Chapter 4 – Completing the Accounting Cycle
Fees Earned
31
Income Summary
31
Income Summary
31
Retained Earnings
LEARNING OBJECTIVES:
186. The following is the adjusted trial balance for Miller Company.
Miller Company
Adjusted Trial Balance
December 31
Cash
8,130
Accounts Receivable
3,300
Prepaid Expenses
2,750
Equipment
10,400
Accumulated Depreciation
2,200
Accounts Payable
2,700
Notes Payable
1,000
Common Stock
9,200
Retained Earnings
2,000
Dividends
4,870
Fees Earned
36,600
Wages Expense
12,450
Rent Expense
4,900
Utilities Expense
3,475
Depreciation Expense
2,150
Miscellaneous Expense
1,275
Totals
53,700
53,700
Prepare closing entries and the post-closing trial balance.
Chapter 4 – Completing the Accounting Cycle
Fees Earned
Income Summary
Income Summary
Retained Earnings
Accounts Receivable
Prepaid Expenses
Accumulated Depreciation
Accounts Payable
Common Stock
Retained Earnings
LEARNING OBJECTIVES:
187. The following are all the steps in the accounting cycle. List them in the order in which they should be done.
– Closing entries are journalized and posted to the ledger.
– An unadjusted trial balance is prepared.
– An optional end-of-period spreadsheet is prepared.
– A post-closing trial balance is prepared.
– Adjusting entries are journalized and posted to the ledger.
– Transactions are analyzed and recorded in the journal.
– Adjustment data are assembled and analyzed.
– Financial statements are prepared.
– An adjusted trial balance is prepared.
– Transactions are posted to the ledger.
Chapter 4 – Completing the Accounting Cycle
Transactions are analyzed and recorded in the journal.
Transactions are posted to the ledger.
Adjusting entries are journalized and posted to the ledger.
Financial statements are prepared.
Closing entries are journalized and posted to the ledger.
A post-closing trial balance is prepared.
LEARNING OBJECTIVES:
188. Kirk Enterprises offers rug cleaning services to business clients. Below is the trial balance for Kirk Enterprises,
which was prepared on the end-of-period spreadsheet for the year ended July 31.
Kirk Enterprises
End-of-Period Spreadsheet
For the Year Ended July 31
Trial Balance
Adjustments
Adjusted Trial
Balance
Debit
Credit
Debit
Credit
Debit
Credit
Cash
36,000
Prepaid Insurance
12,000
Fees Receivable
56,000
Supplies
12,000
Equipment
60,000
Accum. Depreciation
12,000
Unearned Revenue
20,000
Accounts Payable
32,000
Wages Payable
Common Stock
84,000
Dividends
4,000
Service Revenue
80,000
Advertising Expense
28,000
Wage Expense
20,000
Insurance Expense
Supplies Expense
Depreciation Expense
Totals
228,000
228,000
Chapter 4 – Completing the Accounting Cycle
REQUIRED: Enter the adjustment data in the work sheet for the transactions shown below and place the balances in the
Adjusted Trial Balance columns.
a) The equipment is estimated to last for 5 years with no salvage value. The asset will be depreciated evenly over its
useful life. Record one month’s depreciation.
b) Accrued wages, $2,000.
c) Unused supplies on hand, $8,000.
d) Of the unearned revenue, 75% has been earned.
e) Unexpired insurance remaining at the end of the month, $9,000.
Chapter 4 – Completing the Accounting Cycle
189. Kirk Enterprises offers rug cleaning services to business clients. Below is the adjustments data for the year ended
July 31. Using this information along with the spreadsheet below, record the adjusting entries in proper general journal
form.
Adjustments:
(a) The equipment is estimated to last for 5 years with no salvage value. The asset will be depreciated evenly over its
useful life. Record one month’s depreciation.
(b) Accrued wages, $2,000.
(c) Unused supplies on hand, $8,000.
(d) Of the unearned revenue, 75% has been earned.
(e) Unexpired insurance remaining at the end of the month, $9,000.
Kirk Enterprises
End-of-Period Spreadsheet
For the Year Ended July 31
Trial Balance
Adjustments
Adjusted Trial
Balance
Debit
Credit
Debit
Credit
Debit
Credit
Cash
36,000
Prepaid Insurance
12,000
Fees Receivable
56,000
Supplies
12,000
Equipment
60,000
Accumulated Depreciation
12,000
Unearned Revenue
20,000
Accounts Payable
32,000
Wages Payable
Common Stock
84,000
Dividends
4,000
Service Revenue
80,000
Advertising Expense
28,000
Wage Expense
20,000
Insurance Expense
Supplies Expense
Depreciation Expense
______
___
Totals
228,000
228,000
LEARNING OBJECTIVES:
Chapter 4 – Completing the Accounting Cycle
190. Alpha Company has current assets of $74,524, total assets of $203,310, total net income of $67,913, current
liabilities of $60,100, and total liabilities of $150,600.
What is Alpha Company’s working capital?
191. Alpha Company has current assets of $74,524, total assets of $203,310, total net income of $67,913, current
liabilities of $60,100, and total liabilities of $150,600.
What is Alpha Company’s current ratio?
Chapter 4 – Completing the Accounting Cycle
192. Calculate the current ratio for each business below. Which business has the best short-term solvency position given
your calculations?
Company
Current
Assets
Total
Assets
Current
Liabilities
Total
Liabilities
Net
Income
Current
Ratio
Alpha
Company
$74,524
$168,672
$60,100
$150,600
$94,958
Beta
Company
$207,536
$290,290
$152,600
$203,000
$207,536
Gamma
Company
$60,125
$66,929
$32,500
$52,700
$36,725
Delta
Company
$95,335
$182,520
$82,900
$135,200
$105,283
Assets
$60,100
1.24
Beta
Company
1.36
Gamma
Company
$32,500
1.85
Delta
Company
$82,900
1.15
Chapter 4 – Completing the Accounting Cycle
193. Complete the following end-of-period spreadsheet for Danilo Enterprises.
Danilo Enterprises
End-of-Period Spreadsheet
For the Year Ended December 31
Adjusted Trial
Balance
Income Statement
Balance Sheet
Account Title
Debit
Credit
Debit
Credit
Debit
Credit
Cash
14,500
Accounts
Receivable
7,500
Supplies
500
Equipment
20,500
Accumulated
Depr.—Equip.
15,000
Accounts Payable
9,500
Wages Payable
3,060
Common Stock
18,240
Dividends
1,000
Fees Earned
34,000
Wages Expense
18,000
Rent Expense
9,300
Depreciation
Expense
8,500
Totals
79,800
79,800
Net Income (Loss)
Chapter 4 – Completing the Accounting Cycle
Chapter 4 – Completing the Accounting Cycle
194. Explain how net income or loss is determined by using the end-of-period spreadsheets.
DIFFICULTY:
Bloom’s: Understanding
LEARNING OBJECTIVES:
195. If end-of-period spreadsheets are not considered part of the formal accounting records, then why are they used?
ANSWER:
DIFFICULTY:
Bloom’s: Remembering
LEARNING OBJECTIVES:
Match each journal entry that follows as one of the types of journal entries (a–c) below.
a.
Journal entries
b.
Adjusting journal entries
c.
Closing journal entries
DIFFICULTY:
Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES:
FNMN.WARD.17.04-05 – LO: 04–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
196. Cash 450
Fees Earned 450
197. Income Summary 650
Retained Earnings 650
Chapter 4 – Completing the Accounting Cycle
198. Utilities Expense 430
Cash 430
199. Wages Expense 870
Wages Payable 870
200. Unearned Revenue 985
Fees Earned 985
201. Income Summary 597
Rent Expense 200
Supplies Expense 180
Utilities Expense 110
Miscellaneous Exp. 107
202. Dividends 215
Cash 215
203. Accounts Receivable 325
Fees Earned 325
(Customer billed for services performed.)
204. Journalize the reversing entry on January 1 of the current year for the following adjusting journal entry from the prior
year:
Journal
Date
Description
Post Ref.
Debit
Credit
Dec. 31
Insurance Expense
2,500
Insurance Payable
2,500
Date
Jan. 1
Insurance Payable
Insurance Expense
Chapter 4 – Completing the Accounting Cycle
205. Zeta Company has 12 workers who each earn $15 per hour and generally work a 40–hour workweek, although at
times overtime work is required, for which workers are paid 1.5 times their regular hourly wage. Zeta pays wages in cash
on Friday of each week for work performed that week. Zeta’s Wages Expense ledger account for May is shown below.
Account: Wages Expense
Account Number 65
Balance
Date
Item
Post Ref.
Dr.
Cr.
Dr.
Cr.
May 5
32
7,200
7,200
May 12
33
9,360
16,560
May 19
35
7,200
23,760
May 26
37
8,010
31,770
May 31
Adjusting
38
4,320
36,090
May 31
Closing
38
36,090
–
–
During the period May 27 through June 2, Zeta’s workers worked a regular 40–hour week.
1. If Zeta Company uses reversing entries, journalize the entry made when payroll is paid in cash on June 2,
assuming that appropriate reversing entry(ies) have been made at the beginning of June. You may omit posting
references.
2. If Zeta Company does not use reversing entries, journalize the entry made when payroll is paid in cash on June 2.
You may omit posting references.
Jun. 1
Wages Payable
Post Ref.
Jun. 2
Wages Expense
Post Ref.
Jun. 2
Wages Payable
Wages Expense
Chapter 4 – Completing the Accounting Cycle