Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
Chapter 4
Completing the Accounting Cycle
QUESTIONS
1. The four-step closing entry process is: (i) close the revenue (and gain) accounts to
the Income Summary account, (ii) close the expense (and loss) accounts to the
2. Closing entries affect temporary accounts: revenues, expenses, withdrawals, and
income summary. Specifically, closing entries at the end of an accounting period
3. (i) Closing entries prepare the temporary accounts—revenue and expense (and gain
4. The Income Summary account is used to summarize the period’s revenues and
expenses. As a result, it temporarily has a balance equal to the net income (or net
5. Yes, an error would have occurred because a post-closing trial balance should only
6. A work sheet can be used to collect and organize data for preparing (i) adjusting
7. The adjustments in the Adjustments columns of a work sheet are identified by
letters to link the debits with the credits to ensure that the entries are complete and
8. A company’s operating cycle is the normal time between paying cash for
9. Assets on a typical classified balance sheet include current assets and noncurrent
assets—where noncurrent assets usually include long-term investments, plant
10. Unearned revenue is reported as a liability—usually a current liability.
12.A Reversing entries simplify subsequent entries for accrued expenses and accrued
13.A The following reversing entry could be made as of the first day of the next
accounting period, after the post-closing trial balance is completed and financial
14. The five main categories of noncurrent assets on Apple’s balance sheet are: Long–
15. Samsung’s current assets are: Cash and cash equivalents; Short-term financial
16. Google has eight current liability accounts: Accounts payable; Short-term debt;
17. The closing entry likely recorded on December 31, 2015, to transfer the company’s
net income to its Retained Earnings account would have been (in millions of Korean
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
QUICK STUDIES
Quick Study 4-1 (5 minutes)
Quick Study 4-2 (5 minutes)
Quick Study 4-3 (10 minutes)
Computation of B. Warton, Capital for the December 31 year-end balance
sheet:
202
Quick Study 4-4 (20 minutes)
CLAUDELL COMPANY
Work Sheet
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance Sheet
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Quick Study 4-5 (10 minutes)
2. “c”; Permanent accounts report on activities related to one or more
Quick Study 4-6 (15 minutes)
Dec. 31 Services Revenue ………………………………….. 13,000
Income Summary ……………………………. 13,000
Close the revenue account.
Quick Study 4-7 (5 minutes)
Quick Study 4-8 (5 minutes)
Quick Study 4-9 (10 minutes)
1. B
Quick Study 4-10 (10 minutes)
a. The closing process is identical under U.S. GAAP and IFRS.
205
Quick Study 4-11 (5 minutes)
Quick Study 4-12A (10 minutes)
a.
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
206
EXERCISES
Exercise 4-1 (15 minutes)
Exercise 4-2 (20 minutes)
Planta Company
Work Sheet
Adjusted
Trial Balance
Income
Statement
Balance Sheet
& Statement of
Owner’s Equity
No.
Account
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
101
Cash………………………………..
7,000
7,000
106
27,200
153
42,000
32,000
4,200
189,800
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
208
Exercise 4-3 (20 minutes)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Insurance Expense—Office Equipment ……………… 332
209
Exercise 4-4 (25 minutes)
WESTCOTT COMPANY
December 31, 2017
Unadjusted
Trial Balance
Dr. Cr.
Adjustments
Dr. Cr.
Adjusted
Trial Balance
Dr. Cr.
Cash …………………………………………….
21
21
Accounts receivable …………………….
12
12
18
Equipment …………………………..……….
39
39
Accumulated depreciation–Equip
18
Accounts payable …………………………
Salaries payable …………………………..
Unearned revenue ………………………..
W. Westcott, Capital ……………………..
42
Revenue ………………………………………
87
Salaries expense ………………………….
18
24
Insurance expense ……………………….
15
Supplies expense …………………………
210
Exercise 4-5 (10 minutes)
1. Income Summary balance after closing revenues and expenses:
2. K. Capri, Capital balance after all closing entries:
211
Exercise 4-6 (25 minutes)
1.
Work Sheet—partial
Account Title
Debit
Credit
Rent earned ……………………………………. $120,000
2. Closing entries
(1) Rent Earned ………………………………………….. 120,000
212
Exercise 4-7 Part 1 (30 minutes)
DYLAN DELIVERY COMPANY
Work Sheet
For Year Ended December 31, 2017
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance Sheet
and Statement of
Owner’s Equtiy
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash …………………………………………..
16,000
16,000
16,000
Accounts receivable ………………….
34,000
34,000
34,000
Office supplies …………………………..
3,000
Trucks ………………………………………..
Accum. Depreciation—Trucks …..
80,000
Land …………………………………………..
Interest payable …………………………
(b)
1,000
Long-term notes payable …………..
S. Dylan, Capital …………………………
S. Dylan, Withdrawals ………………..
34,000
34,000
34,000
Delivery fees earned ………………….
Depreciation expense—Trucks …
40,000
80,000
Salaries expense ……………………….
110,000
Office supplies expense …………….
15,000
3,000
18,000
Interest expense ………………………..
(b)
1,000
Repairs expense—Trucks …………
Totals …………………………………………
224,000
213
2. Closing entries
Delivery Fees Earned …………………………….. 263,000
Income Summary ……………………………. 263,000
214
Exercise 4-8 (35 minutes)
Closing entries
(1) Services Revenue ………………………………….. 401 76,000
Income Summary ……………………………. 901 76,000
Close the revenue account.
(2) Income Summary ………………………………….. 901 47,800
Depreciation Expense …………………….. 603 15,000
Salaries Expense ……………………………. 622 20,000
215
1.
2017
Dec. 31 Services Revenue ………………………………….. 404 44,000
Income Summary ……………………………. 901 44,000
Close the revenue account.
2.
CRUZ COMPANY
Post-Closing Trial Balance
December 31, 2017
Debit Credit
Cash ………………………………………………………. $19,000
216
Exercise 4-10 (40 minutes)
Salon Marketing Company
Work Sheet
Adjusted
Trial Balance
Closing Entry
Information
Post-Closing
Trial Balance
No.
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
101
Cash …………………………..
9,200
9,200
106
Accounts receivable ……
25,000
25,000
153
Equipment ………………….
42,000
42,000
17,500
17,500
31,000
31,000
201
Accounts payable ……….
15,000
15,000
209
Salaries payable ………….
233
Unearned fees …………….
301
E. Salon, Capital ………….
68,500
15,400
13,800
66,900
302
E. Salon, Withdrawals ….
15,400
401
Marketing fees earned …
80,000
80,000
12,000
12,000
622
Salaries expense …………
32,500
32,500
640
Rent expense ………………
13,000
13,000
677
Miscellaneous expense .
217
Exercise 4-11 (20 minutes)
WILSON TRUCKING COMPANY
Income Statement
For Year Ended December 31, 2017
Trucking fees earned ………………………………………… $130,000
Expenses
WILSON TRUCKING COMPANY
Statement of Owner’s Equity
For Year Ended December 31, 2017
K. Wilson, Capital, December 31, 2016 ………………. $175,000
218
Exercise 4-12 (20 minutes)
WILSON TRUCKING COMPANY
Balance Sheet
December 31, 2017
Assets
Current assets
Cash ………………………………………………………. $ 8,000
Accounts receivable ………………………………. 17,500
*From Exercise 4-11
* K. Wilson Capital is computed as: