Requirements
1. Journalize adjusting entries.
2. Journalize reversing entries for the appropriate adjusting entries.
3. Refer to the 2017 data. Journalize the cash payment and the cash receipt that
occurred in 2017.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Depreciation Expense—Equipment
1,900
Accumulated Depreciation—Equipment
1,900
To adjust depreciation.
Wages Expense
800
Wages Payable
800
To adjust wages.
Supplies Expense
900
Office Supplies
900
To adjust office supplies.
31
Insurance Expense
200
Prepaid Insurance
200
To adjust insurance
31
Unearned Revenue
4,000
Service Revenue
4,000
31
Accounts Receivable
700
Service Revenue
700
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Jan. 1
Wages Payable
800
Wages Expense
800
To reverse accrued wages.
Service Revenue
700
Accounts Receivable
700
P4A-33A, cont.
Requirement 3
Date
Accounts and Explanation
Debit
Credit
Jan. 4
Wages Expense
1,200
Cash
1,200
Cash
1,300
Service Revenue
1,300
Problems (Group B)
P4-34B Preparing financial statements including a classified balance sheet in report form,
preparing and posting closing entries, and preparing a post-closing trial balance
Learning Objectives 1, 3, 4
1. Net Loss $(7,200)
The adjusted trial balance of Estella Real Estate Appraisal at June 30, 2016, follows:
Requirements
1. Prepare the company’s income statement for the year ended June 30, 2016.
2. Prepare the company’s statement of retained earnings for the year ended June 30,
2016.
3. Prepare the company’s classified balance sheet in report form at June 30, 2016.
4. Journalize the closing entries.
5. Open the T-accounts using the balances from the adjusted trial balance, and post the closing entries
to the T-accounts.
6. Prepare the company’s post-closing trial balance at June 30, 2016.
SOLUTION
Requirement 1
ESTELLA REAL ESTATE APPRAISAL
Income Statement
Year Ended June 30, 2016
Revenues:
Service Revenue
Expenses:
Salaries Expense
Depreciation Expense—Building
Insurance Expense
Utilities Expense
Supplies Expense
Interest Expense
Total Expenses
Net Loss
$ (7,200)
Requirement 2
ESTELLA REAL ESTATE APPRAISAL
Statement of Retained Earnings
Year Ended June 30, 2016
Retained Earnings, July 1, 2015
$ 37,000
Net loss for the year
(7,200)
Dividends
Retained Earnings, June 30, 2016
P4-34B, cont.
Requirement 3
ESTELLA REAL ESTATE APPRAISAL
Balance Sheet
June 30, 2016
Assets
Current Assets:
Cash
$ 4,600
Accounts Receivable
5,300
Office Supplies
1,500
Prepaid Insurance
1,600
Total Current Assets
Plant Assets:
Building
Less: Accumulated Depreciation—Building
(26,000)
Land
Total Plant Assets
Total Assets
Liabilities
Current Liabilities:
Accounts Payable
$ 19,300
Interest Payable
8,400
Salaries Payable
1,900
Unearned Revenue
5,300
Total Current Liabilities
Long-Term Liabilities:
Notes Payable
Total Liabilities
Common Stock
Retained Earnings
2,600
Total Liabilities and Stockholders’ Equity
P4-34B, cont.
Requirement 4
Date
Accounts and Explanation
Debit
Credit
Jun. 30
Service Revenue
48,900
Income Summary
48,900
To close revenue.
30
Income Summary
56,100
Insurance Expense
4,300
Salaries Expense
33,000
Supplies Expense
Interest Expense
8,400
Utilities Expense
2,500
Depreciation Expense—Building
7,700
To close expenses.
30
Retained Earnings
Income Summary
7,200
To close Income Summary.
30
Retained Earnings
27,200
Dividends
27,200
To close dividends.
Requirement 5
Cash
Notes Payable
Bal.
4,600
37,000
Bal.
Bal.
4,600
37,000
Bal.
Common Stock
3,000
Bal.
3,000
Bal.
Bal.
37,000
Bal.
Clos.
Bal.
2,600
Bal.
Bal.
Bal.
27,200
Bal.
Bal.
P4-34B, cont.
Requirement 5, cont.
Prepaid Insurance
Income Summary
Bal.
Clos.
56,100
48,900
Clos.
Clos.
Bal.
0
Bal.
Service Revenue
Bal.
77,000
48,900
Clos.
48,900
Bal.
77,000
0
26,000
Bal.
Bal.
4,300
Clos.
26,000
Bal.
Bal.
0
Land
Salaries Expense
Bal.
13,500
Bal.
33,000
33,000
Clos.
Bal.
13,500
Bal.
0
Accounts Payable
Supplies Expense
19,300
Bal.
Bal.
200
200
Clos.
19,300
Bal.
Bal.
0
Interest Expense
8,400
Bal.
Bal.
8,400
Clos.
8,400
Bal.
Bal.
0
1,900
Bal.
Bal.
2,500
Clos.
1,900
Bal.
Bal.
0
Unearned Revenue
5,300
Bal.
Bal.
7,700
Clos.
5,300
Bal.
Bal.
0
P4-34B, cont.
Requirement 6
ESTELLA REAL ESTATE APPRAISAL
Post-Closing Trial Balance
June 30, 2016
Account Title
Balance
Debit
Credit
Cash
$ 4,600
Accounts Receivable
5,300
Office Supplies
1,500
Prepaid Insurance
1,600
Building
Accumulated Depreciation—Building
Land
Accounts Payable
Interest Payable
Salaries Payable
Unearned Revenue
Notes Payable
Common Stock
Retained Earnings
Total
$ 103,500
P4-35B Preparing financial statements including a classified balance sheet in report form,
preparing closing entries, and using the current ratio to evaluate a company
Learning Objectives 1, 3, 6
2. Ending Retained Earnings $58,100
The adjusted trial balance of Blume Irrigation System at December 31, 2016, follows:
Requirements
1. Prepare the company’s income statement for the year ended December 31, 2016.
2. Prepare the company’s statement of retained earnings for the year ended December 31, 2016.
3. Prepare the company’s classified balance sheet in report form at December 31, 2016.
SOLUTION
Requirement 1
BLUME IRRIGATION SYSTEM
Income Statement
Year Ended December 31, 2016
Revenues:
Service Revenue
$ 75,800
Expenses:
Salaries Expense
Depreciation Expense—Building
Depreciation Expense—Equipment
Supplies Expense
Insurance Expense
Interest Expense
Total Expenses
Net Income
BLUME IRRIGATION SYSTEM
Year Ended December 31, 2016
Retained Earnings, January 1, 2016
Net income for the year
52,600
Dividends
Retained Earnings, December 31, 2016
$ 58,100
P4-35B, cont.
Requirement 3
BLUME IRRIGATION SYSTEM
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
$ 49,710
Accounts Receivable
47,500
Office Supplies
3,790
Prepaid Insurance
4,600
Total Current Assets
Plant Assets:
Equipment
$ 28,000
Less: Accumulated Depreciation—Equipment
Building
56,100
Less: Accumulated Depreciation—Building
Total Plant Assets
Total Assets
Liabilities
Current Liabilities:
Accounts Payable
$ 42,000
Interest Payable
1,200
Salaries Payable
3,500
Unearned Revenue
1,300
Total Current Liabilities
Long-Term Liabilities:
Notes Payable
Total Liabilities
Common Stock
Retained Earnings
Total Liabilities and Stockholders’ Equity
P4-35B, cont.
Requirement 4
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
75,800
Income Summary
75,800
To close revenue.
Income Summary
23,200
Insurance Expense
Salaries Expense
15,700
Supplies Expense
1,600
Interest Expense
1,200
Depreciation Expense—Equipment
2,000
Depreciation Expense—Building
1,900
To close expenses.
Income Summary
52,600
Retained Earnings
52,600
To close Income Summary.
Retained Earnings
Dividends
2,500
To close dividends.
Requirement 5
Current ratio = Total current assets / Total current liabilities
= ($49,710 + $47,500 + $3,790 + $4,600) / ($42,000 + $1,200 + $3,500 + $1,300)
P4-36B Preparing a worksheet, financial statements, and closing entries
Learning Objectives 1, 2, 3
2. Total Assets $84,000
The unadjusted trial balance of Farmer Investment Advisers at December 31, 2016, follows:
Adjustment data at December 31, 2016:
a. Unearned Revenue earned during the year, $700.
b. Office Supplies on hand, $2,000.
c. Depreciation for the year, $2,000.
d. Accrued Salaries Expense, $5,000.
e. Accrued Service Revenue, $6,000.
Requirements
1. Prepare a worksheet for Farmer Investment Advisers at December 31, 2016.
SOLUTION
Requirement 1
FARMER INVESTMENT ADVISERS
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
$ 29,000
$ 29,000
$ 29,000
Accounts Receivable
41,000
e.
$ 6,000
47,000
47,000
Office Supplies
7,000
$ 5,000
b.
2,000
2,000
Equipment
22,000
22,000
22,000
Accum. Dep.—Eq.
2,000
c.
$ 16,000
$ 16,000
Accounts Payable
15,000
15,000
Salaries Payable
5,000
d.
5,000
Unearned Revenue
a.
Notes Payable
18,000
18,000
Common Stock
24,000
24,000
Retained Earnings
5,000
Dividends
28,000
28,000
28,000
Service Revenue
a.
$ 105,700
6,000
e.
Insurance Expense
2,000
2,000
$ 2,000
Salaries Expense
33,000
d.
5,000
38,000
38,000
Supplies Expense
b.
5,000
5,000
5,000
Interest Expense
5,000
5,000
5,000
Total
Total
P4-36B, cont.
Requirement 2
FARMER INVESTMENT ADVISERS
Income Statement
Year Ended December 31, 2016
Revenues:
Service Revenue
$ 105,700
Expenses:
Salaries Expense
$ 38,000
Interest Expense
Rent Expense
11,000
Insurance Expense
Depreciation Expense—Equipment
Supplies Expense
Total Expenses
Net Income
FARMER INVESTMENT ADVISERS
Statement of Retained Earnings
Year Ended December 31, 2016
Retained Earnings, January 1, 2016
$ 5,000
Net income for the year
42,700
47,700
Dividends
Retained Earnings, December 31, 2016
$ 19,700
P4-36B, cont.
Requirement 2, cont.
FARMER INVESTMENTS ADVISERS
Balance Sheet
December 31, 2016
Assets
Liabilities
Current Assets:
Current Liabilities:
Cash
$ 29,000
Accounts Payable
$ 15,000
Accounts Receivable
Salaries Payable
Office Supplies
Unearned Revenue
Total Current Assets
Total Current Liabilities
$ 22,300
Plant Assets:
Long-Term Liabilities:
Equipment
Notes Payable
Less: Acc. Depr.—Eq.
Total Liabilities
Total Plant Assets
Common Stock
Retained Earnings
Total Assets
$ 84,000
P4-36B, cont.
Requirement 3
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
105,700
Income Summary
105,700
To close revenue.
Income Summary
Insurance Expense
Salaries Expense
38,000
Supplies Expense
Interest Expense
Rent Expense
11,000
Depreciation Expense—Equipment
To close expenses.
Income Summary
Retained Earnings
42,700
To close Income Summary.
Retained Earnings
Dividends
28,000
To close dividends.
P4-37B Completing the accounting cycle from adjusting entries to post-closing trial balance with
an optional worksheet
Learning Objectives 1, 2, 3, 4, 5, 6
5. Net Income $19,590
The unadjusted trial balance of Walsh Anvils at December 31, 2016, and the data for the adjustments
follow:
Adjustment data:
a. Unearned Revenue still unearned at December 31, $3,000.
Requirements
1. Open the T-accounts using the balances in the unadjusted trial balance.
2. Complete the worksheet for the year ended December 31, 2016. (optional)
3. Prepare the adjusting entries, and post to the accounts.
4. Prepare an adjusted trial balance.
SOLUTION
Requirements 1, 3, and 6
15,000
Bal.
6,710
14,100
6,000
Clos.
Accounts Receivable
Dividends
Bal.
12,500
Bal.
6,000
6,000
Clos.
Bal.
12,500
Bal.
0
Prepaid Rent
Income Summary
Bal.
3,090
Clos.
4,510
24,100
Clos.
190
Adj.
Clos.
19,590
19,590
Bal.
Bal.
2,900
0
Bal.
Bal.
2,500
20,500
1,600
3,600
Adj.
24,100
24,100
Bal.
34,000
Bal.
2,100
280
2,380
2,380
Clos.
Bal.
0
P4-37B, cont.
Requirement 1, 3, and 6, cont.
Accumulated Depreciation—Eq.
Rent Expense
4,000
Bal.
Bal.
0
340
Adj.
Adj.
190
Bal.
190
190
Clos.
4,340
Bal.
Bal.
0
Adj.
340
340
6,700
Bal.
Bal.
0
280
Adj.
1,600
Bal.
1,600
1,600
280
3,600
3,000
Bal.