950
31 Income Summary......................................... 33 77,525Wages Expense...................................... 51 48,760Supplies Expense.................................. 52 3,320Rent Expense......................................... 53 7,600Depreciation Expense—Equipment..... 54 4,700Truck Expense........................................ 55 5,350Depreciation Expense—Trucks............ 56 3,100Insurance Expense................................ 57 2,500Miscellaneous Expense......................... 59 2,195
31 Income Summary......................................... 33 43,425Reed Barmack, Capital.......................... 31 43,425
31 Reed Barmack, Capital................................ 31 2,500Reed Barmack, Drawing........................ 32 2,500
7.
LOOSE LEAF CO.Post-Closing Trial Balance
December 31, 2010
Debit CreditBalances Balances
Cash..................................................................................... 1,825Supplies.............................................................................. 1,500Prepaid Insurance.............................................................. 5,000Equipment........................................................................... 70,200Accumulated Depreciation—Equipment.......................... 16,750Trucks.................................................................................. 50,000Accumulated Depreciation—Trucks................................. 30,200Accounts Payable.............................................................. 12,015Wages Payable................................................................... 750Reed Barmack, Capital....................................................... 68,810
128,525 128,525
Prob. 4–6A
1. and 2. JOURNAL Pages 1 and 2Post.
Date Description Ref. Debit Credit
2010June 1 Cash.............................................................. 11 20,000
Accounts Receivable................................... 12 4,500Supplies........................................................ 14 2,000Office Equipment......................................... 18 11,500
Emily Page, Capital................................ 31 38,000
1 Prepaid Rent................................................. 15 6,000Cash......................................................... 11 6,000
2 Prepaid Insurance........................................ 16 2,400Cash......................................................... 11 2,400
4 Cash.............................................................. 11 2,700Unearned Fees....................................... 23 2,700
5 Office Equipment......................................... 18 3,500Accounts Payable.................................. 21 3,500
6 Cash.............................................................. 11 3,000Accounts Receivable............................. 12 3,000
10 Miscellaneous Expense.............................. 59 200Cash......................................................... 11 200
12 Accounts Payable........................................ 21 750Cash......................................................... 11 750
12 Accounts Receivable................................... 12 5,100Fees Earned............................................ 41 5,100
14 Salary Expense............................................ 51 1,100Cash......................................................... 11 1,100
17 Cash.............................................................. 11 6,500Fees Earned............................................ 41 6,500
18 Supplies........................................................ 14 750Cash......................................................... 11 750
20 Accounts Receivable................................... 12 3,100Fees Earned............................................ 41 3,100
24 Cash.............................................................. 11 5,150Fees Earned............................................ 41 5,150
Prob. 4–6A Continued
1. and 2. JOURNAL Pages 1 and 2Post.
Date Description Ref. Debit Credit
2010June 26 Cash.............................................................. 11 6,900
Accounts Receivable............................. 12 6,900
27 Salary Expense............................................ 51 1,100Cash......................................................... 11 1,100
29 Miscellaneous Expense.............................. 59 150Cash......................................................... 11 150
30 Miscellaneous Expense.............................. 59 400Cash......................................................... 11 400
30 Cash.............................................................. 11 2,500Fees Earned............................................ 41 2,500
30 Accounts Receivable................................... 12 1,000Fees Earned............................................ 41 1,000
30 Emily Page, Drawing.................................... 32 5,000Cash......................................................... 11 5,000
Prob. 4–6A Continued
2., 6., and 9.
Cash 11Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010June 1 ................................. 1 20,000 ............. 20,000 .............
1 ................................. 1 ............. 6,000 14,000 .............2 ................................. 1 ............. 2,400 11,600 .............4 ................................. 1 2,700 ............. 14,300 .............6 ................................. 1 3,000 ............. 17,300 .............
10 ................................. 1 ............. 200 17,100 .............12 ................................. 1 ............. 750 16,350 .............14 ................................. 1 ............. 1,100 15,250 .............17 ................................. 2 6,500 ............. 21,750 .............18 ................................. 2 ............. 750 21,000 .............24 ................................. 2 5,150 ............. 26,150 .............26 ................................. 2 6,900 ............. 33,050 .............27 ................................. 2 ............. 1,100 31,950 .............29 ................................. 2 ............. 150 31,800 .............30 ................................. 2 ............. 400 31,400 .............30 ................................. 2 2,500 ............. 33,900 .............30 ................................. 2 ............. 5,000 28,900 .............
Accounts Receivable 12
2010June 1 ................................. 1 4,500 ............. 4,500 .............
6 ................................. 1 ............. 3,000 1,500 .............12 ................................. 1 5,100 ............. 6,600 .............20 ................................. 2 3,100 ............. 9,700 .............26 ................................. 2 ............. 6,900 2,800 .............30 ................................. 2 1,000 ............. 3,800 .............
Supplies 14
2010June 1 ................................. 1 2,000 ............. 2,000 .............
18 ................................. 2 750 ............. 2,750 .............30 Adjusting................. 3 ............. 2,100 650 .............
Prob. 4–6A Continued
Prepaid Rent 15Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010June 1 ................................. 1 6,000 ............. 6,000 .............
30 Adjusting................. 3 ............. 2,000 4,000 .............
Prepaid Insurance 16
2010June 2 ................................. 1 2,400 ............. 2,400 .............
30 Adjusting................. 3 ............. 200 2,200 .............
Office Equipment 18
2010June 1 ................................. 1 11,500 ............. 11,500 .............
5 ................................. 1 3,500 ............. 15,000 .............
Accumulated Depreciation 19
2010June 30 Adjusting................. 3 ............. 250 ............. 250
Accounts Payable 21
2010June 5 ................................. 1 ............. 3,500 ............. 3,500
12 ................................. 1 750 ............. ............. 2,750
Salaries Payable 22
2010June 30 Adjusting................. 3 ............. 220 ............. 220
Unearned Fees 23
2010June 4 ................................. 1 ............. 2,700 ............. 2,700
30 Adjusting................. 3 825 ............. ............. 1,875
Prob. 4–6A Continued
Emily Page, Capital 31Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010June 1 ................................. 1 ............. 38,000 ............. 38,000
30 Closing.................... 4 ............. 16,455 ............. 54,45530 Closing.................... 4 5,000 ............. ............. 49,455
Emily Page, Drawing 32
2010June 30 ................................. 2 5,000 ............. 5,000 .............
30 Closing.................... 4 ............. 5,000 — —
Income Summary 33
2010June 30 Closing.................... 4 ............. 24,175 ............. 24,175
30 Closing.................... 4 7,720 ............. ............. 16,45530 Closing.................... 4 16,455 ............. — —
Fees Earned 41
2010June 12 ................................. 1 ............. 5,100 ............. 5,100
17 ................................. 2 ............. 6,500 ............. 11,60020 ................................. 2 ............. 3,100 ............. 14,70024 ................................. 2 ............. 5,150 ............. 19,85030 ................................. 2 ............. 2,500 ............. 22,35030 ................................. 2 ............. 1,000 ............. 23,35030 Adjusting................. 3 ............. 825 ............. 24,17530 Closing.................... 4 24,175 ............. — —
Salary Expense 51
2010June 14 ................................. 1 1,100 ............. 1,100 .............
27 ................................. 2 1,100 ............. 2,200 .............30 Adjusting................. 3 220 ............. 2,420 .............30 Closing.................... 4 ............. 2,420 — —
Prob. 4–6A Continued
Rent Expense 52Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010June 30 Adjusting................. 3 2,000 ............. 2,000 .............
30 Closing.................... 4 ............. 2,000 — —
Supplies Expense 53
2010June 30 Adjusting................. 3 2,100 ............. 2,100 .............
30 Closing.................... 4 ............. 2,100 — —
Depreciation Expense 54
2010June 30 Adjusting................. 3 250 ............. 250 .............
30 Closing.................... 4 ............. 250 — —
Insurance Expense 55
2010June 30 Adjusting................. 3 200 ............. 200 .............
30 Closing.................... 4 ............. 200 — —
Miscellaneous Expense 59
2010June 10 ................................. 1 200 ............. 200 .............
29 ................................. 2 150 ............. 350 .............30 ................................. 2 400 ............. 750 .............30 Closing.................... 4 ............. 750 — —
Prob. 4–6A Continued
3.BOTTOM LINE CONSULTING
Unadjusted Trial BalanceJune 30, 2010
Debit CreditBalances Balances
Cash....................................................................................... 28,900Accounts Receivable............................................................ 3,800Supplies................................................................................. 2,750Prepaid Rent.......................................................................... 6,000Prepaid Insurance................................................................. 2,400Office Equipment.................................................................. 15,000Accumulated Depreciation................................................... 0Accounts Payable................................................................. 2,750Salaries Payable.................................................................... 0Unearned Fees...................................................................... 2,700Emily Page, Capital............................................................... 38,000Emily Page, Drawing............................................................. 5,000Fees Earned........................................................................... 23,350Salary Expense...................................................................... 2,200Rent Expense........................................................................ 0Supplies Expense................................................................. 0Depreciation Expense........................................................... 0Insurance Expense............................................................... 0Miscellaneous Expense........................................................ 750
66,800 66,800
Prob. 4–6A Continued
5. Optional (Appendix)
A B C D E F G H I J K1 BOTTOM LINE CONSULTING2 End-of-Period Spreadsheet (Work Sheet)3 For the Month Ended June 30, 2010
4 UnadjustedTrial Balance Adjustments
AdjustedTrial Balance
IncomeStatement
BalanceSheet5
6 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 28,900 28,900 28,9008 Accounts Receivable 3,800 3,800 3,8009 Supplies 2,750 (b) 2,100 650 650
10 Prepaid Rent 6,000 (e) 2,000 4,000 4,00011 Prepaid Insurance 2,400 (a) 200 2,200 2,20012 Office Equipment 15,000 15,000 15,00013 Accum. Depreciation (c) 250 250 25014 Accounts Payable 2,750 2,750 2,75015 Salaries Payable (d) 220 220 22016 Unearned Fees 2,700 (f) 1,875 1,87517 Emily Page, Capital 38,000 38,000 38,00018 Emily Page, Drawing 5,000 5,000 5,00019 Fees Earned 23,350 (f) 825 24,175 24,17520 Salary Expense 2,200 (d) 2,420 2,42021 Rent Expense (e) 2,000 2,000 2,00022 Supplies Expense (b) 2,100 2,10023 Depreciation Expense (c) 250 250 25024 Insurance Expense (a) 200 200 20025 Miscellaneous Expense 750 750 75026 66,800 66,800 5,595 5,595 67,270 67,270 7,720 24,175 59,550 43,09527 Net income 16,455 ______ ______ 16,45528 24,175 24,175 59,550 59,550
Prob. 4–6A Continued
6. JOURNAL Page 3Post.
Date Ref. Debit Credit
Adjusting Entries2010June 30 Insurance Expense...................................... 55 200
Prepaid Insurance.................................. 16 200Insurance expired.
30 Supplies Expense........................................ 53 2,100Supplies.................................................. 14 2,100
Supplies used ($2,750 – $650).
30 Depreciation Expense................................. 54 250Accumulated Depreciation.................... 19 250
Equipment depreciation.
30 Salary Expense............................................ 51 220Salaries Payable..................................... 22 220
Accrued salaries.
30 Rent Expense............................................... 52 2,000Prepaid Rent........................................... 15 2,000
Rent expired.
30 Unearned Fees............................................. 23 825Fees Earned............................................ 41 825
Unearned fees earned ($2,700 – $1,875).
Prob. 4–6A Continued
7.BOTTOM LINE CONSULTING
Adjusted Trial BalanceJune 30, 2010
Debit CreditBalances Balances
Cash....................................................................................... 28,900Accounts Receivable............................................................ 3,800Supplies................................................................................. 650Prepaid Rent.......................................................................... 4,000Prepaid Insurance................................................................. 2,200Office Equipment.................................................................. 15,000Accumulated Depreciation................................................... 250Accounts Payable................................................................. 2,750Salaries Payable.................................................................... 220Unearned Fees...................................................................... 1,875Emily Page, Capital............................................................... 38,000Emily Page, Drawing............................................................. 5,000Fees Earned........................................................................... 24,175Salary Expense...................................................................... 2,420Rent Expense........................................................................ 2,000Supplies Expense................................................................. 2,100Depreciation Expense........................................................... 250Insurance Expense............................................................... 200Miscellaneous Expense........................................................ 750
67,270 67,270
Prob. 4–6A Continued
8.
BOTTOM LINE CONSULTINGIncome Statement
For the Month Ended June 30, 2010
Fees earned........................................................................ $24,175Expenses:
Salary expense............................................................ $2,420Supplies expense........................................................ 2,100Rent expense............................................................... 2,000Depreciation expense................................................. 250Insurance expense...................................................... 200Miscellaneous expense.............................................. 750
Total expenses......................................................... 7,720 Net income.......................................................................... $ 16,455
BOTTOM LINE CONSULTINGStatement of Owner’s Equity
For the Month Ended June 30, 2010
Emily Page, capital, June 1, 2010..................................... $ 0Additional investments during the month....................... 38,000 Total..................................................................................... $38,000Net income for the month.................................................. $16,455Less withdrawals................................................................ 5,000 Increase in owner’s equity................................................ 11,455 Emily Page, capital, June 30, 2010................................... $ 49,455
Prob. 4–6A Continued
BOTTOM LINE CONSULTINGBalance SheetJune 30, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash............................ $28,900 Accounts payable. . . $2,750Accounts receivable. . 3,800 Salaries payable...... 220Supplies...................... 650 Unearned fees.......... 1,875 Prepaid rent................ 4,000 Total liabilities............ $ 4,845Prepaid insurance...... 2,200
Total current assets $39,550Property, plant, and Owner’s Equity
equipment: Emily Page,Office equipment........ $15,000 capital....................... 49,455 Less accum. depr. ..... 250
Total property, plant,and equipment...... 14,750 Total liabilities and
Total assets................... $ 54,300 owner’s equity......... $ 54,300
Prob. 4–6A Concluded
9. JOURNAL Page 4Post.
Date Ref. Debit Credit
Closing Entries2010June 30 Fees Earned.................................................. 41 24,175
Income Summary................................... 33 24,175
30 Income Summary......................................... 33 7,720Salary Expense....................................... 51 2,420Rent Expense......................................... 52 2,000Supplies Expense.................................. 53 2,100Depreciation Expense............................ 54 250Insurance Expense................................ 55 200Miscellaneous Expense......................... 59 750
30 Income Summary......................................... 33 16,455Emily Page, Capital................................ 31 16,455
30 Emily Page, Capital...................................... 31 5,000Emily Page, Drawing.............................. 32 5,000
10.
BOTTOM LINE CONSULTINGPost-Closing Trial Balance
June 30, 2010
Debit CreditBalances Balances
Cash..................................................................................... 28,900Accounts Receivable......................................................... 3,800Supplies.............................................................................. 650Prepaid Rent....................................................................... 4,000Prepaid Insurance.............................................................. 2,200Office Equipment................................................................ 15,000Accumulated Depreciation................................................ 250Accounts Payable.............................................................. 2,750Salaries Payable................................................................. 220Unearned Fees.................................................................... 1,875Emily Page, Capital............................................................ 49,455
54,550 54,550
Prob. 4–1B
1.
LIGHTWORKS COMPANYIncome Statement
For the Year Ended July 31, 2010
Revenues:Fees revenue............................................................... $307,000Rent revenue................................................................ 1,000
Total revenues......................................................... $308,000Expenses:
Salaries and wages expense...................................... $114,900Advertising expense................................................... 21,700Utilities expense.......................................................... 11,400Repairs expense.......................................................... 8,850Depreciation expense—equipment........................... 3,200Insurance expense...................................................... 3,000Supplies expense........................................................ 1,900Depreciation expense—building............................... 1,400Miscellaneous expense.............................................. 4,320
Total expenses......................................................... 170,670 Net income.......................................................................... $ 137,330
2.
LIGHTWORKS COMPANYStatement of Owner’s Equity
For the Year Ended July 31, 2010
Marisa Crider, capital, August 1, 2009.............................. $103,100Net income for the year..................................................... $137,330Less withdrawals................................................................ 10,000 Increase in owner’s capital................................................ 127,330 Marisa Crider, capital, July 31, 2010................................. $230,430
Prob. 4–1B Continued
3.
LIGHTWORKS COMPANYBalance SheetJuly 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $ 5,800 Accounts payable................. $5,700Accounts receivable................... 22,200 Salaries and wagesPrepaid insurance....................... 1,200 payable................................ 1,800Supplies........................................ 830 Unearned rent....................... 1,100
Total current assets.................. $ 30,030 Total liabilities......................... $ 8,600Property, plant, and equipment:
Land.............................................. $98,000Building........................................ $200,000 Owner’s EquityLess accum. depreciation.......... 101,700 98,300 Marisa Crider, capital.............. 230,430
Equipment.................................... $101,000Less accum. depreciation.......... 88,300 12,700
Total property, plant, andequipment............................... 209,000 Total liabilities and
Total assets...................................... $239,030 owner’s equity....................... $239,030
Prob. 4–1B Continued
4.
2010July 31 Fees Revenue...................................................... 307,000
Rent Revenue....................................................... 1,000Income Summary............................................ 308,000
31 Income Summary................................................. 170,670Salaries & Wages Expense............................ 114,900Advertising Expense...................................... 21,700Utilities Expense............................................. 11,400Repairs Expense............................................ 8,850Depreciation Expense—Equipment ............ 3,200Insurance Expense......................................... 3,000Supplies Expense........................................... 1,900Depreciation Expense—Building.................. 1,400Miscellaneous Expense................................. 4,320
31 Income Summary................................................. 137,330Marisa Crider, Capital.................................... 137,330
31 Marisa Crider, Capital.......................................... 10,000Marisa Crider, Drawing.................................. 10,000
Prob. 4–1B Concluded
5.
LIGHTWORKS COMPANYPost-Closing Trial Balance
July 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 5,800Accounts Receivable............................................................ 22,200Prepaid Insurance................................................................. 1,200Supplies................................................................................. 830Land........................................................................................ 98,000Building.................................................................................. 200,000Accumulated Depreciation—Building................................. 101,700Equipment.............................................................................. 101,000Accumulated Depreciation—Equipment............................. 88,300Accounts Payable................................................................. 5,700Salaries & Wages Payable.................................................... 1,800Unearned Rent....................................................................... 1,100Marisa Crider, Capital........................................................... 230,430
429,030 429,030
Prob. 4–2B
1.
SUSPICIONS COMPANYIncome Statement
For the Year Ended November 30, 2010
Revenues:Service fees................................................................. $480,000Rent revenue................................................................ 20,000
Total revenues......................................................... $500,000Expenses:
Salary expense............................................................ $375,000Rent expense............................................................... 62,500Supplies expense........................................................ 9,000Depreciation expense—equipment........................... 5,000Utilities expense.......................................................... 4,400Repairs expense.......................................................... 3,200Insurance expense...................................................... 2,800Miscellaneous expense.............................................. 4,600
Total expenses......................................................... 466,500 Net income.......................................................................... $ 33,500
SUSPICIONS COMPANYStatement of Owner’s Equity
For the Year Ended November 30, 2010
Curtis Graves, capital, December 1, 2009........................ $172,800Net income for the year..................................................... $33,500Less withdrawals................................................................ 30,000 Increase in owner’s capital................................................ 3,500 Curtis Graves, capital, November 30, 2010...................... $176,300
Prob. 4–2B Continued
SUSPICIONS COMPANYBalance Sheet
November 30, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $11,500 Accounts payable............ $6,000Accounts receivable................... 47,200 Salaries payable.............. 1,500Supplies........................................ 3,500 Unearned rent.................. 3,000 Prepaid insurance....................... 4,800 Total liabilities.................... $ 10,500
Total current assets.................. $ 67,000Property, plant, and equipment:
Equipment.................................... $175,000 Owner’s EquityLess accum. depreciation.......... 55,200 Curtis Graves, capital.............. 176,300
Total property, plant, andequipment............................... 119,800 Total liabilities and
Total assets...................................... $186,800 owner’s equity....................... $186,800
Prob. 4–2B Concluded
2.
2010Nov. 30 Service Fees......................................................... 480,000
Rent Revenue....................................................... 20,000Income Summary............................................ 500,000
30 Income Summary................................................. 466,500Salary Expense............................................... 375,000Rent Expense.................................................. 62,500Supplies Expense........................................... 9,000Depreciation Expense—Equipment ............ 5,000Utilities Expense............................................. 4,400Repairs Expense............................................ 3,200Insurance Expense......................................... 2,800Miscellaneous Expense................................. 4,600
30 Income Summary................................................. 33,500Curtis Graves, Capital.................................... 33,500
30 Curtis Graves, Capital......................................... 30,000Curtis Graves, Drawing.................................. 30,000
3. $10,000 net loss. The $40,000 decrease is caused by the $30,000 withdrawals and a $10,000 net loss.
Prob. 4–3B
1, 3, 6.
Cash
Apr. 30 Bal. 11,000
Laundry Supplies
Apr. 30 Bal. 18,900 Apr. 30 Adj. 14,900
30 Adj. Bal. 4,000
Prepaid Insurance
Apr. 30 Bal. 8,600 Apr. 30 Adj. 5,200
30 Adj. Bal. 3,400
Laundry Equipment
Apr. 30 Bal. 284,000
Accumulated Depreciation
Apr. 30 Bal. 150,400
30 Adj. 6,000
30 Adj. Bal. 156,400
Accounts Payable
Apr. 30 Bal. 9,800
Wages Payable
Apr. 30 Adj. 1,100
Deanna Beaven, Capital
Apr. 30 Clos. 8,400 Apr. 30 Bal. 107,600
_____ Apr. 30 Clos. 35,900
Apr. 30 Bal. 135,100
Prob. 4–3B Continued
Deanna Beaven, Drawing
Apr. 30 Bal. 8,400 Apr. 30 Clos. 8,400
Income Summary
Apr. 30 Clos. 196,300 Apr. 30 Clos. 232,200
Apr. 30 Clos. 35,900
Laundry Revenue
Apr. 30 Clos. 232,200 Apr. 30 Bal. 232,200
Wages Expense
Apr. 30 Bal. 104,000 Apr. 30 Clos. 105,100
30 Adj. 1,100 ______
30 Adj. Bal. 105,100
Rent Expense
Apr. 30 Bal. 39,300 Apr. 30 Clos. 39,300
Utilities Expense
Apr. 30 Bal. 20,400 Apr. 30 Clos. 20,400
Laundry Supplies Expense
Apr. 30 Adj. 14,900 Apr. 30 Clos. 14,900
Depreciation Expense
Apr. 30 Adj. 6,000 Apr. 30 Clos. 6,000
Insurance Expense
Apr. 30 Adj. 5,200 Apr. 30 Clos. 5,200
Miscellaneous Expense
Apr. 30 Bal. 5,400 Apr. 30 Clos. 5,400
Prob. 4–3B Continued
2. Optional (Appendix)
A B C D E F G H I J K1 OCEAN BREEZE LAUNDROMAT2 End-of-Period Spreadsheet (Work Sheet)3 For the Year Ended April 30, 20104 Unadjusted
Trial Balance AdjustmentsAdjusted
Trial BalanceIncome
StatementBalance
Sheet56 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 11,000 11,000 11,0008 Laundry Supplies 18,900 (a)14,900 4,000 4,0009 Prepaid Insurance 8,600 (b) 5,200 3,400 3,400
10 Laundry Equipment 284,000 284,000 284,00011 Accumulated Depr. 150,400 (c) 6,000 156,400 156,40012 Accounts Payable 9,800 9,800 9,80013 Wages Payable (d) 1,100 1,100 1,10014 Deanna Beaven, Capital 107,600 107,600 107,60015 Deanna Beaven, Drawing 8,400 8,400 8,40016 Laundry Revenue 232,200 232,200 232,20017 Wages Expense 104,000 (d) 1,100 105,100 105,10018 Rent Expense 39,300 39,300 39,30019 Utilities Expense 20,400 20,400 20,40020 Laundry Supplies Exp. (a) 14,900 14,900 14,90021 Depreciation Expense (c) 6,000 6,000 6,00022 Insurance Expense (b) 5,200 5,200 5,20023 Misc. Expense 5,400 5,400 5,40024 500,000 500,000 27,200 27,200 507,100 507,100 196,300 232,200 310,800 274,90025 Net income 35,900 ______ ______ 35,900 26 232,200 232,200 310,800 310,800
Prob. 4–3B Continued
3.
Adjusting Entries2010Apr. 30 Laundry Supplies Expense............................... 14,900
Laundry Supplies.......................................... 14,900Supplies used ($18,900 – $4,000).
30 Insurance Expense............................................. 5,200Prepaid Insurance......................................... 5,200
Insurance expired.
30 Depreciation Expense........................................ 6,000Accumulated Depreciation........................... 6,000
Equipment depreciation.
30 Wages Expense.................................................. 1,100Wages Payable.............................................. 1,100
Accrued wages.
4.
OCEAN BREEZE LAUNDROMATAdjusted Trial Balance
April 30, 2010
Debit CreditBalances Balances
Cash....................................................................................... 11,000Laundry Supplies.................................................................. 4,000Prepaid Insurance................................................................. 3,400Laundry Equipment.............................................................. 284,000Accumulated Depreciation................................................... 156,400Accounts Payable................................................................. 9,800Wages Payable...................................................................... 1,100Deanna Beaven, Capital....................................................... 107,600Deanna Beaven, Drawing..................................................... 8,400Laundry Revenue.................................................................. 232,200Wages Expense..................................................................... 105,100Rent Expense........................................................................ 39,300Utilities Expense................................................................... 20,400Laundry Supplies Expense.................................................. 14,900Depreciation Expense........................................................... 6,000Insurance Expense............................................................... 5,200Miscellaneous Expense........................................................ 5,400
507,100 507,100
Prob. 4–3B Continued
5.OCEAN BREEZE LAUNDROMAT
Income StatementFor the Year Ended April 30, 2010
Laundry revenue................................................................ $232,200Expenses:
Wages expense........................................................... $105,100Rent expense............................................................... 39,300Utilities expense.......................................................... 20,400Laundry supplies expense......................................... 14,900Depreciation expense................................................. 6,000Insurance expense...................................................... 5,200Miscellaneous expense.............................................. 5,400
Total expenses......................................................... 196,300 Net income.......................................................................... $ 35,900
OCEAN BREEZE LAUNDROMATStatement of Owner’s Equity
For the Year Ended April 30, 2010
Deanna Beaven, capital, May 1, 2009............................... $107,600Net income for the year..................................................... $35,900Less withdrawals................................................................ 8,400 Increase in owner’s equity................................................ 27,500 Deanna Beaven, capital, April 30, 2010............................ $ 135,100
OCEAN BREEZE LAUNDROMATBalance SheetApril 30, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash........................... $ 11,000 Accounts payable. . . $9,800Laundry supplies...... 4,000 Wages payable........ 1,100 Prepaid insurance..... 3,400 Total liabilities............ $ 10,900
Total current assets $ 18,400Property, plant, and
equipment: Owner’s EquityLaundry equipment. . $284,000 Deanna Beaven, capital 135,100 Less accum. depr..... 156,400
Total property, plant,and equipment..... 127,600 Total liabilities and
Total assets.................. $ 146,000 owner’s equity......... $ 146,000
Prob. 4–3B Concluded
6.
Closing Entries2010Apr. 30 Laundry Revenue............................................... 232,200
Income Summary.......................................... 232,200
30 Income Summary................................................ 196,300Wages Expense............................................. 105,100Rent Expense................................................ 39,300Utilities Expense........................................... 20,400Laundry Supplies Expense.......................... 14,900Depreciation Expense.................................. 6,000Insurance Expense....................................... 5,200Miscellaneous Expense............................... 5,400
30 Income Summary................................................ 35,900Deanna Beaven, Capital............................... 35,900
30 Deanna Beaven, Capital..................................... 8,400Deanna Beaven, Drawing............................. 8,400
7.
OCEAN BREEZE LAUNDROMATPost-Closing Trial Balance
April 30, 2010
Debit CreditBalances Balances
Cash....................................................................................... 11,000Laundry Supplies.................................................................. 4,000Prepaid Insurance................................................................. 3,400Laundry Equipment.............................................................. 284,000Accumulated Depreciation................................................... 156,400Accounts Payable................................................................. 9,800Wages Payable...................................................................... 1,100Deanna Beaven, Capital....................................................... 135,100
302,400 302,400
Prob. 4–4B
1. Optional (Appendix)A B C D E F G H I J K
1 HANDY MAN SERVICES CO.2 End-of-Period Spreadsheet (Work Sheet)3 For the Month Ended July 31, 2010
4 UnadjustedTrial Balance Adjustments
AdjustedTrial Balance
IncomeStatement
BalanceSheet5
6 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 26,870 26,870 26,8708 Accounts Receivable 10,900 (a) 2,200 13,100 13,1009 Supplies 3,050 (b) 1,600 1,450 1,450
10 Prepaid Insurance 4,800 (c) 800 4,000 4,00011 Land 50,000 50,000 50,00012 Building 57,500 57,500 57,50013 Acc. Depr.—Building 23,400 (d) 1,000 24,400 24,40014 Equipment 32,000 32,000 32,00015 Acc. Depr.—Equipment 10,200 (e) 750 10,950 10,95016 Accounts Payable 3,350 3,350 3,35017 Wages Payable (g) 600 600 60018 Unearned Rent 2,700 (f) 900 1,800 1,80019 Rafael Cagle, Capital 123,000 123,000 123,00020 Rafael Cagle, Drawing 2,000 2,000 2,00021 Service Revenue 35,000 (a) 2,200 37,200 37,20022 Rent Revenue (f) 900 900 90023 Wages Expense 5,000 (g) 600 5,600 5,60024 Supplies Expense (b) 1,600 1,600 1,60025 Rent Expense 2,500 2,500 2,50026 Depr. Exp.—Building (d) 1,000 1,000 1,00027 Utilities Expense 1,650 1,650 1,65028 Depr. Exp.—Equipment (e) 750 750 75029 Insurance Expense (c) 800 800 80030 Misc. Expense 1,380 1,380 1,380
31 197,650 197,650 7,850 7,850 202,200 202,200 15,280 38,100 186,920 164,10032 Net income 22,820 ______ ______ 22,820
33 38,100 38,100 186,920 186,920
Prob. 4–4B Continued
2.JOURNAL Page 26
Post.Date Ref. Debit Credit
2010 Adjusting EntriesJuly 31 Accounts Receivable................................... 12 2,200
Service Revenue..................................... 41 2,200Accrued revenue.
31 Supplies Expense........................................ 52 1,600Supplies.................................................. 13 1,600
Supplies used ($3,050 – $1,450).
31 Insurance Expense...................................... 57 800Prepaid Insurance.................................. 14 800
Insurance expired.
31 Depreciation Expense—Building............... 54 1,000Accum. Depreciation—Building........... 17 1,000
Building depreciation.
31 Depreciation Expense—Equipment........... 56 750Accum. Depreciation—Equipment....... 19 750
Equipment depreciation.
31 Unearned Rent............................................. 23 900Rent Revenue......................................... 42 900
Rent revenue earned ($2,700 – $1,800).
31 Wages Expense............................................ 51 600Wages Payable....................................... 22 600
Accrued wages.
Prob. 4–4B Continued
3.
HANDY MAN SERVICES CO.Adjusted Trial Balance
July 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 26,870Accounts Receivable............................................................ 13,100Supplies................................................................................. 1,450Prepaid Insurance................................................................. 4,000Land........................................................................................ 50,000Building.................................................................................. 57,500Accumulated Depreciation—Building................................. 24,400Equipment.............................................................................. 32,000Accumulated Depreciation—Equipment............................. 10,950Accounts Payable................................................................. 3,350Wages Payable...................................................................... 600Unearned Rent....................................................................... 1,800Rafael Cagle, Capital............................................................. 123,000Rafael Cagle, Drawing.......................................................... 2,000Service Revenue................................................................... 37,200Rent Revenue........................................................................ 900Wages Expense..................................................................... 5,600Supplies Expense................................................................. 1,600Rent Expense........................................................................ 2,500Depreciation Expense—Building........................................ 1,000Utilities Expense................................................................... 1,650Depreciation Expense—Equipment.................................... 750Insurance Expense............................................................... 800Miscellaneous Expense........................................................ 1,380
202,200 202,200
Prob. 4–4B Continued
4.
HANDY MAN SERVICES CO.Income Statement
For the Month Ended July 31, 2010
Revenues:Service revenue........................................................... $37,200Rent revenue................................................................ 900
Total revenues......................................................... $38,100Expenses:
Wages expense........................................................... $ 5,600Rent expense............................................................... 2,500Utilities expense.......................................................... 1,650Supplies expense........................................................ 1,600Depreciation expense—building............................... 1,000Insurance expense...................................................... 800Depreciation expense—equipment........................... 750Miscellaneous expense.............................................. 1,380
Total expenses......................................................... 15,280 Net income.......................................................................... $ 22,820
HANDY MAN SERVICES CO.Statement of Owner’s Equity
For the Month Ended July 31, 2010
Rafael Cagle, capital, July 1, 2010.................................... $118,000Additional investment during the month......................... 5,000 Total..................................................................................... $123,000Net income for the month.................................................. $22,820Less withdrawals................................................................ 2,000 Increase in owner’s equity................................................ 20,820 Rafael Cagle, capital, July 31, 2010.................................. $ 143,820
Prob. 4–4B Continued
HANDY MAN SERVICES CO.Balance SheetJuly 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $26,870 Accounts payable................. $3,350Accounts receivable................... 13,100 Wages payable...................... 600Supplies........................................ 1,450 Unearned rent....................... 1,800 Prepaid insurance....................... 4,000 Total liabilities......................... $ 5,750
Total current assets.................. $ 45,420Property, plant, and equipment:
Land.............................................. $50,000 Owner’s EquityBuilding........................................ $57,500 Rafael Cagle, capital............... 143,820 Less accum. depreciation.......... 24,400 33,100
Equipment.................................... $32,000Less accum. depreciation.......... 10,950 21,050
Total property, plant, andequipment............................... 104,150 Total liabilities and
Total assets...................................... $ 149,570 owner’s equity....................... $ 149,570
Prob. 4–4B Continued
5.JOURNAL Page 27
Post.Date Ref. Debit Credit
2010 Closing EntriesJuly 31 Service Revenue.......................................... 41 37,200
Rent Revenue............................................... 42 900Income Summary................................... 33 38,100
31 Income Summary......................................... 33 15,280Wages Expense...................................... 51 5,600Supplies Expense.................................. 52 1,600Rent Expense......................................... 53 2,500Depreciation Expense—Building.......... 54 1,000Utilities Expense.................................... 55 1,650Depreciation Expense—Equipment..... 56 750Insurance Expense................................ 57 800Miscellaneous Expense......................... 59 1,380
31 Income Summary......................................... 33 22,820Rafael Cagle, Capital.............................. 31 22,820
31 Rafael Cagle, Capital................................... 31 2,000Rafael Cagle, Drawing............................ 32 2,000
Prob. 4–4B Continued
2. and 5.
Cash 11Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. 6,000 .............
3 ................................. 23 ............. 2,500 3,500 .............4 ................................. 23 5,000 ............. 8,500 .............5 ................................. 23 ............. 400 8,100 .............7 ................................. 23 3,200 ............. 11,300 .............8 ................................. 23 5,900 ............. 17,200 .............8 ................................. 23 ............. 4,500 12,700 .............8 ................................. 23 9,400 ............. 22,100 .............
10 ................................. 24 ............. 500 21,600 .............12 ................................. 24 ............. 2,400 19,200 .............15 ................................. 24 7,800 ............. 27,000 .............16 ................................. 24 ............. 1,000 26,000 .............19 ................................. 24 ............. 2,100 23,900 .............22 ................................. 24 ............. 1,200 22,700 .............22 ................................. 24 8,100 ............. 30,800 .............24 ................................. 25 ............. 800 30,000 .............26 ................................. 25 ............. 2,600 27,400 .............30 ................................. 25 ............. 350 27,050 .............30 ................................. 25 ............. 600 26,450 .............31 ................................. 25 ............. 1,000 25,450 .............31 ................................. 25 2,200 ............. 27,650 .............31 ................................. 25 ............. 780 26,870 .............
Accounts Receivable 12
2010July 1 Balance.................... ............. ............. 12,500 .............
7 ................................. 23 ............. 3,200 9,300 .............8 ................................. 23 ............. 5,900 3,400 .............
22 ................................. 24 7,500 ............. 10,900 .............31 Adjusting................. 26 2,200 ............. 13,100 .............
Prob. 4–4B Continued
Supplies 13Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. 1,750 .............
10 ................................. 24 500 ............. 2,250 .............27 ................................. 25 800 ............. 3,050 .............31 Adjusting................. 26 ............. 1,600 1,450 .............
Prepaid Insurance 14
2010July 1 Balance.................... ............. ............. 3,600 .............
22 ................................. 24 1,200 ............. 4,800 .............31 Adjusting................. 26 ............. 800 4,000 .............
Land 15
2010July 1 Balance.................... ............. ............. 50,000 .............
Building 16
2010July 1 Balance.................... ............. ............. 57,500 .............
Accumulated Depreciation—Building 17
2010July 1 Balance.................... ............. ............. ............. 23,400
31 Adjusting................. 26 ............. 1,000 ............. 24,400
Equipment 18
2010July 1 Balance.................... ............. ............. 29,250 .............
3 ................................. 23 2,750 ............. 32,000 .............
Prob. 4–4B Continued
Accumulated Depreciation—Equipment 19Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. ............. 10,200
31 Adjusting................. 26 ............. 750 ............. 10,950
Accounts Payable 21
2010July 1 Balance.................... ............. ............. ............. 6,300
3 ................................. 23 ............. 2,750 ............. 9,0508 ................................. 23 4,500 ............. ............. 4,550
19 ................................. 24 2,100 ............. ............. 2,45031 ................................. 25 ............. 900 ............. 3,350
Wages Payable 22
2010July 31 Adjusting................. 26 ............. 600 ............. 600
Unearned Rent 23
2010July 1 Balance.................... ............. ............. ............. 2,700
31 Adjusting................. 26 900 ............. ............. 1,800
Rafael Cagle, Capital 31
2010July 1 Balance.................... ............. ............. ............. 118,000
4 ................................. 23 ............. 5,000 ............. 123,00031 Closing.................... 27 ............. 22,820 ............. 145,82031 Closing.................... 27 2,000 ............. ............. 143,820
Rafael Cagle, Drawing 32
2010July 16 ................................. 24 1,000 ............. 1,000 .............
31 ................................. 25 1,000 ............. 2,000 .............31 Closing.................... 27 ............. 2,000 — —
Prob. 4–4B Continued
Income Summary 33Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 31 Closing.................... 27 ............. 38,100 ............. 38,100
31 Closing.................... 27 15,280 ............. ............. 22,82031 Closing.................... 27 22,820 ............. — —
Service Revenue 41
2010July 8 ................................. 23 ............. 9,400 ............. 9,400
15 ................................. 24 ............. 7,800 ............. 17,20022 ................................. 24 ............. 8,100 ............. 25,30022 ................................. 24 ............. 7,500 ............. 32,80031 ................................. 25 ............. 2,200 ............. 35,00031 Adjusting................. 26 ............. 2,200 ............. 37,20031 Closing.................... 27 37,200 ............. — —
Rent Revenue 42
2010July 1 Adjusting................. 26 ............. 900 ............. 900
31 Closing.................... 27 900 ............. — —
Wages Expense 51
2010July 12 ................................. 24 2,400 ............. 2,400 .............
26 ................................. 25 2,600 ............. 5,000 .............31 Adjusting................. 26 600 ............. 5,600 .............31 Closing.................... 27 ............. 5,600 — —
Supplies Expense 52
2010July 31 Adjusting................. 26 1,600 ............. 1,600 .............
31 Closing.................... 27 ............. 1,600 — —
Prob. 4–4B Continued
Rent Expense 53Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 3 ................................. 23 2,500 ............. 2,500 .............
31 Closing.................... 27 ............. 2,500 — —
Depreciation Expense—Building 54
2010July 31 Adjusting................. 26 1,000 ............. 1,000 .............
31 Closing.................... 27 ............. 1,000 — —
Utilities Expense 55
2010July 5 ................................. 24 400 ............. 400 .............
30 ................................. 25 350 ............. 750 .............31 ................................. 25 900 ............. 1,650 .............31 Closing.................... 27 ............. 1,650 — —
Depreciation Expense—Equipment 56
2010July 31 Adjusting................. 26 750 ............. 750 .............
31 Closing.................... 27 ............. 750 — —
Insurance Expense 57
2010July 31 Adjusting................. 26 800 ............. 800 .............
31 Closing.................... 27 ............. 800 — —
Miscellaneous Expense 59
2010July 30 ................................. 25 600 ............. 600 .............
31 ................................. 25 780 ............. 1,380 .............31 Closing.................... 27 ............. 1,380 — —
Prob. 4–4B Concluded
6.
HANDY MAN SERVICES CO.Post-Closing Trial Balance
July 31, 2010
Debit CreditBalances Balances
Cash..................................................................................... 26,870Accounts Receivable......................................................... 13,100Supplies.............................................................................. 1,450Prepaid Insurance.............................................................. 4,000Land..................................................................................... 50,000Building............................................................................... 57,500Accumulated Depreciation—Building.............................. 24,400Equipment........................................................................... 32,000Accumulated Depreciation—Equipment.......................... 10,950Accounts Payable.............................................................. 3,350Wages Payable................................................................... 600Unearned Rent.................................................................... 1,800Rafael Cagle, Capital.......................................................... 143,820
184,920 184,920
Prob. 4–5B
1., 3., and 6.
Cash 11Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Feb. 28 Balance.................... ............. ............. 3,950 .............
Supplies 13
2010Feb. 28 Balance.................... ............. ............. 15,295 .............
28 Adjusting................. 26 ............. 11,295 4,000 .............
Prepaid Insurance 14
2010Feb. 28 Balance.................... ............. ............. 2,735 .............
28 Adjusting................. 26 ............. 2,000 735 .............
Equipment 16
2010Feb. 28 Balance.................... ............. ............. 100,650 .............
Accumulated Depreciation—Equipment 17
2010Feb. 28 Balance.................... ............. ............. ............. 21,209
28 Adjusting................. 26 ............. 6,000 ............. 27,209
Trucks 18
2010Feb. 28 Balance.................... ............. ............. 36,300 .............
Accumulated Depreciation—Trucks 19
2010Feb. 28 Balance.................... ............. ............. ............. 7,400
28 Adjusting................. 26 ............. 3,500 ............. 10,900
Prob. 4–5B Continued
Accounts Payable 21Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Feb. 28 Balance.................... ............. ............. ............. 4,015
Wages Payable 22
2010Feb. 28 Adjusting................. 26 ............. 450 ............. 450
Tomas Guerrero, Capital 31
2010Feb. 28 Balance.................... ............. ............. ............. 72,426
28 Closing.................... 27 ............. 35,635 ............. 108,06128 Closing.................... 27 5,000 ............. ............. 103,061
Tomas Guerrero, Drawing 32
2010Feb. 28 Balance.................... ............. ............. 5,000 .............
28 Closing.................... 27 ............. 5,000 — —
Income Summary 33
2010Feb. 28 Closing.................... 27 ............. 119,950 ............. 119,950
28 Closing.................... 27 84,315 ............. ............. 35,63528 Closing.................... 27 35,635 ............. — —
Service Revenue 41
2010Feb. 28 Balance.................... ............. ............. ............. 119,950
Closing.................... 27 119,950 ............. — —
Wages Expense 51
2010Feb. 28 Balance.................... ............. ............. 39,925 .............
28 Adjusting................. 26 450 ............. 40,375 .............28 Closing.................... 27 ............. 40,375 — —
Prob. 4–5B Continued
Supplies Expense 52Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Feb. 28 Adjusting................. 26 11,295 ............. 11,295 .............
28 Closing.................... 27 ............. 11,295 — —
Rent Expense 53
2010Feb. 28 Balance.................... ............. ............. 10,600 .............
28 Closing.................... 27 ............. 10,600 — —
Depreciation Expense—Equipment 54
2010Feb. 28 Adjusting................. 26 6,000 ............. 6,000 .............
28 Closing.................... 27 ............. 6,000 — —
Truck Expense 55
2010Feb. 28 Balance.................... ............. ............. 7,350 .............
28 Closing.................... 27 ............. 7,350 — —
Depreciation Expense—Trucks 56
2010Feb. 28 Adjusting................. 26 3,500 ............. 3,500 .............
28 Closing.................... 27 ............. 3,500 — —
Insurance Expense 57
2010Feb. 28 Adjusting................. 26 2,000 ............. 2,000 .............
28 Closing.................... 27 ............. 2,000 — —
Miscellaneous Expense 59
2010Feb. 28 Balance.................... ............. ............. 3,195 .............
28 Closing.................... 27 ............. 3,195 — —
Prob. 4–5B Continued2. Optional (Appendix)
A B C D E F G H I J K1 FIX-IT CO.2 End-of-Period Spreadsheet (Work Sheet)3 For the Year Ended February 28, 20104 Unadjusted
Trial Balance AdjustmentsAdjusted
Trial BalanceIncome
StatementBalance
Sheet56 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 3,950 3,950 3,9508 Supplies 15,295 (a)11,295 4,000 4,0009 Prepaid Insurance 2,735 (b) 2,000 735 735
10 Equipment 100,650 100,650 100,65011 Accum. Depr.—Equip. 21,209 (c) 6,000 27,209 27,20912 Trucks 36,300 36,300 36,30013 Accum. Depr.—Trucks 7,400 (d) 3,500 10,900 10,90014 Accounts Payable 4,015 4,015 4,01515 Wages Payable (e) 450 450 45016 Tomas Guerrero, Capital 72,426 72,426 72,42617 Tomas Guerrero, Drawing 5,000 5,000 5,00018 Service Revenue 119,950 119,950 119,95019 Wages Expense 39,925 (e) 450 40,375 40,37520 Supplies Expense (a) 11,295 11,295 11,29521 Rent Expense 10,600 10,600 10,60022 Depr. Exp.—Equipment (c) 6,000 6,000 6,00023 Truck Expense 7,350 7,350 7,35024 Depr. Exp.—Trucks (d) 3,500 3,500 3,50025 Insurance Expense (b) 2,000 2,000 2,00026 Misc. Expense 3,195 3,195 3,19527 225,000 225,000 23,245 23,245 234,950 234,950 84,315 119,950 150,635 115,00028 Net income 35,635 _ _ 35,635 29 119,950 119,950 150,635 150,635
Prob. 4–5B Continued
3. JOURNAL Page 26Post.
Date Ref. Debit Credit
Adjusting Entries2010Feb. 28 Supplies Expense........................................ 52 11,295
Supplies.................................................. 13 11,295Supplies used ($15,295 – $4,000).
28 Insurance Expense...................................... 57 2,000Prepaid Insurance.................................. 14 2,000
Insurance expired.
28 Depreciation Expense—Equipment........... 54 6,000Accumulated Depr.—Equipment.......... 17 6,000
Equipment depreciation.
28 Depreciation Expense—Trucks.................. 56 3,500Accumulated Depr.—Trucks................. 19 3,500
Truck depreciation.
28 Wages Expense............................................ 51 450Wages Payable....................................... 22 450
Accrued wages.
Prob. 4–5B Continued
4.FIX-IT CO.
Adjusted Trial BalanceFebruary 28, 2010
Debit CreditBalances Balances
Cash..................................................................................... 3,950Supplies.............................................................................. 4,000Prepaid Insurance.............................................................. 735Equipment........................................................................... 100,650Accumulated Depreciation—Equipment.......................... 27,209Trucks.................................................................................. 36,300Accumulated Depreciation—Trucks................................. 10,900Accounts Payable.............................................................. 4,015Wages Payable................................................................... 450Tomas Guerrero, Capital.................................................... 72,426Tomas Guerrero, Drawing................................................. 5,000Service Revenue................................................................. 119,950Wages Expense.................................................................. 40,375Supplies Expense............................................................... 11,295Rent Expense...................................................................... 10,600Truck Expense.................................................................... 7,350Depreciation Expense—Equipment.................................. 6,000Depreciation Expense—Trucks........................................ 3,500Insurance Expense............................................................. 2,000Miscellaneous Expense..................................................... 3,195
234,950 234,950
Prob. 4–5B Continued
5.
FIX-IT CO.Income Statement
For the Year Ended February 28, 2010
Service revenue.................................................................. $119,950Expenses:
Wages expense........................................................... $40,375Supplies expense........................................................ 11,295Rent expense............................................................... 10,600Truck expense............................................................. 7,350Depreciation expense—equipment........................... 6,000Depreciation expense—trucks................................... 3,500Insurance expense...................................................... 2,000Miscellaneous expense.............................................. 3,195
Total expenses......................................................... 84,315 Net income.......................................................................... $ 35,635
FIX-IT CO.Statement of Owner’s Equity
For the Year Ended February 28, 2010
Tomas Guerrero, capital, March 1, 2009.......................... $ 72,426Net income for the year..................................................... $35,635Less withdrawals................................................................ 5,000 Increase in owner’s capital................................................ 30,635 Tomas Guerrero, capital, February 28, 2010.................... $103,061
Prob. 4–5B Continued
FIX-IT CO.Balance Sheet
February 28, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash.............................................. $ 3,950 Accounts payable................ $4,015Supplies........................................ 4,000 Wages payable.................... 450 Prepaid insurance....................... 735 Total liabilities........................ $ 4,465
Total current assets.................. $ 8,685Property, plant, and equipment:
Equipment.................................... $100,650 Owner’s EquityLess accum. depreciation.......... 27,209 $73,441 Tomas Guerrero, capital........ 103,061
Trucks........................................... $ 36,300Less accum. depreciation.......... 10,900 25,400
Total property, plant, andequipment............................... 98,841 Total liabilities and
Total assets...................................... $107,526 owner’s equity..................... $107,526
Prob. 4–5B Concluded
6. JOURNAL Page 27Post.
Date Ref. Debit Credit
Closing Entries2010Feb. 28 Service Revenue.......................................... 41 119,950
Income Summary................................... 33 119,950
28 Income Summary......................................... 33 84,315Wages Expense...................................... 51 40,375Supplies Expense.................................. 52 11,295Rent Expense......................................... 53 10,600Truck Expense........................................ 55 7,350Depreciation Expense—Equipment..... 54 6,000Depreciation Expense—Trucks............ 56 3,500Insurance Expense................................ 57 2,000Miscellaneous Expense......................... 59 3,195
28 Income Summary......................................... 33 35,635Tomas Guerrero, Capital....................... 31 35,635
28 Tomas Guerrero, Capital............................. 31 5,000Tomas Guerrero, Drawing..................... 32 5,000
7.
FIX-IT CO.Post-Closing Trial Balance
February 28, 2010
Debit CreditBalances Balances
Cash..................................................................................... 3,950Supplies.............................................................................. 4,000Prepaid Insurance.............................................................. 735Equipment........................................................................... 100,650Accumulated Depreciation—Equipment.......................... 27,209Trucks.................................................................................. 36,300Accumulated Depreciation—Trucks................................. 10,900Accounts Payable.............................................................. 4,015Wages Payable................................................................... 450Tomas Guerrero, Capital.................................................... 103,061
145,635 145,635
Prob. 4–6B
1. and 2. JOURNAL Pages 1 and 2Post.
Date Description Ref. Debit Credit
2010Oct. 1 Cash.............................................................. 11 18,000
Accounts Receivable................................... 12 5,000Supplies........................................................ 14 1,500Office Equipment......................................... 18 10,750
Kareem Ismail, Capital........................... 31 35,250
1 Prepaid Rent................................................. 15 4,800Cash......................................................... 11 4,800
2 Prepaid Insurance........................................ 16 2,700Cash......................................................... 11 2,700
4 Cash.............................................................. 11 3,150Unearned Fees....................................... 23 3,150
5 Office Equipment......................................... 18 1,250Accounts Payable.................................. 21 1,250
6 Cash.............................................................. 11 2,000Accounts Receivable............................. 12 2,000
10 Miscellaneous Expense.............................. 59 325Cash......................................................... 11 325
12 Accounts Payable........................................ 21 750Cash......................................................... 11 750
12 Accounts Receivable................................... 12 5,750Fees Earned............................................ 41 5,750
14 Salary Expense............................................ 51 900Cash......................................................... 11 900
17 Cash.............................................................. 11 9,250Fees Earned............................................ 41 9,250
18 Supplies........................................................ 14 600Cash......................................................... 11 600
20 Accounts Receivable................................... 12 4,100Fees Earned............................................ 41 4,100
24 Cash.............................................................. 11 4,850Fees Earned............................................ 41 4,850
Prob. 4–6B Continued
1. and 2. JOURNAL Pages 1 and 2Post.
Date Description Ref. Debit Credit
2010Oct. 26 Cash.............................................................. 11 3,450
Accounts Receivable............................. 12 3,450
27 Salary Expense............................................ 51 900Cash......................................................... 11 900
29 Miscellaneous Expense.............................. 59 250Cash......................................................... 11 250
31 Miscellaneous Expense.............................. 59 300Cash......................................................... 11 300
31 Cash.............................................................. 11 3,975Fees Earned............................................ 41 3,975
31 Accounts Receivable................................... 12 2,500Fees Earned............................................ 41 2,500
31 Kareem Ismail, Drawing.............................. 32 7,500Cash......................................................... 11 7,500
Prob. 4–6B Continued
2., 6., and 9.
Cash 11Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Oct. 1 ................................. 1 18,000 ............. 18,000 .............
1 ................................. 1 ............. 4,800 13,200 .............2 ................................. 1 ............. 2,700 10,500 .............4 ................................. 1 3,150 ............. 13,650 .............6 ................................. 1 2,000 ............. 15,650 .............
10 ................................. 1 ............. 325 15,325 .............12 ................................. 1 ............. 750 14,575 .............14 ................................. 1 ............. 900 13,675 .............17 ................................. 2 9,250 ............. 22,925 .............18 ................................. 2 ............. 600 22,325 .............24 ................................. 2 4,850 ............. 27,175 .............26 ................................. 2 3,450 ............. 30,625 .............27 ................................. 2 ............. 900 29,725 .............29 ................................. 2 ............. 250 29,475 .............31 ................................. 2 ............. 300 29,175 .............31 ................................. 2 3,975 ............. 33,150 .............31 ................................. 2 ............. 7,500 25,650 .............
Accounts Receivable 12
2010Oct. 1 ................................. 1 5,000 ............. 5,000 .............
6 ................................. 1 ............. 2,000 3,000 .............12 ................................. 1 5,750 ............. 8,750 .............20 ................................. 2 4,100 ............. 12,850 .............26 ................................. 2 ............. 3,450 9,400 .............31 ................................. 2 2,500 ............. 11,900 .............
Supplies 14
2010Oct. 1 ................................. 1 1,500 ............. 1,500 .............
18 ................................. 2 600 ............. 2,100 .............31 Adjusting................. 3 ............. 1,225 875 .............
Prob. 4–6B Continued
Prepaid Rent 15Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Oct. 1 ................................. 1 4,800 ............. 4,800 .............
31 Adjusting................. 3 ............. 1,600 3,200 .............
Prepaid Insurance 16
2010Oct. 2 ................................. 1 2,700 ............. 2,700 .............
31 Adjusting................. 3 ............. 225 2,475 .............
Office Equipment 18
2010Oct. 1 ................................. 1 10,750 ............. 10,750 .............
5 ................................. 1 1,250 ............. 12,000 .............
Accumulated Depreciation 19
2010Oct. 31 Adjusting................. 3 ............. 400 ............. 400
Accounts Payable 21
2010Oct. 5 ................................. 1 ............. 1,250 ............. 1,250
12 ................................. 1 750 ............. ............. 500
Salaries Payable 22
2010Oct. 31 Adjusting................. 3 ............. 200 ............. 200
Unearned Fees 23
2010Oct. 4 ................................. 1 ............. 3,150 ............. 3,150
31 Adjusting................. 3 2,000 ............. ............. 1,150
Prob. 4–6B Continued
Kareem Ismail, Capital 31Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Oct. 1 ................................. 1 ............. 35,250 ............. 35,250
31 Closing.................... 4 ............. 26,100 ............. 61,35031 Closing.................... 4 7,500 ............. ............. 53,850
Kareem Ismail, Drawing 32
2010Oct. 31 ................................. 2 7,500 ............. 7,500 .............
31 Closing.................... 4 ............. 7,500 — —
Income Summary 33
2010Oct. 31 Closing.................... 4 ............. 32,425 ............. 32,425
31 Closing.................... 4 6,325 ............. ............. 26,10031 Closing.................... 4 26,100 ............. — —
Fees Earned 41
2010Oct. 12 ................................. 1 ............. 5,750 ............. 5,750
17 ................................. 2 ............. 9,250 ............. 15,00020 ................................. 2 ............. 4,100 ............. 19,10024 ................................. 2 ............. 4,850 ............. 23,95031 ................................. 2 ............. 3,975 ............. 27,92531 ................................. 2 ............. 2,500 ............. 30,42531 Adjusting................. 3 ............. 2,000 ............. 32,42531 Closing.................... 4 32,425 ............. — —
Salary Expense 51
2010Oct. 14 ................................. 1 900 ............. 900 .............
27 ................................. 2 900 ............. 1,800 .............31 Adjusting................. 3 200 ............. 2,000 .............31 Closing.................... 4 ............. 2,000 — —
Prob. 4–6B Continued
Rent Expense 52Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010Oct. 31 Adjusting................. 3 1,600 ............. 1,600 .............
31 Closing.................... 4 ............. 1,600 — —
Supplies Expense 53
2010Oct. 31 Adjusting................. 3 1,225 ............. 1,225 .............
31 Closing.................... 4 ............. 1,225 — —
Depreciation Expense 54
2010Oct. 31 Adjusting................. 3 400 ............. 400 .............
31 Closing.................... 4 ............. 400 — —
Insurance Expense 55
2010Oct. 31 Adjusting................. 3 225 ............. 225 .............
31 Closing.................... 4 ............. 225 — —
Miscellaneous Expense 59
2010Oct. 10 ................................. 1 325 ............. 325 .............
29 ................................. 2 250 ............. 575 .............31 ................................. 2 300 ............. 875 .............31 Closing.................... 4 ............. 875 — —
Prob. 4–6B Continued
3.IRON MOUNTAIN CONSULTING
Unadjusted Trial BalanceOctober 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 25,650Accounts Receivable............................................................ 11,900Supplies................................................................................. 2,100Prepaid Rent.......................................................................... 4,800Prepaid Insurance................................................................. 2,700Office Equipment.................................................................. 12,000Accumulated Depreciation................................................... 0Accounts Payable................................................................. 500Salaries Payable.................................................................... 0Unearned Fees...................................................................... 3,150Kareem Ismail, Capital.......................................................... 35,250Kareem Ismail, Drawing........................................................ 7,500Fees Earned........................................................................... 30,425Salary Expense...................................................................... 1,800Rent Expense........................................................................ 0Supplies Expense................................................................. 0Depreciation Expense........................................................... 0Insurance Expense............................................................... 0Miscellaneous Expense........................................................ 875
69,325 69,325
Prob. 4–6B Continued5. Optional (Appendix)
A B C D E F G H I J K1 IRON MOUNTAIN CONSULTING2 End-of-Period Spreadsheet (Work Sheet)3 For the Month Ended October 31, 2010
4 UnadjustedTrial Balance Adjustments
AdjustedTrial Balance
IncomeStatement
BalanceSheet5
6 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 25,650 25,650 25,6508 Accounts Receivable 11,900 11,900 11,9009 Supplies 2,100 (b) 1,225 875 875
10 Prepaid Rent 4,800 (e) 1,600 3,200 3,20011 Prepaid Insurance 2,700 (a) 225 2,475 2,47512 Office Equipment 12,000 12,000 12,00013 Accum. Depreciation (c) 400 400 40014 Accounts Payable 500 500 50015 Salaries Payable (d) 200 200 20016 Unearned Fees 3,150 (f) 2,000 1,150 1,15017 Kareem Ismail, Capital 35,250 35,250 35,25018 Kareem Ismail, Drawing 7,500 7,500 7,50019 Fees Earned 30,425 (f) 2,000 32,425 32,42520 Salary Expense 1,800 (d) 200 2,000 2,00021 Rent Expense (e) 1,600 1,600 1,60022 Supplies Expense (b) 1,225 1,225 1,22523 Depreciation Expense (c) 400 400 40024 Insurance Expense (a) 225 225 22525 Miscellaneous Expense 875 875 875 26 69,325 69,325 5,650 5,650 69,925 69,925 6,325 32,425 63,600 37,500
27 Net income 26,100 ______ _____ _ 26,100
28 32,425 32,425 63,600 63,600
Prob. 4–6B Continued
6. JOURNAL Page 3Post.
Date Ref. Debit Credit
Adjusting Entries2010Oct. 31 Insurance Expense...................................... 55 225
Prepaid Insurance.................................. 16 225Insurance expired.
31 Supplies Expense........................................ 53 1,225Supplies.................................................. 14 1,225
Supplies used ($2,100 – $875).
31 Depreciation Expense................................. 54 400Accumulated Depreciation.................... 19 400
Equipment depreciation.
31 Salary Expense............................................ 51 200Salaries Payable..................................... 22 200
Accrued salaries.
31 Rent Expense............................................... 52 1,600Prepaid Rent........................................... 15 1,600
Rent expired.
31 Unearned Fees............................................. 23 2,000Fees Earned............................................ 41 2,000
Unearned fees earned ($3,150 – $1,150).
Prob. 4–6B Continued
7.IRON MOUNTAIN CONSULTING
Adjusted Trial BalanceOctober 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 25,650Accounts Receivable............................................................ 11,900Supplies................................................................................. 875Prepaid Rent.......................................................................... 3,200Prepaid Insurance................................................................. 2,475Office Equipment.................................................................. 12,000Accumulated Depreciation................................................... 400Accounts Payable................................................................. 500Salaries Payable.................................................................... 200Unearned Fees...................................................................... 1,150Kareem Ismail, Capital.......................................................... 35,250Kareem Ismail, Drawing........................................................ 7,500Fees Earned........................................................................... 32,425Salary Expense...................................................................... 2,000Rent Expense........................................................................ 1,600Supplies Expense................................................................. 1,225Depreciation Expense........................................................... 400Insurance Expense............................................................... 225Miscellaneous Expense........................................................ 875
69,925 69,925
Prob. 4–6B Continued
8.
IRON MOUNTAIN CONSULTINGIncome Statement
For the Month Ended October 31, 2010
Fees earned........................................................................ $32,425Expenses:
Salary expense............................................................ $2,000Rent expense............................................................... 1,600Supplies expense........................................................ 1,225Depreciation expense................................................. 400Insurance expense...................................................... 225Miscellaneous expense.............................................. 875
Total expenses......................................................... 6,325 Net income.......................................................................... $ 26,100
IRON MOUNTAIN CONSULTINGStatement of Owner’s Equity
For the Month Ended October 31, 2010
Kareem Ismail, capital, October 1, 2010........................... $ 0Additional investments during the month....................... 35,250 Total..................................................................................... $35,250Net income for the month.................................................. $26,100Less withdrawals................................................................ 7,500 Increase in owner’s equity................................................ 18,600 Kareem Ismail, capital, October 31, 2010......................... $ 53,850
Prob. 4–6B Continued
IRON MOUNTAIN CONSULTINGBalance Sheet
October 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash............................ $25,650 Accounts payable. . . $ 500Accounts receivable. . 11,900 Salaries payable...... 200Supplies...................... 875 Unearned fees.......... 1,150 Prepaid rent................ 3,200 Total liabilities............ $ 1,850Prepaid insurance...... 2,475
Total current assets $44,100Property, plant, and
equipment:.................. Owner’s EquityOffice equipment........ $12,000 Kareem Ismail, capital 53,850 Less accum. depr....... 400 Total property, plant,
and equipment......... 11,600 Total liabilities andTotal assets................... $ 55,700 owner’s equity......... $ 55,700
Prob. 4–6B Concluded
9. JOURNAL Page 4Post.
Date Ref. Debit Credit
Closing Entries2010Oct. 31 Fees Earned.................................................. 41 32,425
Income Summary................................... 33 32,425
31 Income Summary......................................... 33 6,325Salary Expense....................................... 51 2,000Rent Expense......................................... 52 1,600Supplies Expense.................................. 53 1,225Depreciation Expense............................ 54 400Insurance Expense................................ 55 225Miscellaneous Expense......................... 59 875
31 Income Summary......................................... 33 26,100Kareem Ismail, Capital........................... 31 26,100
31 Kareem Ismail, Capital................................. 31 7,500Kareem Ismail, Drawing......................... 32 7,500
10.
IRON MOUNTAIN CONSULTINGPost-Closing Trial Balance
October 31, 2010
Debit CreditBalances Balances
Cash..................................................................................... 25,650Accounts Receivable......................................................... 11,900Supplies.............................................................................. 875Prepaid Rent....................................................................... 3,200Prepaid Insurance.............................................................. 2,475Office Equipment................................................................ 12,000Accumulated Depreciation................................................ 400Accounts Payable.............................................................. 500Salaries Payable................................................................. 200Unearned Fees.................................................................... 1,150Kareem Ismail, Capital....................................................... 53,850
56,100 56,100
CONTINUING PROBLEM1. Optional (Appendix)
A B C D E F G H I J K1 MUSIC DEPOT2 End-of-Period Spreadsheet (Work Sheet)3 For the Two Months Ended July 31, 2010
4 UnadjustedTrial Balance Adjustments
AdjustedTrial Balance
IncomeStatement
BalanceSheet5
6 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 12,780 12,780 12,7808 Accounts Receivable 3,150 (a) 1,600 4,750 4,7509 Supplies 850 (b) 675 175 175
10 Prepaid Insurance 2,700 (c) 225 2,475 2,47511 Office Equipment 5,000 5,000 5,00012 Acc. Depr.—Office Equip. (d) 60 60 6013 Accounts Payable 5,680 5,680 5,68014 Wages Payable (f) 120 120 12015 Unearned Revenue 7,200 (e) 3,600 3,600 3,60016 Lee Chang, Capital 10,500 10,500 10,50017 Lee Chang, Drawing 1,700 1,700 1,70018 Fees Earned 15,300 (a) 1,600 20,500 20,50019 (e) 3,60020 Wages Expense 2,400 (f) 120 2,520 2,52021 Office Rent Expense 2,750 2,750 2,75022 Equip. Rent Expense 1,100 1,100 1,10023 Utilities Expense 860 860 86024 Music Expense 2,810 2,810 2,81025 Advertising Expense 1,600 1,600 1,60026 Supplies Expense 180 (b) 675 855 85527 Insurance Expense (c) 225 225 22528 Depreciation Expense (d) 60 60 6029 Miscellaneous Expense 800 800 800
30 38,680 38,680 6,280 6,280 40,460 40,460 13,580 20,500 26,880 19,96031 Net income 6,920 ______ ______ 6,920 32 20,500 20,500 26,880 26,880
Continuing Problem Continued
2.
MUSIC DEPOTIncome Statement
For the Two Months Ended July 31, 2010
Fees earned........................................................................ $20,500Expenses:
Music expense............................................................. $2,810Office rent expense..................................................... 2,750Wages expense........................................................... 2,520Advertising expense................................................... 1,600Equipment rent expense............................................. 1,100Utilities expense.......................................................... 860Supplies expense........................................................ 855Insurance expense...................................................... 225Depreciation expense................................................. 60Miscellaneous expense.............................................. 800
Total expenses......................................................... 13,580 Net income.......................................................................... $ 6,920
MUSIC DEPOTStatement of Owner’s Equity
For the Two Months Ended July 31, 2010
Lee Chang, capital, June 1, 2010...................................... $ 0Additional investments during the period....................... 10,500 Total..................................................................................... $10,500Net income for the period.................................................. $6,920Less withdrawals................................................................ 1,700 Increase in owner’s equity................................................ 5,220 Lee Chang, capital, July 31, 2010..................................... $15,720
Continuing Problem Continued
MUSIC DEPOTBalance SheetJuly 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash............................... $12,780 Accounts payable. . . $5,680Accounts receivable..... 4,750 Wages payable........ 120Supplies......................... 175 Unearned revenue... 3,600 Prepaid insurance......... 2,475 Total liabilities............ $ 9,400
Total current assets... $20,180Property, plant, and
equipment: Owner’s EquityOffice equipment.......... $ 5,000 Lee Chang,Less accum. depr......... 60 capital....................... 15,720
Total property, plant,and equipment......... 4,940 Total liabilities and
Total assets...................... $ 25,120 owner’s equity......... $25,120
Continuing Problem Continued
3. JOURNAL Page 4Post.
Date Ref. Debit Credit
Closing Entries2010July 31 Fees Earned.................................................. 41 20,500
Income Summary................................... 33 20,500
31 Income Summary......................................... 33 13,580Wages Expense...................................... 50 2,520Office Rent Expense.............................. 51 2,750Equipment Rent Expense...................... 52 1,100Utilities Expense.................................... 53 860Music Expense....................................... 54 2,810Advertising Expense.............................. 55 1,600Supplies Expense.................................. 56 855Insurance Expense................................ 57 225Depreciation Expense............................ 58 60Miscellaneous Expense......................... 59 800
31 Income Summary......................................... 33 6,920Lee Chang, Capital................................. 31 6,920
31 Lee Chang, Capital...................................... 31 1,700Lee Chang, Drawing............................... 32 1,700
Continuing Problem Continued
Cash 11Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. 8,010 .............
1 ................................. 1 2,500 ............. 10,510 .............1 ................................. 1 ............. 2,000 8,510 .............1 ................................. 1 ............. 2,700 5,810 .............2 ................................. 1 1,350 ............. 7,160 .............3 ................................. 1 7,200 ............. 14,360 .............3 ................................. 1 ............. 250 14,110 .............4 ................................. 1 ............. 500 13,610 .............8 ................................. 1 ............. 200 13,410 .............
11 ................................. 1 800 ............. 14,210 .............13 ................................. 1 ............. 600 13,610 .............14 ................................. 1 ............. 1,000 12,610 .............16 ................................. 2 1,750 ............. 14,360 .............21 ................................. 2 ............. 420 13,940 .............22 ................................. 2 ............. 800 13,140 .............23 ................................. 2 750 ............. 13,890 .............27 ................................. 2 ............. 560 13,330 .............28 ................................. 2 ............. 1,000 12,330 .............29 ................................. 2 ............. 150 12,180 .............30 ................................. 2 400 ............. 12,580 .............31 ................................. 2 2,800 ............. 15,380 .............31 ................................. 2 ............. 1,100 14,280 .............31 ................................. 2 ............. 1,500 12,780 .............
Accounts Receivable 12
2010July 1 Balance.................... ............. ............. 1,350 .............
2 ................................. 1 ............. 1,350 — —23 ................................. 2 1,750 ............. 1,750 .............30 ................................. 2 1,400 ............. 3,150 .............31 Adjusting................. 3 1,600 ............. 4,750 .............
Continuing Problem Continued
Supplies 14Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. 170 .............
18 ................................. 2 680 ............. 850 .............31 Adjusting................. 3 ............. 675 175 .............
Prepaid Insurance 15
2010July 1 ................................. 1 2,700 ............. 2,700 .............
31 Adjusting................. 3 ............. 225 2,475 .............
Office Equipment 17
2010July 5 ................................. 1 5,000 ............. 5,000 .............
Accumulated Depreciation—Office Equipment 18
2010July 31 Adjusting................. 3 ............. 60 ............. 60
Accounts Payable 21
2010July 1 Balance.................... ............. ............. ............. 250
3 ................................. 1 250 ............. — —5 ................................. 1 ............. 5,000 ............. 5,000
18 ................................. 2 ............. 680 ............. 5,680
Wages Payable 22
2010July 31 Adjusting................. 3 ............. 120 ............. 120
Unearned Revenue 23
2010July 3 ................................. 1 ............. 7,200 ............. 7,200
31 Adjusting................. 3 3,600 ............. ............. 3,600
Continuing Problem Continued
Lee Chang, Capital 31Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. ............. 8,000
1 ................................. 1 ............. 2,500 ............. 10,50031 Closing.................... 4 ............. 6,920 ............. 17,42031 Closing.................... 4 1,700 ............. ............. 15,720
Lee Chang, Drawing 32
2010July 1 Balance.................... ............. ............. 200 .............
31 ................................. 2 1,500 ............. 1,700 .............31 Closing.................... 4 ............. 1,700 — —
Income Summary 33
2010July 31 Closing.................... 4 ............. 20,500 ............. 20,500
31 Closing.................... 4 13,580 ............. ............. 6,92031 Closing.................... 4 6,920 ............. — —
Fees Earned 41
2010July 1 Balance.................... ............. ............. ............. 5,650
11 ................................. 1 ............. 800 ............. 6,45016 ................................. 2 ............. 1,750 ............. 8,20023 ................................. 2 ............. 2,500 ............. 10,70030 ................................. 2 ............. 1,800 ............. 12,50031 ................................. 2 ............. 2,800 ............. 15,30031 Adjusting................. 3 ............. 1,600 ............. 16,90031 Adjusting................. 3 ............. 3,600 ............. 20,50031 Closing.................... 4 20,500 ............. — —
Wages Expense 50
2010July 1 Balance.................... ............. ............. 400 .............
14 ................................. 1 1,000 ............. 1,400 .............28 ................................. 2 1,000 ............. 2,400 .............31 Adjusting................. 3 120 ............. 2,520 .............31 Closing.................... 4 ............. 2,520 — —
Continuing Problem Continued
Office Rent Expense 51Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 1 Balance.................... ............. ............. 750 .............
1 ................................. 1 2,000 ............. 2,750 .............31 Closing.................... 4 ............. 2,750 — —
Equipment Rent Expense 52
2010July 1 Balance.................... ............. ............. 500 .............
13 ................................. 1 600 ............. 1,100 .............31 Closing.................... 4 ............. 1,100 — —
Utilities Expense 53
2010July 1 Balance.................... ............. ............. 300 .............
27 ................................. 2 560 ............. 860 .............31 Closing.................... 4 ............. 860 — —
Music Expense 54
2010July 1 Balance.................... ............. ............. 1,290 .............
21 ................................. 2 420 ............. 1,710 .............31 ................................. 2 1,100 ............. 2,810 .............31 Closing.................... 4 ............. 2,810 — —
Advertising Expense 55
2010July 1 Balance.................... ............. ............. 600 .............
8 ................................. 1 200 ............. 800 .............22 ................................. 2 800 ............. 1,600 .............31 Closing.................... 4 ............. 1,600 — —
Supplies Expense 56
2010July 1 Balance.................... ............. ............. 180 .............
31 Adjusting................. 3 675 ............. 855 .............31 Closing.................... 4 ............. 855 — —
Continuing Problem Concluded
Insurance Expense 57Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010July 31 Adjusting................. 3 225 ............. 225 .............
31 Closing.................... 4 ............. 225 — —
Depreciation Expense 58
2010July 31 Adjusting................. 3 60 ............. 60 .............
31 Closing.................... 4 ............. 60 — —
Miscellaneous Expense 59
2010July 1 Balance.................... ............. ............. 150 .............
4 ................................. 1 500 ............. 650 .............29 ................................. 2 150 ............. 800 .............31 Closing.................... 4 ............. 800 — —
4.
MUSIC DEPOTPost-Closing Trial Balance
July 31, 2010
Debit CreditBalances Balances
Cash..................................................................................... 12,780Accounts Receivable......................................................... 4,750Supplies.............................................................................. 175Prepaid Insurance.............................................................. 2,475Office Equipment................................................................ 5,000Accumulated Depreciation—Office Equipment............... 60Accounts Payable.............................................................. 5,680Wages Payable................................................................... 120Unearned Revenue............................................................. 3,600Lee Chang, Capital............................................................. 15,720
25,180 25,180
COMPREHENSIVE PROBLEM 1
1. and 2. JOURNAL Pages 5 and 6Post.
Date Description Ref. Debit Credit
2010May 3 Cash.............................................................. 11 2,500
Unearned Fees....................................... 23 2,500
5 Cash.............................................................. 11 1,750Accounts Receivable............................. 12 1,750
9 Miscellaneous Expense.............................. 59 300Cash......................................................... 11 300
13 Accounts Payable........................................ 21 400Cash......................................................... 11 400
15 Accounts Receivable................................... 12 6,100Fees Earned............................................ 41 6,100
16 Salary Expense............................................ 51 630Salaries Payable........................................... 22 120
Cash......................................................... 11 750
17 Cash.............................................................. 11 8,200Fees Earned............................................ 41 8,200
20 Supplies........................................................ 14 400Accounts Payable.................................. 21 400
21 Accounts Receivable................................... 12 3,900Fees Earned............................................ 41 3,900
25 Cash.............................................................. 11 5,100Fees Earned............................................ 41 5,100
27 Cash.............................................................. 11 9,500Accounts Receivable............................. 12 9,500
28 Salary Expense............................................ 51 750Cash......................................................... 11 750
30 Miscellaneous Expense.............................. 59 120Cash......................................................... 11 120
31 Miscellaneous Expense.............................. 59 290Cash......................................................... 11 290
31 Cash.............................................................. 11 3,875Fees Earned............................................ 41 3,875
Comp. Prob. 1 Continued
1. and 2. JOURNAL Pages 5 and 6Post.
Date Description Ref. Debit Credit
2010May 31 Accounts Receivable................................... 12 3,200
Fees Earned............................................ 41 3,200
31 Kelly Pitney, Drawing.................................. 32 8,000Cash......................................................... 11 8,000
Comp. Prob. 1 Continued
2., 6., and 9.
Cash 11Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010May 1 Balance.................... ............. ............. 22,100 .............
3 ................................. 5 2,500 ............. 24,600 .............5 ................................. 5 1,750 ............. 26,350 .............9 ................................. 5 ............. 300 26,050 .............
13 ................................. 5 ............. 400 25,650 .............16 ................................. 5 ............. 750 24,900 .............17 ................................. 6 8,200 ............. 33,100 .............25 ................................. 6 5,100 ............. 38,200 .............27 ................................. 6 9,500 ............. 47,700 .............28 ................................. 6 ............. 750 46,950 .............30 ................................. 6 ............. 120 46,830 .............31 ................................. 6 ............. 290 46,540 .............31 ................................. 6 3,875 ............. 50,415 .............31 ................................. 6 ............. 8,000 42,415 .............
Accounts Receivable 12
2010May 1 Balance.................... ............. ............. 3,400 .............
5 ................................. 5 ............. 1,750 1,650 .............15 ................................. 5 6,100 ............. 7,750 .............21 ................................. 6 3,900 ............. 11,650 .............27 ................................. 6 ............. 9,500 2,150 .............31 ................................. 6 3,200 ............. 5,350 .............
Supplies 14
2010May 1 Balance.................... ............. ............. 1,350 .............
20 ................................. 6 400 ............. 1,750 .............31 Adjusting................. 7 ............. 1,150 600 .............
Comp. Prob. 1 Continued
Prepaid Rent 15Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010May 1 Balance.................... ............. ............. 3,200 .............
31 Adjusting................. 7 ............. 1,600 1,600 .............
Prepaid Insurance 16
2010May 1 Balance.................... ............. ............. 1,500 .............
31 Adjusting................. 7 ............. 300 1,200 .............
Office Equipment 18
2010May 1 Balance.................... 5 ............. ............. 14,500 .............
Accumulated Depreciation 19
2010May 1 Balance.................... ............. ............. ............. 330
31 Adjusting................. 7 ............. 330 ............. 660
Accounts Payable 21
2010May 1 Balance.................... ............. ............. ............. 800
13 ................................. 5 400 ............. ............. 40020 ................................. 6 ............. 400 ............. 800
Salaries Payable 22
2010May 1 Balance.................... ............. ............. ............. 120
16 ................................. 5 120 ............. ............. —31 Adjusting................. 7 ............. 240 ............. 240
Unearned Fees 23
2010May 1 Balance.................... ............. ............. ............. 2,500
3 ................................. 5 ............. 2,500 ............. 5,00031 Adjusting................. 7 3,000 ............. ............. 2,000
Comp. Prob. 1 Continued
Kelly Pitney, Capital 31Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010May 1 Balance.................... ............. ............. ............. 42,300
31 Closing.................... 8 ............. 27,665 ............. 69,96531 Closing.................... 8 8,000 ............. ............. 61,965
Kelly Pitney, Drawing 32
2010May 31 ................................. 6 8,000 ............. 8,000 .............
31 Closing.................... 8 ............. 8,000 — —
Income Summary 33
2010May 31 Closing.................... 8 ............. 33,375 ............. 33,375
31 Closing.................... 8 5,710 ............. ............. 27,66531 Closing.................... 8 27,665 ............. — —
Fees Earned 41
2010May 15 ................................. 5 ............. 6,100 ............. 6,100
17 ................................. 6 ............. 8,200 ............. 14,30021 ................................. 6 ............. 3,900 ............. 18,20025 ................................. 6 ............. 5,100 ............. 23,30031 ................................. 6 ............. 3,875 ............. 27,17531 ................................. 6 ............. 3,200 ............. 30,37531 Adjusting................. 7 ............. 3,000 ............. 33,37531 Closing.................... 8 33,375 ............. — —
Salary Expense 51
2010May 16 ................................. 5 630 ............. 630 .............
28 ................................. 6 750 ............. 1,380 .............31 Adjusting................. 7 240 ............. 1,620 .............31 Closing.................... 8 ............. 1,620 — —
Comp. Prob. 1 Continued
Rent Expense 52Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2010May 31 Adjusting................. 7 1,600 ............. 1,600 .............
31 Closing.................... 8 ............. 1,600 — —
Supplies Expense 53
2010May 31 Adjusting................. 7 1,150 ............. 1,150 .............
31 Closing.................... 8 ............. 1,150 — —
Depreciation Expense 54
2010May 31 Adjusting................. 7 330 ............. 330 .............
31 Closing.................... 8 ............. 330 — —
Insurance Expense 55
2010May 31 Adjusting................. 7 300 ............. 300 .............
31 Closing.................... 8 ............. 300 — —
Miscellaneous Expense 59
2010May 9 ................................. 5 300 ............. 300 .............
30 ................................. 6 120 ............. 420 .............31 ................................. 6 290 ............. 710 .............31 Closing.................... 8 ............. 710 — —
Comp. Prob. 1 Continued
3.
KELLY CONSULTINGUnadjusted Trial Balance
May 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 42,415Accounts Receivable............................................................ 5,350Supplies................................................................................. 1,750Prepaid Rent.......................................................................... 3,200Prepaid Insurance................................................................. 1,500Office Equipment.................................................................. 14,500Accumulated Depreciation................................................... 330Accounts Payable................................................................. 800Salaries Payable.................................................................... 0Unearned Fees...................................................................... 5,000Kelly Pitney, Capital.............................................................. 42,300Kelly Pitney, Drawing............................................................ 8,000Fees Earned........................................................................... 30,375Salary Expense...................................................................... 1,380Rent Expense........................................................................ 0Supplies Expense................................................................. 0Depreciation Expense........................................................... 0Insurance Expense............................................................... 0Miscellaneous Expense........................................................ 710
78,805 78,805
Comp. Prob. 1 Continued
5. Optional (Appendix)
A B C D E F G H I J K1 KELLY CONSULTING2 End-of-Period Spreadsheet (Work Sheet)3 For the Month Ended May 31, 2010
4 UnadjustedTrial Balance Adjustments
AdjustedTrial Balance
IncomeStatement
BalanceSheet5
6Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
7 Cash 42,415 42,415 42,4158 Accounts Receivable 5,350 5,350 5,3509 Supplies 1,750 (b) 1,150 600 600
10 Prepaid Rent 3,200 (e) 1,600 1,600 1,60011 Prepaid Insurance 1,500 (a) 300 1,200 1,20012 Office Equipment 14,500 14,500 14,50013 Accum. Depreciation 330 (c) 330 660 66014 Accounts Payable 800 800 80015 Salaries Payable (d) 240 240 24016 Unearned Fees 5,000 (f) 3,000 2,000 2,00017 Kelly Pitney, Capital 42,300 42,300 42,30018 Kelly Pitney, Drawing 8,000 8,000 8,00019 Fees Earned 30,375 (f) 3,000 33,375 33,37520 Salary Expense 1,380 (d) 240 1,620 1,62021 Rent Expense (e) 1,600 1,600 1,60022 Supplies Expense (b) 1,150 1,150 1,15023 Depreciation Expense (c) 330 330 33024 Insurance Expense (a) 300 300 30025 Miscellaneous Expense 710 710 710 26 78,805 78,805 6,620 6,620 79,375 79,375 5,710 33,375 73,665 46,00027 Net income 27,665 27,66528 33,375 33,375 73,665 73,665
Comp. Prob. 1 Continued
6. JOURNAL Page 7Post.
Date Ref. Debit Credit
Adjusting Entries2010May 31 Insurance Expense...................................... 55 300
Prepaid Insurance.................................. 16 300Insurance expired.
31 Supplies Expense........................................ 53 1,150Supplies.................................................. 14 1,150
Supplies used ($1,750 – $600).
31 Depreciation Expense................................. 54 330Accumulated Depreciation.................... 19 330
Equipment depreciation.
31 Salary Expense............................................ 51 240Salaries Payable..................................... 22 240
Accrued salaries.
31 Rent Expense............................................... 52 1,600Prepaid Rent........................................... 15 1,600
Rent expired.
31 Unearned Fees............................................. 23 3,000Fees Earned............................................ 41 3,000
Unearned fees ($5,000 – $2,000).
Comp. Prob. 1 Continued
7.
KELLY CONSULTINGAdjusted Trial Balance
May 31, 2010
Debit CreditBalances Balances
Cash....................................................................................... 42,415Accounts Receivable............................................................ 5,350Supplies................................................................................. 600Prepaid Rent.......................................................................... 1,600Prepaid Insurance................................................................. 1,200Office Equipment.................................................................. 14,500Accumulated Depreciation................................................... 660Accounts Payable................................................................. 800Salaries Payable.................................................................... 240Unearned Fees...................................................................... 2,000Kelly Pitney, Capital.............................................................. 42,300Kelly Pitney, Drawing............................................................ 8,000Fees Earned........................................................................... 33,375Salary Expense...................................................................... 1,620Rent Expense........................................................................ 1,600Supplies Expense................................................................. 1,150Depreciation Expense........................................................... 330Insurance Expense............................................................... 300Miscellaneous Expense........................................................ 710
79,375 79,375
Comp. Prob. 1 Continued
8.
KELLY CONSULTINGIncome Statement
For the Month Ended May 31, 2010
Fees earned........................................................................ $33,375Expenses:
Salary expense............................................................ $1,620Rent expense............................................................... 1,600Supplies expense........................................................ 1,150Depreciation expense................................................. 330Insurance expense...................................................... 300Miscellaneous expense.............................................. 710
Total expenses......................................................... 5,710 Net income.......................................................................... $ 27,665
KELLY CONSULTINGStatement of Owner’s Equity
For the Month Ended May 31, 2010
Kelly Pitney, capital, May 1, 2010...................................... $42,300Net income for the month.................................................. $27,665Less withdrawals................................................................ 8,000 Increase in owner’s equity................................................ 19,665 Kelly Pitney, capital, May 31, 2010.................................... $ 61,965
Comp. Prob. 1 Continued
KELLY CONSULTINGBalance SheetMay 31, 2010
Assets LiabilitiesCurrent assets: Current liabilities:
Cash............................ $42,415 Accounts payable. . . $ 800Accounts receivable. . 5,350 Salaries payable...... 240Supplies...................... 600 Unearned fees.......... 2,000 Prepaid rent................ 1,600 Total liabilities....... $ 3,040Prepaid insurance...... 1,200
Total current assets $51,165Property, plant, and Owner’s Equity
equipment: Kelly Pitney,Office equipment........ $14,500 capital....................... 61,965
Less accum. depr.... 660 13,840 Total liabilities andTotal assets................... $ 65,005 owner’s equity......... $ 65,005
Comp. Prob. 1 Concluded
9. JOURNAL Page 8Post.
Date Ref. Debit Credit
Closing Entries2010May 31 Fees Earned.................................................. 41 33,375
Income Summary................................... 33 33,375
31 Income Summary......................................... 33 5,710Salary Expense....................................... 51 1,620Rent Expense......................................... 52 1,600Supplies Expense.................................. 53 1,150Depreciation Expense............................ 54 330Insurance Expense................................ 55 300Miscellaneous Expense......................... 59 710
31 Income Summary......................................... 33 27,665Kelly Pitney, Capital............................... 31 27,665
31 Kelly Pitney, Capital..................................... 31 8,000Kelly Pitney, Drawing............................. 32 8,000
10.
KELLY CONSULTINGPost-Closing Trial Balance
May 31, 2010
Debit CreditBalances Balances
Cash..................................................................................... 42,415Accounts Receivable......................................................... 5,350Supplies.............................................................................. 600Prepaid Rent....................................................................... 1,600Prepaid Insurance.............................................................. 1,200Office Equipment................................................................ 14,500Accumulated Depreciation................................................ 660Accounts Payable.............................................................. 800Salaries Payable................................................................. 240Unearned Fees.................................................................... 2,000Kelly Pitney, Capital........................................................... 61,965
Totals............................................................................ 65,665 65,665
SPECIAL ACTIVITIES
Activity 4–1
It is unacceptable to prepare financial statements in such a way that users of the statements would be misled. The August 31, 2010, balance sheet of Pixel Graph-ics could be misleading in two ways. First, the account receivable from Chas should be segregated and reported separately from trade (customer) receivables. Such receivables are normally reported as “officer receivables” or “other receiv-ables” and accompanied by a note disclosing the nature of the receivable. Such disclosure is required for what are termed “related-party transactions.” Second, given that the receivable has been outstanding since November 2008, it is ques-tionable whether the receivable from Chas should be classified as a current as-set. Marcie could justify the classification as “current” if Chas has agreed to a written schedule for repaying within the next year. Alternatively, the receivable could be classified as current if it has been converted to a note receivable with a specific due date within the next year.
In summary, because of the preceding issues, it appears that Marcie is not be-having in a professional manner. Note: It is a criminal offense to submit false or misleading documents to a bank in applying for a loan.
Activity 4–2
1. (a) With the decreasing cost of computers and related software, DeSoto Sup-plies Co. may find it desirable to computerize its financial reporting sys-tem. In many cases, the computerization of a manual accounting system reduces the overall cost of the accounting function.
(b) A computerized accounting system would allow for eliminating the end-of-period spreadsheet (work sheet) and, thus, financial statements could be prepared with “a push of a button.” However, adjustment data would still need to be recorded at the end of the accounting period before the fi-nancial statements could be prepared.
(c) In designing a computerized financial reporting (accounting) system, it is essential that proper accounting principles, concepts, and procedures be followed. At a minimum, basic controls such as the use of the double-en-try accounting system should be included. For example, debits must equal credits for all transactions, and assets must equal liabilities plus owner’s equity. In addition, the system should be designed to detect obvi-ous errors, such as a credit (minus) balance for supplies or prepaid insur-ance. In other words, to design an adequate financial reporting system, a computer programmer must have a thorough understanding of account-ing and the accounting cycle.
Note: Numerous accounting software packages, similar to the Klooster and Allen General Ledger Software package accompanying this text, are available. Therefore, it would probably be better for DeSoto Supplies Co. to purchase an existing accounting software package rather than trying to design its own.
2. Supplies cannot have a credit balance, since the supplies account is an asset account. A business cannot have a “negative” asset. Thus, the only way that a credit balance could have occurred in supplies is the result of an error in recording one or more transactions.
Activity 4–3
1. A set of financial statements provides useful information concerning the eco-nomic condition of a company. For example, the balance sheet describes the financial condition of the company as of a given date and is useful in assess-ing the company’s financial soundness and liquidity. The income statement describes the results of operations for a period and indicates the profitability of the company. The statement of owner’s equity describes the changes in the owner’s interest in the company for a period. Each of these statements is useful in evaluating whether to extend credit to the company.
2. The following adjustments might be necessary before an accurate set of fi-nancial statements could be prepared:
No supplies expense is shown. The supplies account should be adjusted for the supplies used during the year.
No depreciation expense is shown for the trucks or equipment accounts. An adjusting entry should be prepared for depreciation expense on each of these assets.
An inquiry should be made as to whether any accrued expenses, such as wages or utilities, exist at the end of the year.
An inquiry should be made as to whether any prepaid expenses, such as rent or insurance, exist at the end of the year.
An inquiry should be made as to whether the owner withdrew any funds from the company during the year. No drawing account is shown in the “Statement of Accounts.”
The following items should be relabeled for greater clarity:
Billings Due from Others—Accounts Receivable
Amounts Owed to Others—Accounts Payable
Investment in Business—Yolanda Tovar, Capital
Other Expenses—Miscellaneous Expense
Note to Instructors: The preceding items are not intended to include all ad-justments that might exist in the Statement of Accounts. The possible adjust-ments listed include only items that have been covered in Chapters 1–4. For example, uncollectible accounts expense (discussed in a later chapter) is not mentioned.
Activity 4–3 Concluded
3. In general, the decision to extend a loan is based on an assessment of the profitability and riskiness of the loan. Although the financial statements pro-vide useful data for this purpose, other factors such as the following might also be significant:
The due date and payment terms of the loan.
Security for the loan. For example, whether Yolanda Tovar is willing to pledge personal assets in support of the loan will affect the riskiness of the loan.
The intended use of the loan. For example, if the loan is to purchase real estate (possibly for a future building site), the real estate could be used as security for the loan.
The projected profitability of the company.
Activity 4–4
Note to Instructors: The purpose of this activity is to familiarize students with the information that a balance sheet provides about a company.