CHAPTER 4 The Accounting Cycle
4–61
Prob. 4–2B (Continued)
The Gorman Group
Balance Sheet
October 31, 20Y9
Assets
Current assets:
Cash
$ 11,000
Accounts receivable
28,150
Supplies
6,350
Prepaid insurance
9,500
Total current assets
$ 55,000
Property, plant, and equipment:
Land
$ 75,000
Buildings
$ 250,000
Accumulated depreciation—buildings
(117,200)
Book value—buildings
132,800
Equipment
$ 240,000
Accumulated depreciation—equipment
(151,700)
Book value—equipment
88,300
Total property, plant, and equipment
296,100
Total assets
$351,100
Liabilities
Current liabilities:
Accounts payable
$ 33,300
Salaries payable
3,300
Unearned rent
1,500
Total liabilities
$ 38,100
Stockholders’ Equity
Common stock
$ 25,000
Retained earnings
288,000
Total stockholders’ equity
313,000
Total liabilities and stockholders’ equity
$351,100
CHAPTER 4 The Accounting Cycle
4–62
Prob. 4–2B (Concluded)
2.
20Y9
Closing Entries
Oct.
Service Fees
468,000
Rent Revenue
5,000
Salaries Expense
291,000
Depreciation Expense—Equipment
17,500
Rent Expense
15,500
Supplies Expense
9,000
Utilities Expense
8,500
Depreciation Expense—Buildings
6,600
Repairs Expense
3,450
Insurance Expense
3,000
Miscellaneous Expense
5,450
Retained Earnings
113,000
Retained Earnings
20,000
Dividends
20,000
CHAPTER 4 The Accounting Cycle
Prob. 4–3B
1., 3., and 6.
Cash
Aug.
31
Bal.
3,800
Laundry Supplies
Aug.
31
Bal.
9,000
Aug. 31
Adj.
7,000
31
Adj. Bal.
2,000
Prepaid Insurance
Aug.
31
Bal.
6,000
Aug. 31
Adj.
5,300
31
Adj. Bal.
700
Aug.
31
Bal.
180,800
Aug. 31
Bal.
Adj.
Adj. Bal.
Aug. 31
Bal.
7,800
Aug. 31
Adj.
2,200
Aug. 31
Bal.
Aug. 31 Clos. 2,400
Aug. 31
Bal.
Clos.
Bal.
Dividends
Aug. 31 Bal. 2,400
Aug. 31
Clos.
2,400
CHAPTER 4 The Accounting Cycle
4–64
Prob. 4–3B (Continued)
Laundry Revenue
Aug.
31
Clos.
248,000
Aug. 31
Bal.
248,000
Wages Expense
Aug.
31
Bal.
135,800
Aug. 31
Clos.
138,000
31
Adj.
2,200
31
Adj. Bal.
138,000
Rent Expense
Aug.
31
Bal.
43,200
Aug. 31
Clos.
43,200
Utilities Expense
Aug.
31
Bal.
16,000
Aug. 31
Clos.
16,000
Depreciation Expense
Aug.
31
Adj.
8,150
Aug. 31
Clos.
8,150
Laundry Supplies Expense
Aug.
31
Adj.
7,000
Aug. 31
Clos.
7,000
Insurance Expense
Aug.
31
Adj.
5,300
Aug. 31
Clos.
5,300
Miscellaneous Expense
Aug.
31
Bal.
3,000
Aug. 31
Clos.
3,000
CHAPTER 4 The Accounting Cycle
4–65
Prob. 4–3B (Continued)
2. Optional (Appendix)
La Mesa Laundry
End-of-Period Spreadsheet (Work Sheet)
For the Year Ended August 31, 20Y5
Unadjusted
Trial Balance
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
Adjustments
Account Title
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Cash
3,800
3,800
3,800
Laundry Supplies
9,000
(c) 7,000
2,000
2,000
Prepaid Insurance
6,000
(d) 5,300
700
700
Laundry Equipment
180,800
180,800
180,800
Accum. Depreciation
49,200
(b) 8,150
57,350
57,350
Accounts Payable
7,800
7,800
7,800
Wages Payable
(a) 2,200
2,200
2,200
Common Stock
15,000
15,000
15,000
Retained Earnings
80,000
80,000
80,000
Dividends
2,400
2,400
2,400
Laundry Revenue
248,000
248,000
248,000
Wages Expense
135,800
(a) 2,200
138,000
138,000
Rent Expense
43,200
43,200
43,200
Utilities Expense
16,000
16,000
16,000
Depreciation Expense
(b) 8,150
8,150
8,150
Laundry Supplies Exp.
(c) 7,000
7,000
7,000
Insurance Expense
(d) 5,300
5,300
5,300
Miscellaneous
Expense
3,000
3,000
3,000
400,000
400,000
22,650
22,650
410,350
410,350
220,650
248,000
189,700
162,350
Net income
27,350
27,350
248,000
248,000
189,700
189,700
CHAPTER 4 The Accounting Cycle
4–66
Prob. 4–3B (Continued)
3.
Adjusting Entries
20Y5
Aug.
31
Wages Expense
2,200
Wages Payable
2,200
Accrued wages.
31
Depreciation Expense
8,150
Accumulated Depreciation
8,150
Equipment depreciation.
31
Laundry Supplies Expense
7,000
Laundry Supplies
7,000
Supplies used ($9,000 – $2,000).
31
Insurance Expense
5,300
Prepaid Insurance
5,300
Insurance expired.
4.
La Mesa Laundry
Adjusted Trial Balance
August 31, 20Y5
Debit
Balances
Credit
Balances
Cash
3,800
Laundry Supplies
2,000
Prepaid Insurance
700
Laundry Equipment
180,800
Accumulated Depreciation
57,350
Accounts Payable
7,800
Wages Payable
2,200
Common Stock
15,000
Retained Earnings
80,000
Dividends
2,400
Laundry Revenue
248,000
Wages Expense
138,000
Rent Expense
43,200
Utilities Expense
16,000
Depreciation Expense
8,150
Laundry Supplies Expense
7,000
Insurance Expense
5,300
Miscellaneous Expense
3,000
410,350
410,350
CHAPTER 4 The Accounting Cycle
4–67
Prob. 4–3B (Continued)
5.
La Mesa Laundry
Income Statement
For the Year Ended August 31, 20Y5
Laundry revenue
$ 248,000
Expenses:
Wages expense
$138,000
Rent expense
43,200
Utilities expense
16,000
Depreciation expense
8,150
Laundry supplies expense
7,000
Insurance expense
5,300
Miscellaneous expense
3,000
Total expenses
(220,650)
Net income
$ 27,350
La Mesa Laundry
Statement of Stockholders’ Equity
For the Year Ended August 31, 20Y5
Common
Stock
Retained
Earnings
Total
Balances, September 1, 20Y4
$12,000
$ 80,000
$ 92,000
Issued common stock
3,000
3,000
Net income
27,350
27,350
Dividends
(2,400)
(2,400)
Balances, August 31, 20Y5
$15,000
$104,950
$ 119,950
CHAPTER 4 The Accounting Cycle
4–68
Prob. 4–3B (Continued)
La Mesa Laundry
Balance Sheet
August 31, 20Y5
Assets
Current assets:
Cash
$ 3,800
Laundry supplies
2,000
Prepaid insurance
700
Total current assets
$ 6,500
Property, plant, and equipment:
Laundry equipment
$180,800
Accumulated depreciation
(57,350)
Total property, plant, and equipment
123,450
Total assets
$129,950
Liabilities
Current liabilities:
Accounts payable
$ 7,800
Wages payable
2,200
Total liabilities
$ 10,000
Stockholders’ Equity
Common stock
$ 15,000
Retained earnings
104,950
Total stockholders’ equity
119,950
Total liabilities and stockholders’ equity
$129,950
CHAPTER 4 The Accounting Cycle
4–69
Prob. 4–3B (Concluded)
6.
Closing Entries
20Y5
Aug.
31
Laundry Revenue
248,000
Wages Expense
138,000
Rent Expense
43,200
Utilities Expense
16,000
Depreciation Expense
8,150
Laundry Supplies Expense
7,000
Insurance Expense
5,300
Miscellaneous Expense
3,000
Retained Earnings
27,350
31
Retained Earnings
2,400
Dividends
2,400
7.
La Mesa Laundry
Post-Closing Trial Balance
August 31, 20Y5
Debit
Balances
Credit
Balances
Cash
3,800
Laundry Supplies
2,000
Prepaid Insurance
700
Laundry Equipment
180,800
Accumulated Depreciation
57,350
Accounts Payable
7,800
Wages Payable
2,200
Common Stock
15,000
Retained Earnings
104,950
187,300
187,300
CHAPTER 4 The Accounting Cycle
Prob. 4–4B
1., 3., and 6.
Account:
Cash
Account No.
11
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
13,100
Account:
Supplies
Account No.
13
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
8,000
31
Adjusting
26
5,150
2,850
Account:
Prepaid Insurance
Account No.
14
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
7,500
31
Adjusting
26
3,150
4,350
Account:
Equipment
Account No.
16
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
113,000
Account:
Accumulated Depreciation—Equipment
Account No.
17
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
12,000
31
Adjusting
26
5,250
17,250
Account:
Trucks
Account No.
18
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
Jan.
31
Balance
90,000
CHAPTER 4 The Accounting Cycle
Prob. 4–4B (Continued)
Account:
Accumulated Depreciation—Trucks
Account No.
19
Post.
Ref.
Balance
Date
Item
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
27,100
31
Adjusting
26
4,000
31,100
Account:
Accounts Payable
Account No.
21
Ref.
Date
Item
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
Account:
Wages Payable
Account No.
22
Ref.
Balance
Date
Item
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Adjusting
Account:
Common Stock
Account No.
31
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
30,000
Account:
Retained Earnings
Account No.
32
Item
Ref.
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
96,400
31
Closing
31
Closing
27
3,000
Account:
Account No.
33
Post.
Ref.
Balance
Date
Item
Debit
Credit
Debit
Credit
CHAPTER 4 The Accounting Cycle
Prob. 4–4B (Continued)
Account:
Service Revenue
Account No.
41
Post.
Ref.
Balance
Date
Item
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
155,000
31
Closing
27
155,000
—
—
Item
Ref.
Debit
Credit
Balance
Debit
Credit
20Y2
Jan.
31
Balance
31
Adjusting
31
Closing
—
Account:
Rent Expense
Account No.
52
Post.
Ref.
Balance
Date
Item
Debit
Credit
Credit
20Y2
Jan.
31
Balance
✓
31
Closing
27
—
—
Ref.
Balance
Date
Item
Debit
Credit
Credit
20Y2
Jan.
31
Balance
✓
31
Closing
27
—
—
Account:
Depreciation Expense—Equipment
Account No.
54
Ref.
Balance
Date
Item
Debit
Credit
Credit
20Y2
Jan.
31
Adjusting
31
Closing
—
—
CHAPTER 4 The Accounting Cycle
4–73
Prob. 4–4B (Continued)
Account:
Supplies Expense
Account No.
55
Post.
Ref.
Balance
Date
Item
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Adjusting
26
5,150
5,150
31
Closing
27
5,150
—
—
Account:
Depreciation Expense—Trucks
Account No.
56
Post.
Ref.
Balance
Date
Item
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Adjusting
26
4,000
4,000
31
Closing
27
4,000
—
—
Account:
Insurance Expense
Account No.
57
Post.
Ref.
Balance
Date
Item
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Adjusting
26
3,150
3,150
31
Closing
27
3,150
—
—
Account:
Miscellaneous Expense
Account No.
59
Post.
Ref.
Balance
Date
Item
Debit
Credit
Debit
Credit
20Y2
Jan.
31
Balance
✓
5,450
31
Closing
27
5,450
—
—
CHAPTER 4 The Accounting Cycle
4–74
Prob. 4–4B (Continued)
2. Optional (Appendix)
Recessive Interiors
End-of-Period Spreadsheet (Work Sheet)
For the Year Ended January 31, 20Y2
Account Title
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Cash
13,100
13,100
13,100
Supplies
8,000
(a) 5,150
2,850
2,850
Prepaid Insurance
7,500
(b) 3,150
4,350
4,350
Equipment
113,000
113,000
113,000
Accum. Depr.—Equipment
12,000
(c) 5,250
17,250
17,250
Trucks
90,000
90,000
90,000
Accum. Depr.—Trucks
27,100
(d) 4,000
31,100
31,100
Accounts Payable
4,500
4,500
4,500
Wages Payable
(e) 900
900
900
Common Stock
30,000
30,000
30,000
Retained Earnings
96,400
96,400
96,400
Dividends
3,000
3,000
3,000
Service Revenue
155,000
155,000
155,000
Wages Expense
72,000
(e) 900
72,900
72,900
Rent Expense
7,600
7,600
7,600
Truck Expense
5,350
5,350
5,350
Depr. Exp.—Equipment
(c) 5,250
5,250
5,250
Supplies Expense
(a) 5,150
5,150
5,150
Depr. Exp.—Trucks
(d) 4,000
4,000
4,000
Insurance Expense
(b) 3,150
3,150
3,150
Miscellaneous Expense
5,450
5,450
5,450
325,000
325,000
18,450
18,450
335,150
335,150
108,850
155,000
226,300
180,150
Net income
46,150
46,150
155,000
155,000
226,300
226,300
CHAPTER 4 The Accounting Cycle
4–75
Prob. 4–4B (Continued)
3. JOURNAL Page_______26_
Date
Post.
Ref.
Debit
Credit
20Y2
Adjusting Entries
Jan.
31
Supplies Expense
55
5,150
Supplies
13
5,150
Supplies used ($8,000 – $2,850).
31
Insurance Expense
57
3,150
Prepaid Insurance
14
3,150
Insurance expired.
31
Depreciation Expense—Equipment
54
5,250
Accumulated Depr.—Equipment
17
5,250
Equipment depreciation.
31
Depreciation Expense—Trucks
56
4,000
Accumulated Depr.—Trucks
19
4,000
Truck depreciation.
31
Wages Expense
51
900
Wages Payable
22
900
Accrued wages.
CHAPTER 4 The Accounting Cycle
4–76
Prob. 4–4B (Continued)
4.
Recessive Interiors
Adjusted Trial Balance
January 31, 20Y2
Account
Debit
Credit
No.
Balances
Balances
Cash
11
13,100
Supplies
13
2,850
Prepaid Insurance
14
4,350
Equipment
16
113,000
Accumulated Depreciation—Equipment
17
17,250
Trucks
18
90,000
Accumulated Depreciation—Trucks
19
31,100
Accounts Payable
21
4,500
Wages Payable
22
900
Common Stock
31
30,000
Retained Earnings
32
96,400
Dividends
33
3,000
Service Revenue
41
155,000
Wages Expense
51
72,900
Rent Expense
52
7,600
Truck Expense
53
5,350
Depreciation Expense—Equipment
54
5,250
Supplies Expense
55
5,150
Depreciation Expense—Trucks
56
4,000
Insurance Expense
57
3,150
Miscellaneous Expense
59
5,450
335,150
335,150
CHAPTER 4 The Accounting Cycle
4–77
Prob. 4–4B (Continued)
5.
Recessive Interiors
Income Statement
For the Year Ended January 31, 20Y2
Service revenue
$ 155,000
Expenses:
Wages expense
$72,900
Rent expense
7,600
Truck expense
5,350
Depreciation expense—equipment
5,250
Supplies expense
5,150
Depreciation expense—trucks
4,000
Insurance expense
3,150
Miscellaneous expense
5,450
Total expenses
(108,850)
Net income
$ 46,150
Recessive Interiors
Statement of Stockholders’ Equity
For the Year Ended January 31, 20Y2
Common
Stock
Retained
Earnings
Total
Balances, February 1, 20Y1
$22,500
$ 96,400
$118,900
Issued common stock
7,500
7,500
Net income
46,150
46,150
Dividends
(3,000)
(3,000)
Balances, January 31, 20Y2
$30,000
$139,550
$169,550
CHAPTER 4 The Accounting Cycle
4–78
Prob. 4–4B (Continued)
Recessive Interiors
Balance Sheet
January 31, 20Y2
Assets
Current assets:
Cash
$ 13,100
Supplies
2,850
Prepaid insurance
4,350
Total current assets
$ 20,300
Property, plant, and equipment:
Equipment
$113,000
Accumulated depreciation—equipment
(17,250)
Book value—equipment
$ 95,750
Trucks
$ 90,000
Accumulated depreciation—trucks
(31,100)
Book value—trucks
58,900
Total property, plant, and equipment
154,650
Total assets
$174,950
Liabilities
Current liabilities:
Accounts payable
$ 4,500
Wages payable
900
Total liabilities
$ 5,400
Stockholders’ Equity
Common stock
$ 30,000
Retained earnings
139,550
Total stockholders’ equity
169,550
Total liabilities and stockholders’ equity
$174,950
CHAPTER 4 The Accounting Cycle
4–79
Prob. 4–4B (Concluded)
6. JOURNAL Page 27
Date
Post.
Ref.
Debit
Credit
20Y2
Closing Entries
Jan.
31
Service Revenue
41
155,000
Wages Expense
51
72,900
Rent Expense
52
7,600
Truck Expense
53
5,350
Depreciation Expense—Equipment
54
5,250
Supplies Expense
55
5,150
Depreciation Expense—Trucks
56
4,000
Insurance Expense
57
3,150
Miscellaneous Expense
59
5,450
Retained Earnings
32
46,150
31
Retained Earnings
32
3,000
Dividends
33
3,000
7.
Recessive Interiors
Post-Closing Trial Balance
January 31, 20Y2
Account
No.
Debit
Balances
Credit
Balances
Cash
11
13,100
Supplies
13
2,850
Prepaid Insurance
14
4,350
Equipment
16
113,000
Accumulated Depreciation—Equipment
17
17,250
Trucks
18
90,000
Accumulated Depreciation—Trucks
19
31,100
Accounts Payable
21
4,500
Wages Payable
22
900
Common Stock
31
30,000
Retained Earnings
32
139,550
223,300
223,300
CHAPTER 4 The Accounting Cycle
4–80
Prob. 4–5B
1. and 2.
JOURNAL Page 1_
Date
Post.
Ref.
Debit
Credit
20Y6
Apr.
1
Cash
11
20,000
Accounts Receivable
12
14,700
Supplies
14
3,300
Office Equipment
18
12,000
Common Stock
31
50,000
1
Prepaid Rent
15
6,000
Cash
11
6,000
2
Prepaid Insurance
16
4,200
Cash
11
4,200
4
Cash
11
9,400
Unearned Fees
23
9,400
5
Office Equipment
18
8,000
Accounts Payable
21
8,000
6
Cash
11
11,700
Accounts Receivable
12
11,700
10
Miscellaneous Expense
59
350
Cash
11
350
12
Accounts Payable
21
6,400
Cash
11
6,400
12
Accounts Receivable
12
21,900
Fees Earned
41
21,900
14
Salary Expense
51
1,650
Cash
11
1,650