254.
Presented below are the year-end balances at December 31 of Becca’s Dry Cleaning
Service, Inc. (All accounts have normal balances.)
Accounts receivable
$12,000
Accounts payable
25,000
Accumulated depreciation—equipment
30,000
Cash
42,000
Depreciation expense—equipment
12,000
Insurance expense
7,000
Equipment
125,000
Service revenue
200,000
Notes payable
65,000
Common stock
1,000
Retained earnings
16,000
Dividends
18,000
Prepaid insurance
1,500
Salaries payable
4,000
Salary expense
97,000
Supplies
1,500
Supplies expense
16,000
Unearned service revenues
500
Utilities expense
9,500
(a) Prepare the necessary closing entries at December 31.
(b) Prepare a post-closing trial balance at December 31.
255.
Mandalay Company, Inc. frequently has accrued expenses at the end of its fiscal year that
should be recorded for proper financial statement presentation. Mandalay pays on a
weekly basis and has $50,000 of accrued salaries incurred but not paid for June 30, its
fiscal year-end. This consists of one day’s accrued salaries for the week. The company will
pay its employees $250,000 on July 4; the one day of accrued salaries and the remaining
four days for July salaries. Record the following entries:
(a) Accrual of the salaries on June 30.
(b) Payment of the salaries on July 4, assuming that Mandalay does not prepare reversing
entries.
(c) Assuming that Mandalay prepares reversing entries, reverse the adjusting entry made
on June 30.
(d) Assuming that Mandalay prepares reversing entries, payment of the salaries on July
4.
256.
Compute Darling Company’s current ratio using the following information:
Accounts
receivable
$20,000
Long-term
notes payable
$80,000
Salaries
payable
5,000
Building
170,000
Prepaid Rent
7,000
Accounts
payable
15,000
Cash
12,000
Land
75,000
257.
The unadjusted trial balance of Barber Housekeeping Service, Inc. is entered on the partial
work sheet below.
Barber Housekeeping Service, Inc.
Work Sheet
For the year ended December 3l
Account
Unadjusted
Trial
Balance
Adjustments
Adjusted
Trial
Balance
Income
Statement
Balance
Sheet
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Cash
50,000
Accounts
receivable
10,000
Supplies
8,000
Automobiles
160,000
Accum.
Depr.—
Autos.
55,000
Accounts
payable
37,000
Salaries
payable
Common
stock
1,000
Retained
earnings
54,000
Dividends
45,000
Fees earned
275,400
Salary
expense
125,000
Rent
expense
24,400
Advertising
expense
Supplies
expense
Depreciation
expense
Total
422,400
422,400
Required:
Complete the work sheet using the following information:
(a) Salaries earned by employees that are unpaid and unrecorded, $5,000.
(b) An inventory of supplies showed $3,000 of unused supplies still on hand.
(c) Depreciation on automobiles, $30,000.
(d) Advertising for November and December in the amount of $8,000 remains unpaid and
unrecorded.
Cash
Supplies
Automobiles
160,000
160,000
Fill in the Blank Questions
258.
______________________ are required at the end of the accounting period because certain
internal transactions and events remain unrecorded.
259.
Accrual accounting and the adjusting process rely on two principles: the
___________________ principle and the ________________________ principle.
260.
__________ basis accounting means that revenues are recognized when cash is received
and that expenses are recorded when cash is paid. _____________ basis accounting means
that the financial effects of revenues and expenses are recorded when earned or
incurred.
261.
Accrued revenues at the end of one accounting period often result in cash
_______________________ in the next period.
262.
______________ revenues are liabilities requiring delivery of products and for services.
263.
If a prepaid expense account was not adjusted for the amount used, on the balance sheet
assets would be ___________________ and equity would be ___________________.
264.
Profit margin = ___________________ divided by net sales.
265.
The _______________ depreciation method allocates equal amounts of an asset’s cost to
depreciation during its useful life.
266.
___________________ is the process of allocating the cost of plant assets to the income
statement over their expected useful lives.
267.
A _____________ account is an account linked with another account, having an opposite
normal balance, and reported as a subtraction from that other account’s balance.
268.
_____________ expenses are those costs that are incurred in a period but are both unpaid
and unrecorded.
269.
An _______________________ is a listing of all of the accounts in the ledger with their
account balances
before
adjustments are made.
270.
An _______________________ is a listing of all of the accounts in the ledger with their
account balances
after
adjustments are made.
271.
The closing process resets ________, __________, and ________ account balances to zero at
the end of each accounting period.
272.
The ___________________ account is a temporary account used only in the closing
process.
273.
Revenues, expenses, dividends, and Income Summary are called _________________
accounts because they are closed at the end of each accounting period.
274.
_______________ are long-term resources used to produce or sell products and services;
they generally lack physical form and their benefits are highly uncertain.
275.
A current ratio of 2.1 suggests that a company has ____________ current assets to cover
current liabilities.