SOLUTION
Requirement 1
VOICE LINK
Worksheet
November 30, 2016
Account Names
Unadjusted Trial
Balance
Adjustments
Adjusted Trial
Balance
Balance Sheet
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 3,900
$ 3,900
$ 3,900
Accounts Receivable
3,700
a.
$
600
4,300
4,300
Prepaid Rent
$ 900
d.
700
700
500
e.
Equipment
300
600
c.
Common Stock
Dividends
2,400
Service Revenue
8,600
600
9,200
$ 9,200
.
Salaries Expense
Rent Expense
e.
500
500
500
Total
$ 51,600
$ 51,600
$
2,900
$ 2,900
$ 53,100
$ 53,100
$ 5,000
$ 9,200
$ 48,100
$ 43,900
Total
$ 9,200
$ 9,200
$ 48,100
$ 48,100
E4-18, cont.
Requirement 2
Net income for November was $4,200.
Note: Exercise E4-19 should be used only after completing Exercise E4-18.
E4-19 Preparing financial statements from the completed worksheet
Learning Objectives 1, 2
2. Ending Retained Earnings $1,800
Use your answer from Exercise E4-18 to prepare Voice Link’s financial statements.
Requirements
1. Complete the income statement for the month ended November 30, 2016.
2. Complete the statement of retained earnings for the month ended November 30, 2016. Assume
beginning Retained Earnings was $0.
3. Complete the classified balance sheet as of November 30, 2016. Use the report form.
SOLUTION
Requirement 1
VOICE LINK
Income Statement
Month Ended November 30, 2016
E4-19, cont.
Requirement 2
VOICE LINK
Statement of Retained Earnings
Month Ended November 30, 2016
Retained Earnings, November 1, 2016
Net income for the month
Dividends
Retained Earnings, November 30, 2016
Requirement 3
VOICE LINK
Balance Sheet
November 30, 2016
Assets
Current Assets:
Cash
$ 3,900
Accounts Receivable
4,300
Prepaid Rent
Office Supplies
3,400
Total Current Assets
Plant Assets:
Equipment
33,400
Less: Accumulated Depreciation—Equipment
Total Plant Assets
Total Assets
Current Liabilities:
Accounts Payable
Salaries Payable
Common Stock
Retained Earnings
1,800
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
E4-20 Preparing closing entries from an adjusted trial balance
Learning Objective 3
The adjusted trial balance of Smith Sign Company follows:
Requirements
1. Assume Smith Sign Company has a January 31 year-end. Journalize Smith’s closing entries at
January 31.
2. How much net income or net loss did Smith earn for the year ended January 31?
How can you tell?
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Jan. 31
Service Revenue
17,600
Income Summary
17,600
To close revenue.
31
Income Summary
Salaries Expense
3,800
Rent Expense
1,500
Depreciation Expense—Equipment
Supplies Expense
Utilities Expense
To close expenses.
31
Income Summary
11,000
Retained Earnings
11,000
To close Income Summary.
31
Retained Earnings
Dividends
1,000
To close dividends.
E4-21 Preparing closing entries from T-accounts
Learning Objective 3
Selected accounts for Kennedy Photography at December 31, 2016, follow:
Requirements
1. Journalize Kennedy Photography’s closing entries at December 31, 2016.
2. Determine Kennedy Photography’s ending Retained Earnings balance at December 31, 2016.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
43,000
Income Summary
43,000
31
Income Summary
Salaries Expense
32,900
Supplies Expense
3,200
Depreciation Expense—Furniture
1,700
Depreciation Expense—Building
6,900
31
Retained Earnings
Income Summary
1,700
31
Retained Earnings
23,000
Dividends
23,000
E4-21, cont.
Requirement 2
Retained Earnings
E4-22 Determining the effects of closing entries on the Retained Earnings account
Learning Objective 3
Allen Insurance Agency started the year with a beginning Retained Earnings balance of $24,500. During
the year, Allen earned $34,000 of Service Revenue and incurred $22,500 of various expenses. Dividends
of $16,000 from the business were paid to stockholders. After the closing entries are recorded and
posted, what will be the balance of Retained Earnings?
SOLUTION
Retained Earnings
E4-23 Preparing a worksheet and closing entries
Learning Objectives 2, 3
1. Net Income $16,350
(Requirement 1 only)
Cadence Elliot, CPA, had the following partial worksheet:
Requirements
1. Complete the worksheet.
2. Prepare the closing entries for Cadence Elliot, CPA.
SOLUTION
Requirement 1
CADENCE ELLIOT, CPA
Worksheet
December 31, 2016
Account Names
Unadjusted Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 45,500
$ 45,500
$ 45,500
Accounts Receivable
9,300
h.
$ 4,400
13,700
13,700
Office Supplies
$ 600
b.
Prepaid Rent
a.
Furniture
c.
Building
115,000
115,000
115,000
Acc. Dep.—Building
d.
Land
$ 5,200
f.
g.
Retained Earnings
Dividends
30,000
30,000
e., h.
d.
Total
$ 338,500
$ 15,250
$ 350,050
$ 86,450
$ 102,800
$ 263,600
Net Income
16,350
E4-23, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
102,800
Income Summary
102,800
To close revenue.
31
Income Summary
Rent Expense
27,700
Salaries Expense
36,000
Supplies Expense
Utilities Expense
19,000
Depreciation Expense—Furniture
Depreciation Expense—Building
Interest Expense
To close expenses.
31
Income Summary
Retained Earnings
16,350
To close Income Summary.
31
Retained Earnings
Dividends
30,000
To close dividends.
E4-24 Preparing closing entries from an adjusted trial balance; preparing a post-closing trial
balance; and calculating the current ratio
Learning Objectives 3, 4, 6
Matthew’s Bowling Alley’s adjusted trial balance as of December 31, 2016, is presented below:
Requirements
1. Prepare the closing entries for Matthew’s Bowling Alley.
2. Prepare a post-closing trial balance.
3. Compute the current ratio for Matthew’s Bowling Alley.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
100,000
Income Summary
100,000
To close revenue.
31
Income Summary
Insurance Expense
28,000
Salaries Expense
30,000
Supplies Expense
Utilities Expense
25,000
Depreciation Expense—Equipment
Depreciated Expense—Building
To close expenses.
31
Income Summary
Retained Earnings
12,250
To close Income Summary.
31
Retained Earnings
Dividends
30,000
To close dividends.
E4-24, cont.
Requirement 2
MATTHEW’S BOWLING ALLEY
Post-Closing Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 18,500
Accounts Receivable
3,300
Office Supplies
650
Prepaid Insurance
2,600
Equipment
Accumulated Depreciation—Equipment
Building
135,000
Accumulated Depreciation—Building
Land
Accounts Payable
Utilities Payable
Salaries Payable
Unearned Revenue
Common Stock
Retained Earnings
Total
$ 231,050
Requirement 3
E4-25 Preparing a worksheet, closing entries, and a post-closing trial balance
Learning Objectives 2, 3, 4
1. Net Loss $(21,000)
San Antonio Veterinary Hospital completed the following worksheet as of December 31, 2016.
Requirements
1. Complete the worksheet for San Antonio Veterinary Hospital.
2. Prepare the closing entries.
3. Prepare a post-closing trial balance.
SOLUTION
Requirement 1
SAN ANTONIO VETERINARY HOSPITAL
Worksheet
December 31, 2016
Account Names
Unadjusted Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 28,100
$ 28,100
$ 28,100
Accounts Receivable
9,600
f.
$ 600
10,200
10,200
Office Supplies
900
$ 75
b.
825
825
a.
Equipment
Acc. Dep.—Equipment
c.
Accounts Payable
Utilities Payable
320
Salaries Payable
e.
875
Unearned Revenue
Common Stock
Dividends
Service Revenue
d., f.
Rent Expense
21,950
$ 21,950
Salaries Expense
Supplies Expense
75
Utilities Expense
10,000
10,000
Dep. Exp.—Equipment
Net Loss
Total
E4-25, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
27,000
Income Summary
27,000
To close revenue.
31
Income Summary
48,000
Rent Expense
21,950
Salaries Expense
14,875
Supplies Expense
Utilities Expense
10,000
Depreciation Expense—Equipment
1,100
To close expenses.
31
Retained Earnings
21,000
Income Summary
21,000
To close Income Summary.
31
Retained Earnings
19,000
Dividends
19,000
To close dividends.
Requirement 3
SAN ANTONIO VETERINARY HOSPITAL
Post-Closing Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 28,100
Accounts Receivable
10,200
Office Supplies
825
Prepaid Rent
8,050
Accumulated Depreciation—Equipment
$ 1,100
Accounts Payable
3,600
Utilities Payable
Salaries Payable
Unearned Revenue
Common Stock
Retained Earnings
E4A-26 Journalizing reversing entries
Learning Objective 7
Appendix 4A
Krisp Architects recorded the following adjusting entries as of December 31:
a. Service Revenue accrued, $2,600.
b. Unearned Revenue that has been earned, $400.
c. Office Supplies on hand, $675. The balance of the Office Supplies account was $810.
d. Salaries owed to employees, $850.
e. One month of Prepaid Rent has expired, $2,700.
f. Depreciation on equipment, $12,000.
Journalize any necessary reversing entries for Krisp Architects.
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Jan. 1
Service Revenue
2,600
Accounts Receivable
2,600
To reverse accrued revenue.
1
Salaries Payable
Salaries Expense
To reverse accrued salaries.
E4A-27 Journalizing reversing entries
Learning Objective 7
Appendix 4A
Ocean View Services had the following unadjusted balances at December 31, 2016: Salaries Payable,
$0; Salaries Expense, $1,400. The following transactions have taken place at the end of 2016 and
beginning of 2017:
Requirements
1. Open T-accounts for Salaries Payable and Salaries Expense using their unadjusted balances at
December 31, 2016.
2. Journalize the entries assuming Ocean View Services does not use reversing entries.
Do not record the reversing entry on Jan. 1. Post to the accounts.
3. Open new T-accounts for Salaries Payable and Salaries Expense using their unadjusted balances at
December 31, 2016. Journalize the entries assuming Ocean View Services uses reversing entries.
Don’t forget to record the reversing entry on Jan. 1. Post to the accounts. Compare the balances
with Requirement 2 balances.
SOLUTION
Requirement 1
0
Bal.12/31/16
Requirement 2
Date
Accounts and Explanation
Debit
Credit
2016
Dec. 31
Salaries Expense
3,000
Salaries Payable
3,000
To adjust accrued salaries.
31
Income Summary
4,400
Salaries Expense
4,400
To close salaries expense.
2017
Jan. 4
Salaries Payable
3,000
Salaries Expense
1,400
Cash
4,400
To pay salaries.
0
3,000
3,000
4,400
0
0
E4-27, cont.
Requirement 3
Date
Accounts and Explanation
Debit
Credit
2016
Dec. 31
Salaries Expense
3,000
Salaries Payable
3,000
31
Income Summary
4,400
Salaries Expense
4,400
2017
Jan. 1
Salaries Payable
3,000
Salaries Expense
3,000
Jan. 4
Salaries Expense
4,400
Cash
4,400
0
3,000
4,400
0
3,000