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Rent expense
14,400
Insurance expense
1,200
Office supplies expense
1,900
Depreciation expense–Office equipment
6,000
Totals
$51,600
$98,900
Net income
47,300
Totals
$98,900
$98,900
176)
The Income Statement columns of the work sheet prepared for Jolly Auto Service at current
year-end are shown below. In addition, B. Jolly, Capital had a credit balance of $235,000 and B.
Jolly, Withdrawals had a debit balance of $40,000 at year end. Prepare closing journal entries for
this company.
Income Statement
Dr.
Cr.
Service revenue
$130,200
Wages expense……………………………..
Wagalaries expense
$43,100
Rent expense
16,200
Insurance expense
1,800
Shop supplies expense
3,500
Depreciation expense–Shop equipment
7,000
Totals
$71,600
$130,20
0
Net income 102
58,600
103
Net income
58,600
Totals
$130,200
$130,20
0
177)
Presented below are the year-end balances at December 31 of Becca's Dry Cleaning Service. (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
B. Stanton, Capital
17,000
B. Stanton, Withdrawals
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.
Paradise Travel
Adjusted Trial Balance
December 31
Dr.
Cr.
Cash
$ 25,000
Accounts receivable
15,000
Office supplies
4,300
Office equipment
29,600
Accumulated depreciation–Office equipment
$5,000
Long-term notes payable
25,000
D. Chambers, Capital
30,260
D. Chambers, Withdrawals
1,000
Fees earned
75,000
Salaries expense
32,800
Rent expense
16,800
Depreciation expense–Office equipment
3,960
Advertising expense
4,000
Office supplies expense
2,800
Totals
$135,260
$135,260
178)
Paradise Travel's adjusted trial balance as of the end of its annual accounting period is shown
below:
(a) Prepare the necessary closing entries.
(b) Prepare a post-closing trial balance.
179)
Employees of Potteryworld 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 for Potteryworld at December 31 of the current year.
(b) Assuming that Potteryworld makes reversing entries, prepare the necessary reversing entry,
including the appropriate date.
180)
The following information has been gathered for Major Properties 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) Major had previously recorded $3,200 of unearned rental revenue. 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 Major Properties
Co. uses reversing entries.
181)
The unadjusted trial balance of Rapido 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.
107
182)
The following December 31 year-end adjusted trial balance is for Heath Wilmer Co.. The credit
balance in Heath Wilmer, Owner Capital at the beginning of the year, January 1, was $320,000.
The owner, Heath Wilmer, invested an additional $300,000 during the current year. The land held
for future expansion was also purchased during the current year.
H
EATH
W
ILMER
C
O.
A
DJUSTED
T
RIAL
B
ALANCE
D
ECEMBER 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
600,000
Accumulated depreciation–Building
170,000
Intangible assets–licensing agreement
50,000
Accounts payable
17,800
Salaries payable
16,400
Long-term note payable
224,000
Heath Wilmer, Capital
620,000
Heath Wilmer, Withdrawals
60,000
Service fees earned 108
470,800
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 Heath Wilmer Co. to meets its short-term
debts.
(b) Calculate the debt ratio and comment on the financial position and risk analysis of Heath Wilmer
Co.
(c) Using the account balances to analyze the financial position of Heath Wilmer 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?
183)
Mandalay Company 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.
184)
Tunica Company's fiscal year ends on September 30 of the current year. Tunica frequently has
accrued revenues at the end of its fiscal year that are recorded for proper financial statement
presentation. The company 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 Tunica
does not prepare reversing entries.
(c) Assuming that Tunica prepares reversing entries, reverse the adjusting entry made on September
30.
(d) Assuming that Tunica prepares reversing entries, receipt of the payment for the total contract
amount on October 9.
185)
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
186)
Compute Chase Company's current ratio using the following information:
Cash
$20,000
Accounts Payable
$8,000
Accounts Receivable
5,000
Salaries Payable
12,000
Prepaid Rent
7,000
Note Payable (due in 2 years)
150,000
Equipment
12,000
187)
The unadjusted trial balance of Barber Housekeeping Service is entered on the partial work sheet
below.
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.
188)
Complete the work sheet below for Barber Housekeeping Services by extending the account
balances from the adjusted trial balance columns into the appropriate financial statement columns and
by entering the amount of net income for the reporting period:
189)
The following adjusted trial balance is for Carla Co. at year-end December 31. The credit balance
in Carla West, Capital at the beginning of the year, January 1, was $320,000. The owner, Carla
West, invested an additional $100,000 during the current year. The land held for future expansion
was also purchased during the current year.
Carla 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 116
10,500
Salaries payable
10,500
Interest payable
7,900
Long-term note payable
252,000
C. West, Capital
420,000
C. West, 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 as of December 31. (Note: A $21,000 installment on the
long-term note payable is due within one year.)
SHORT ANSWER QUESTIONS
190)
The closing process resets ________, ________, and ________ account balances to zero at the end
of each accounting period.
191)
The ________ account is a temporary account used only in the closing process.
192)
Revenues, expenses, withdrawals, and Income Summary are called ________ accounts because
they are closed at the end of each accounting period.
193)
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.
194)
The ________ refers to the steps in preparing financial statements for users.
195)
are long-term resources used to produce or sell products and services; they generally
lack physical form and their benefits are highly uncertain.
196)
The current portion of long-term debt is classified in the ________ section of a classified balance
sheet.
197)
A current ratio of 2.1 suggests that a company has ________ current assets to cover current
liabilities.
198)
A ________ is an optional working paper that helps in preparing financial statements, is useful in
preparing interim statements, and is helpful in showing the effects of proposed transactions.
199)
A company's post-closing trial balance has a debit total of $475,000 and a credit total of $457,000.
This indicates that ________.
200)
Reversing entries are linked to ________ and ________ that were created by adjusting entries at
the end of the prior accounting period.
