275
Problem 4-6BA (Concluded)
Part 4
Instructor note: Entries are shown without an account reference column because no posting is required.
2018
Jan. 4 Salaries Expense …………………………………… 1,200
Cash ………………………………………………. 1,200
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
276
SERIAL PROBLEM – SP 4
Serial Problem, Business Solutions (20 minutes) — Part 1
<Note: The general ledger is displayed at the end of Part 2>
Closing entries
2017
Dec. 31 Computer Services Revenue …………………….. 403 31,284
Income Summary ……………………………….. 901 31,284
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
277
Serial Problem, SP 4 (Continued)
Part 2
BUSINESS SOLUTIONS
Post-Closing Trial Balance
December 31, 2017
Debit Credit
Cash ………………………………………………………………………. $ 48,372
Accounts receivable ………………………………………………. 5,668
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
278
Serial Problem, SP 4 (Continued)
[Instructor Note: Ledger includes all entries from prior three months. The Working
Papers shorten the solution by showing account balances as of December 31.]
General Ledger
Cash
Acct. No. 101
Date
Explanation
PR
Credit
Balance
Oct.
1
45,000
2
3,300
41,700
5
2,220
39,480
8
1,420
38,060
42,860
42,055
1,728
40,327
41,727
40,852
3,600
37,252
Nov.
1
36,932
2
41,565
5
1,125
40,440
42,648
42,398
1,750
40,264
2,000
38,264
Dec.
2
1,025
37,239
3
36,739
4
40,689
39,939
41,439
47,064
50,064
49,872
1,500
48,372
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
279
Serial Problem, SP 4 (Continued)
Accounts Receivable
Acct. No. 106
Date
Explanation
PR
Credit
Oct.
6
Computer Supplies
Acct. No. 126
Date
Explanation
PR
Credit
Oct.
3
Nov.
5
Dec.
3,065
Date
Explanation
PR
Credit
Oct.
5
Dec.
Date
Explanation
PR
Credit
Oct.
2
Dec.
2,475
Date
Explanation
PR
Credit
Oct.
1
Date
Explanation
PR
Credit
Dec.
1,400
6,200
4,800
1,400
1,400
5,208
5,208
Nov.
8
5,668
2,208
8,668
3,950
3,000
5,668
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
280
Serial Problem, SP 4 (Continued)
Computer Equipment
Acct. No. 167
Date
Explanation
PR
Credit
Oct.
1
Accumulated Depreciation—Computer Equipment
Acct. No. 168
Date
Explanation
PR
Credit
Dec.
Date
Explanation
PR
Debit
Credit
Balance
Oct.
Dec.
Date
Explanation
PR
Debit
Credit
Balance
Dec.
Date
Explanation
PR
Debit
Credit
Balance
Dec.
Acct. No. 301
Date
Explanation
PR
Debit
Credit
Balance
Oct.
Dec.
Closing
Closing
Date
Explanation
PR
Debit
Credit
Balance
Nov.
Dec.
Closing
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
281
Serial Problem, SP 4 (Continued)
Computer Services Revenue
Acct. No. 403
Date
Explanation
PR
Credit
Oct.
6
4,800
Depreciation Expense—Office Equipment
Acct. No. 612
Date
Explanation
PR
Credit
Dec.
31
31
Closing
Acct. No. 613
Date
Explanation
PR
Credit
Dec.
31
31
Closing
1,250
Wages Expense
Acct. No. 623
Date
Explanation
PR
Credit
Oct.
31
Nov.
30
Dec.
10
31
31
Closing
3,875
Acct. No. 637
Date
Explanation
PR
Credit
Dec.
31
31
Closing
Acct. No. 640
Date
Explanation
PR
Credit
Dec.
31
31
Closing
2,475
12
1,400
6,200
28
5,208
Nov.
2
4,633
8
5,668
24
3,950
Dec.
20
5,625
31
Closing
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
282
Serial Problem, SP 4 (Concluded)
Computer Supplies Expense
Acct. No. 652
Date
Explanation
PR
Credit
Dec.
31
31
Closing
3,065
Acct. No. 655
Date
Explanation
PR
Debit
Credit
Balance
20
1,728
1,728
Dec.
1,025
2,753
31
Closing
2,753
Acct. No. 676
Date
Explanation
PR
Debit
Credit
Balance
Nov.
28
Dec.
29
31
Closing
Acct. No. 677
Date
Explanation
PR
Debit
Credit
Balance
Nov.
22
Dec.
31
Closing
Acct. No. 684
Date
Explanation
PR
Debit
Credit
Balance
17
Dec.
1,305
31
Closing
1,305
Acct. No. 901
Date
Explanation
PR
Debit
Credit
Balance
Dec.
31
Closing
31
Closing
31
Closing
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
283
Reporting in Action — BTN 4-1
1. The revenue items from its income statement must be identified, and
those would be credited to Income Summary as step 1 in the closing
2. The total expenses that would be debited to Income Summary as step 2
in the closing entry process must be computed. Apple’s total expenses
3. The balance of Income Summary before it is closed as of its fiscal year–
end September 26, 2015, equals the net income for Apple of $53,394 (in
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
Comparative Analysis — BTN 4-2
1. Apple’s current ratios: ($ in millions)
2. In both years, Google has the higher current ratio (4.67 vs 1.11 for the
current year; 4.69 vs. 1.08 in the prior year), suggesting a better ability
4. Google’s current ratio is above (better than) the industry average for
both years, and Apple’s is below (worse than) the industry average for
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
Ethics Challenge — BTN 4-3
1. There are several courses of action that Tamira could have taken. Two
possibilities follow:
a. She could have consulted with the president and told him that
finalized financial statements would not be ready by the time of the
2. Students may offer one of the above alternatives or another response
they may think of, given the situation. Try to generate a discussion of
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
286
Communicating in Practice — BTN 4-4
TO: _____________________
FROM: _____________________
DATE: ______________________
SUBJECT: CLARIFICATIONS—OBJECTIVE OF THE CLOSING PROCESS
[Following is a sample of what the memorandum’s contents might include.]
When we speak of “closing the books” or the closing process we are not
talking about ending or closing the business nor doing anything that reflects
this thinking in the financial statements. Let me use an analogy to explain the
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
287
Taking It to the Net — BTN 4-5
1. The Motley Fool states that a benchmark of 1.5 is generally regarded as
Teamwork in Action — BTN 4-6
[Note: Each team member will be working on a different component of the solution and will
ultimately combine information and verify the final check figures using the accounting equation.]
1. Accounts and adjusted balances to be extended to Balance Sheet columns
Trial Balance
Adjustments
Balance Sheet
Account Title
Debit
Credit
Debit
Credit
Debit
Credit
Cash …………………………..
$16,000
$16,000
(d) 800
(a) 2,200
$ 7,000
(b) 4,000
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
288
Teamwork in Action (Continued)
2. Adjusted revenue account balance
Trial Balance
Adjustments
Income
Statement
Title
Debit
Credit
Debit
Credit
Debit
Credit
Investigation Fees
Closing entry
Account Titles and Explanation
Debit
Credit
Investigation Fees Earned ……………………………………………
33,800
Income Summary ………………………………………….
33,800
3. Adjusted balances of expense accounts
Title
Trial Balance
Adjustments
Income
Statement
Debit
Credit
Debit
Credit
Debit
Credit
Rent Expense ………………..
15,000
15,000
Insurance Expense ………..
(a) 2,200
Depreciation Expense ……
(b) 4,000
Supplies Expense ………….
(c) 7,000
Closing entry
Account Titles and Explanation
Debit
Credit
Income Summary ……………………………………………………….
28,200
Rent Expense ………………………………………………..
15,000
Insurance Expense ………………………………………..
Depreciation Expense ……………………………………
Supplies Expense ………………………………………….
33,000
33,800
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
Teamwork in Action (Concluded)
4.
D. Noseworthy, Capital
Income Summary
(4)
6,000
34,000
(2)
28,200
33,800
(1)
(3)
33,600
Third and Fourth closing entries
Account Titles and Explanation
Debit
Credit
Income Summary ……………………………………………………….
5,600
D. Noseworthy, Capital ………………………………….
5,600
D. Noseworthy, Capital ………………………………………………..
6,000
D. Noseworthy, Withdrawals ………………………….
6,000
5. Proving the Accounting Equation
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
Entrepreneurial Decision — BTN 4-7
1. A classified balance sheet classifies liabilities into current and non–
current. The current liabilities are those that are due in the short-term,
2. To better understand the company’s operations, the entrepreneur must
make sure that all revenues earned in a particular accounting period are
3. Closing procedures will accomplish two objectives for the owner. First,
Hitting the Road — BTN 4-8
There is no formal solution to this field activity. The instructor may wish to
Global Decision — BTN 4-9
1. Current ratio (in millions KRW)
2. Analysis: Samsung’s current ratio improved (is better) for the current