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CHAPTER 4 Completing the Accounting Cycle
Comp. Prob. 1 (Continued)
Account No. 54
Post.
Item Ref. Debit Credit Debit Credit
2016
Account No. 55
Post.
Item Ref. Debit Credit Debit Credit
2016
Account No. 59
Post.
Item Ref. Debit Credit Debit Credit
2016
May 9 5 225 225
Balance
Date
Account: Miscellaneous Expense
Balance
Date
Account: Depreciation Expense
Balance
Date
Account: Insurance Expense
CHAPTER 4 Completing the Accounting Cycle
Comp. Prob. 1 (Continued)
3.
Debit Credit
Balances Balances
Cash 44,195
Accounts Receivable 8,080
Supplies 2,085
Accounts Payable 895
Salaries Payable 0
Unearned Fees 7,000
Unadjusted Trial Balance
May 31, 2016
KELLY CONSULTING
5. Optional (Appendix)
Account Title Debit Credit Debit Credit Debit Credit Debit Credit
Cash 44,195 44,195 44,195
Accounts Receivable 8,080 8,080 8,080
Unearned Fees 7,000 (f) 3,790 3,210 3,210
Kelly Pitney, Capital 42,300 42,300 42,300
Kelly Pitney, Drawing 10,500 10,500 10,500
Fees Earned 36,210 (f) 3,790 40,000 40,000
Salary Expense 1,380 (d) 325 1,705 1,705
KELLY CONSULTING
End-of-Period Spreadsheet (Work Sheet)
For the Month Ended May 31, 2016
BalanceUnadjusted Adjusted Income
SheetTrial Balance
Debit Credit
Trial Balance StatementAdjustments
6. Page 7
Post.
Ref. Debit Credit
2016
May 31 Insurance Expense 55 275
Prepaid Insurance 16 275
Insurance expired.
31 Supplies Expense 53 1,370
Supplies 14 1,370
Supplies used ($2,085 – $715).
Date
Adjusting Entries
JOURNAL
7.
Debit Credit
Balances Balances
Cash 44,195
Accounts Receivable 8,080
Accumulated Depreciation 660
Accounts Payable 895
Salaries Payable 325
Unearned Fees 3,210
Kelly Pitney, Capital 42,300
Kelly Pitney, Drawing 10,500
Fees Earned 40,000
Adjusted Trial Balance
May 31, 2016
KELLY CONSULTING
CHAPTER 4 Completing the Accounting Cycle
Comp. Prob. 1 (Continued)
8.
Fees earned $40,000
Expenses:
Salary expense $1,705
Rent expense 1,600
Kelly Pitney, capital, May 1, 2016 $42,300
KELLY CONSULTING
Statement of Owner’s Equity
For the Month Ended May 31, 2016
KELLY CONSULTING
Income Statement
For the Month Ended May 31, 2016
CHAPTER 4 Completing the Accounting Cycle
Comp. Prob. 1 (Continued)
Current assets: Current liabilities:
Cash $44,195 Accounts payable $895
Accounts receivable 8,080 Salaries payable 325
Supplies 715 Unearned fees 3,210
Prepaid rent 1,600 Total liabilities $4,430
KELLY CONSULTING
Balance Sheet
May 31, 2016
Assets Liabilities
9. Page 8
Post.
Ref. Debit Credit
2016
May 31 Fees Earned 41 40,000
Income Summary 33 40,000
31 Income Summary 33 6,575
Salary Expense 51 1,705
10.
Debit Credit
Balances Balances
Cash
44,195
Accounts Receivable 8,080
JOURNAL
May 31, 2016
Closing Entries
Date
KELLY CONSULTING
Post-Closing Trial Balance
CHAPTER 4 Completing the Accounting Cycle
CP 4–1
It is unacceptable to prepare financial statements in such a way that users of
the statements would be misled. The July 31, 2016, balance sheet of Picasso
Graphics could be misleading in two ways. First, the account receivable from
CASES & PROJECTS
CP 4–2
1. (a) With the decreasing cost of computers and related software, Main Street
Co. may find it desirable to computerize its financial reporting
(b) A computerized accounting system would allow for eliminating the end-of-
period spreadsheet, and thus, financial statements could be
(c) In designing a computerized financial reporting (accounting) system, it is
essential that proper accounting principles, concepts, and procedures be
followed. At a minimum, basic controls such as the use of the double-
entry accounting system should be included. For example, debits must
2. Supplies cannot have a credit balance, because the supplies account is an asset
CHAPTER 4 Completing the Accounting Cycle
1. A set of financial statements provides useful information concerning the
economic condition of a company. For example, the balance sheet describes
2. The following adjustments might be necessary before an accurate set of
financial statements could be prepared:
No supplies expense is shown. The supplies account should be adjusted for
the supplies used during the year.
No depreciation expense or accumulated depreciation is shown for the
building or equipment accounts. An adjusting entry should be prepared for
depreciation expense on each of these assets.
The following items should be relabeled for greater clarity:
Billings Due from Others—Accounts Receivable
Amounts Owed to Others—Accounts Payable
Investment in Business—Joan Whalen, Capital
Other Expenses—Miscellaneous Expense
CP 4–3 (Concluded)
3. In general, the decision to extend a loan is based on an assessment of the
profitability and riskiness of the loan. Although the financial statements
provide useful data for this purpose, other factors such as the following
CP 4–4
The purpose of this activity is to familiarize students with the information (assets,
