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157. Employees of Artworld Co. have earned but have not been paid $3,500 in salaries for the last
week of the current calendar year.
(a) Prepare the necessary adjusting journal entry(ies) for Artworld at December 31 of the current
year.
(b) Assuming that Artworld makes reversing entries, prepare the necessary reversing entry.
Include the appropriate date for the reversing entry(ies).
158. The following information has been gathered for Stylish Co. to assist in preparing its year-
end adjusting entries at December 31:
(a) The company has earned $2,500 of rental revenue that has not yet been received or recorded.
(b) Stylish has recorded $3,200 of unearned service fees. At year-end, $1,500 of this amount has
been earned.
(c) Depreciation on equipment for the year is $7,800.
(d) Employees have earned but have not yet been paid $2,750 in salaries.
Identify which of the above accounting adjustment would be reversed assuming Stylish Co. uses
reversing entries.
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159. The unadjusted trial balance of Quick Delivery is entered on the partial work sheet below.
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 $1,000 of unused supplies still on hand.
(c) Depreciation on delivery vans, $24,000.
(d) Services paid in advance by customers of $10,000 have now been provided to customers.
Quick Delivery
Work Sheet
For the year ended December 31
Account Unadjusted Trial
Balance Adjustments Adjusted Trial
Balance Income
Statement Balance Sheet and
Statement of
Owner s Equity
Debit Credit Debit Credit Debit Credit Debit Credit Debit
Credit
Cash 70,000
Accounts Receivable 10,000
Supplies 3,000
Delivery Vans 120,000
Accum. Dept-. - Vans 48,000
Accounts payable 15,000
Unearned fees 20,000
Salaries payable
B. Rapid, Capital 55,000
B. Rapid, Withdrawals 50,000
Fees earned 320,000
Salary expense 177,000
Rent expense 28,000
Supplies expense
Depreciation expense
Totals 458 000 458,000
4-84
160. The following year-end adjusted trial balance is for Tom Janes Co. at the end of December
31. The credit balance in Tom Janes, Capital at the beginning of the year, January 1, was
$320,000. The owner, Tom Janes, invested an additional $300,000 during the current year. The
land held for future expansion was also purchased during the current year.
TORN JANES CO.
ADJUSTED TRIAL BALANCE
DECEMBER 31
Cash $ 90,000
Accounts receivable 18,000
Prepaid insurance 6,000
Office supplies 2,000
Investments in stocks 150,000
Land held for future expansion 300,000
Office equipment 18,000
Accumulated depreciation—Equipment $ 4,000
Building 350,000
Accumulated depreciation—Building 170,000
Land 250,000
Intangible assets — licensing agreement 50,000
Accounts payable 17,800
Salaries payable 8,500
Interest payable 7,900
Long-term note payable 224,000
Torn Janes, Capital 620,000
Tom Janes, Withdrawals 60,000
Service fees earned 470,800
Salaries expense 180,000
Insurance expense 12,000
Rent expense 25,000
Depreciation expense—Equipment 2,000
Depreciation expense—Building 10,000
Totals $1,523,000 $1,523,000
Required:
1. Prepare a classified year-end balance sheet. (Note: A $22,000 installment on the long-term note
payable is due within one year.)
2. Using the information presented:
(a) Calculate the current ratio. Comment on the ability of Tom Janes Co. to meets its short-term
debts.
(b) Calculate the debt ratio and comment on the financial position and risk analysis of Tom Janes
Co.
(c) Using the account balances to analyze the financial position of Tom Janes Co., why would the
owner need to invest an additional $300,000 in the business when the business is already profitable
and the owner had an existing capital balance of $320,000?
4-86
161. Excalibur frequently has accrued expenses at the end of its fiscal year that should be recorded
for proper financial statement presentation. Excalibur 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. Excalibur 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 Excalibur does not prepare reversing entries.
(c) Assuming that Excalibur prepares reversing entries, reverse the adjusting entry made on June
30.
(d) Assuming that Excalibur prepares reversing entries, payment of the salaries on July 4.
162. Epee Inc. frequently has accrued revenues at the end of its fiscal year that should be recorded
for proper financial statement presentation. Epee Inc.'s fiscal year ends on September 30 of the
current year. Epee Inc. has determined through an evaluation of invoices and services rendered
that $32,000 of services has been provided as of September 30, but not yet billed. The total
contract to be billed for services when completed will be $60,000. Record the following entries:
(a) Accrual of the revenues on September 30.
(b) Receipt of payment from customers on October 9 for the services rendered, assuming that Epee
does not prepare reversing entries.
(c) Assuming that Epee prepares reversing entries, reverse the adjusting entry made on September
30.
(d) Assuming that Epee prepares reversing entries, receipt of the payment for the total contract
amount on October 9.
4-88
163. Compute Dave 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
164. The unadjusted trial balance of Bade Cleaning Service is entered on the partial work sheet
below. Complete the work sheet using the following information:
(a) Salaries earned by employees that are unpaid and unrecorded, $4,000.
(b) An inventory of supplies showed $3,000 of unused supplies still on hand.
(c) Depreciation on automobiles, $30,000.
(d) Services paid in advance by customers of $12,000 have now been provided to customers.
(e) Advertising for November and December in the amount of $8,000 remains unpaid and
unrecorded.
Bade Cleaning Service
Work Sheet
For the year ended December 31
Account
Unadjusted Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement Balance Sheet and Statement of Owner’s Equity
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 15,000
Unearned fees 22,000
Salaries payable
B. Kleen, Capital 55,000
B. Kleen, Withdrawals 45,000
Fees earned 275,400
Salary expense 125,000
Rent expense 24,400
Advertising expense
Supplies expense
Depreciation expense ______ ______
Totals 422,400 422,400
4-91
165. The Adjusted Trial Balance of Bade Cleaning Service is entered on the partial work sheet
below. Complete the work sheet by extending the account balances into the appropriate financial
statement columns and by entering the amount of net income for the reporting period:
Bade Cleaning Service
Work Sheet
For the year ended December 31
Account
Unadjusted Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement Balance Sheet and Statement of Owner’s Equity
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 50,000 50,000
Accounts Receivable 10,000 10,000
Supplies 8,000 5,000 3,000
Automobiles 160,000 160,000
Accum. Depr. - Autos. 55,000 30,000 85,000
Accounts payable 15,000 8,000 23,000
Unearned fees 22,000 12,000 10,000
Salaries payable 4,000 4,000
B. Kleen, Capital 55,000 55,000
B. Kleen, Withdrawals 45,000 45,000
Fees earned 275,400 12,000 287,400
Salary expense 125,000 4,000 129,000
Rent expense 24,400 24,400
Advertising expense 8,000 8,000
Supplies expense 5,000 5,000
Depreciation expense ______ ______ 30,000 30,000
Totals 422,400 422,400 59,000 59,000 464,400 464,400
Net income
Totals
4-93
166. The following adjusted trial balance is for Clara Co. at year-end December 31. The credit
balance in Clara, Capital at the beginning of the year, January 1, was $320,000. The owner,
Sara Clara, invested an additional $100,000 during the current year. The land held for future
expansion was also purchased during the current year.
Clara Co.
Adjusted Trial Balance
December 31
Cash $ 60,000
Accounts receivable 22,000
Prepaid rent 7,000
Office supplies 3,000
Investments in stocks 120,000
Land held for future expansion 220,000
Office equipment 58,000
Accumulated depreciation–Equipment $ 38,000
Building 280,000
Accumulated depreciation–Building 200,000
Land 180,000
Patents 150,000
Accounts payable 36,800
Salaries payable 10,500
Interest payable 7,900
Long-term note payable 252,000
Sara Clara, Capital 420,000
Sara Clara, Withdrawals 60,000
Service fees earned 470,800
Salaries expense 195,000
Insurance expense 18,000
Rent expense 36,000
Depreciation expense–Equipment 12,000
Depreciation expense–Building 15,000
_________
Totals $1,436,000
$1,436,000
Required:
Prepare a classified balance sheet. (Note: A $21,000 installment on the long-term note payable is
due within one year.)
4-95
Fill in the Blank Questions
167. The closing process resets ________, __________, and ________ account balances to zero at
the end of each accounting period.
168. The ___________________ account is used only in the closing process.
169. Revenues, expenses, withdrawals, and Income Summary are called _________________
accounts because they are closed at the end of each accounting period.
170. Balance sheet accounts are called ____________________ accounts because they carry their
balances to the next accounting period, and are not closed as long as the company continues to
own the asset, owe the liability and have equity.
171. The ______________ refers to the steps in preparing financial statements for users.
172. Intangible assets are long-term resources used to produce or sell products and services; they
generally lack ______________ and their benefits are highly ____________.
173. The current portion of long-term debt is classified with the______________.
174. A current ratio of 2.1 suggests that a company has ____________ current assets to cover
current liabilities.
175. A ____________________ helps in preparing financial statements, is useful in preparing
interim statements, and is helpful in showing the effects of proposed transactions.
176. A company's post-closing trial balance has a debit total of $475,000 and a credit total of
$457,000. This indicates that __________________________.
177. Reversing entries are linked to ____________________ and _____________ that were
created by adjusting entries at the end of the prior accounting period.
