P4-37B, cont.
Requirement 2
WALSH ANVILS
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
$ 6,710
$ 6,710
$ 6,710
Accounts Receivable
12,500
12,500
12,500
Acc. Depreciation—Eq.
Common Stock
Salaries Expense
Supplies Expense
P4-37B, cont.
Requirement 3
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Unearned Revenue
3,600
Service Revenue
3,600
To adjust revenue earned.
Rent Expense
Prepaid Rent
To adjust rent expense
Supplies Expense
1,600
Office Supplies
1,600
To adjust office supplies
Depreciation Expense—Equipment
Accumulated Depreciation—Equipment
To adjust depreciation
Salaries Expense
Salaries Payable
To adjust accrued salaries
P4-37B, cont.
Requirement 4
WALSH ANVILS
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 6,710
Accounts Receivable
12,500
Prepaid Rent
2,900
Office Supplies
Equipment
34,000
Accumulated Depreciation—Equipment
Accounts Payable
Salaries Payable
Unearned Revenue
Common Stock
Retained Earnings
Dividends
6,000
Service Revenue
Salaries Expense
2,380
Rent Expense
Depreciation Expense—Equipment
Supplies Expense
1,600
Total
$ 67,520
P4-37B, cont.
Requirement 5
WALSH ANVILS
Income Statement
Year Ended December 31, 2016
Revenues:
Service Revenue
$ 24,100
Expenses:
Salaries Expense
Supplies Expense
Rent Expense
Depreciation Expense—Equipment
Total Expenses
Net Income
$ 19,590
WALSH ANVILS
Statement of Retained Earnings
Year Ended December 31, 2016
Retained Earnings, January 1, 2016
$ 14,100
Net income for the year
Dividends
Retained Earnings, December 31, 2016
$ 27,690
P4-37B, cont.
Requirement 5, cont.
WALSH ANVILS
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
$ 6,710
Accounts Receivable
12,500
Prepaid Rent
2,900
Office Supplies
900
Total Current Assets
Plant Assets:
Equipment
34,000
Less: Accumulated Depreciation—Equipment
Total Plant Assets
Total Assets
Current Liabilities:
Accounts Payable
$ 6,700
Salaries Payable
280
Unearned Revenue
3,000
Total Current Liabilities
Total Liabilities
Common Stock
15,000
Retained Earnings
27,690
Total Liabilities and Stockholders’ Equity
P4-37B, cont.
Requirement 6
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
24,100
Income Summary
24,100
To close revenue.
31
Income Summary
Salaries Expense
2,380
Rent Expense
Depreciation Expense—Equipment
Supplies Expense
1,600
31
Income Summary
19,590
Retained Earnings
19,590
To close Income Summary.
31
Retained Earnings
Dividends
6,000
To close dividends.
Requirement 7
WALSH ANVILS
Post-Closing Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 6,710
Accounts Receivable
12,500
Prepaid Rent
Office Supplies
Equipment
34,000
Accounts Payable
Salaries Payable
Unearned Revenue
Common Stock
Retained Earnings
Total
$ 57,010
P4-37B, cont.
Requirement 8
Current ratio = Total current assets / Total current liabilities
= ($6,710 + $12,500 + $2,900 + $900) / ($6,700 + $280 + $3,000)
= $23,010 / $9,980 = 2.31
P4-38B Completing the accounting cycle from journal entries to post-closing trial balance with an
optional worksheet
Learning Objectives 1, 2, 3, 4, 5
6. Ending Retained Earnings $4,120
On December 1, Curt Walton began an auto repair shop, Walton’s Quality Automotive. The following
transactions occurred during December:
The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid
Insurance; Equipment; Accumulated Depreciation—Equipment; Land; Accounts Payable; Utilities
Payable; Interest Payable; Unearned Revenue; Notes Payable; Common Stock; Retained Earnings;
Dividends; Income Summary; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense;
Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation
Expense—Equipment.
Requirements
1. Prepare the journal entries, and post to the T-accounts.
2. Prepare an unadjusted trial balance.
3. Complete the worksheet for the month ended December 31, 2016. (optional)
4. Prepare the adjusting entries, and post to the T-accounts.
5. Prepare an adjusted trial balance.
6. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in
report form.
7. Prepare the closing entries, and post to the T-accounts.
8. Prepare a post-closing trial balance.
SOLUTION
Requirement 1
Date
Accounts
Debit
Credit
Dec. 1
Cash
55,000
Common Stock
55,000
1
Equipment
9,000
Cash
9,000
1
Prepaid Insurance
1,500
Cash
1,500
9
Land
16,000
Cash
16,000
Office Supplies
2,000
Accounts Payable
2,000
Cash
12,000
Notes Payable
12,000
Advertising Expense
1,700
Cash
1,700
Accounts Payable
Cash
Utilities Expense
Utilities Payable
Cash
14,000
Accounts Receivable
2,600
Service Revenue
16,600
Salaries Expense
3,800
Rent Expense
1,300
Cash
5,100
Cash
1,400
Unearned Revenue
1,400
Dividends
4,000
Cash
4,000
P4-38B, cont.
Requirements 1, 4, and 7
Cash
1,500
4,000
16,000
Bal.
0
1,700
300
5,100
16,600
4,000
Clos.
8,120
Bal.
Dividends
Accounts Receivable
Service Revenue
Dec. 31
2,600
16,600
Dec. 31
Clos.
16,600
Bal.
2,600
0
Bal.
Office Supplies
Salaries Expense
Dec. 10
2,000
Dec. 31
3,800
1,000
Adj.
3,800
Clos.
Bal.
1,000
Bal.
0
Dec. 1
1,500
Dec. 31
1,300
300
Adj.
1,300
1,200
Bal.
0
180
Bal.
0
Accumulated Depreciation—Equipment
Advertising Expense
150
Bal.
Bal.
0
P4-38B, cont.
Requirements 1, 4, and 7, cont.
Land
Supplies Expense
Dec. 9
16,000
Adj.
1,000
1,000
Clos.
Bal.
16,000
Bal.
0
Accounts Payable
2,000
Dec. 10
Adj.
Dec. 26
1,700
Bal.
Bal.
Utilities Payable
Interest Expense
180
Dec. 28
Adj.
50
50
Clos.
180
Bal.
Bal.
0
50
Adj.
150
50
Bal.
Bal.
0
1,400
Dec. 31
1,400
Notes Payable
12,000
Dec. 19
12,000
Bal.
P4-38B, cont.
Requirement 2
WALTON’S QUALITY AUTOMOTIVE
Unadjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 44,800
Accounts Receivable
2,600
Office Supplies
2,000
Prepaid Insurance
1,500
Equipment
9,000
Land
Accounts Payable
$ 1,700
Utilities Payable
Notes Payable
Common Stock
Dividends
4,000
Service Revenue
Salaries Expense
3,800
Rent Expense
1,300
P4-38B, cont.
Requirement 3
WALTON’S QUALITY AUTOMOTIVE
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
$ 44,800
$ 44,800
$ 44,800
Accounts Receivable
2,600
2,600
2,600
Office Supplies
2,000
$ 1,000
a.
1,000
1,000
Acc. Dep.—Equipment
Supplies Expense
P4-38B, cont.
Requirement 4
Date
Accounts
Debit
Credit
Dec.31
Supplies Expense
1,000
Office Supplies
1,000
To adjust office supplies used.
Depreciation Expense—Equipment
Accumulated Depreciation—Equipment
To adjust for depreciation.
Insurance Expense
Prepaid Insurance
To adjust for insurance expired.
P4-38B, cont.
Requirement 5
WALTON’S QUALITY AUTOMOTIVE
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 44,800
Accounts Receivable
2,600
Office Supplies
1,000
Prepaid Insurance
1,200
Equipment
9,000
Accumulated Depreciation—Equipment
$ 150
Land
Accounts Payable
1,700
Interest Payable
Unearned Revenue
1,400
Notes Payable
Common Stock
Dividends
Service Revenue
Salaries Expense
3,800
Rent Expense
1,300
Utilities Expense
Advertising Expense
1,700
Supplies Expense
1,000
Insurance Expense
Interest Expense
Depreciation Expense—Equipment
P4-38B, cont.
Requirement 6
WALTON’S QUALITY AUTOMOTIVE
Income Statement
Month Ended December 31, 2016
Revenues:
Service Revenue
$ 16,600
Expenses:
Salaries Expense
$ 3,800
Supplies Expense
Rent Expense
Advertising Expense
Insurance Expense
Depreciation Expense—Equipment
Utilities Expense
P4-38B, cont.
Requirement 6, cont.
WALTON’S QUALITY AUTOMOTIVE
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
$ 44,800
Accounts Receivable
2,600
Office Supplies
Prepaid Insurance
Total Current Assets
Plant Assets:
Equipment
Less: Accumulated Depreciation—Equipment
Land
Total Plant Assets
Total Assets
Current Liabilities:
Accounts Payable
$ 1,700
Utilities Payable
Interest Payable
Unearned Revenue
Total Current Liabilities
Long-term Liabilities:
Notes Payable
Total Liabilities
Common Stock
55,000
Retained Earnings
Total Liabilities and Stockholders’ Equity
P4-38B, cont.
Requirement 7
Date
Accounts
Debit
Credit
Dec.31
Service Revenue
16,600
Income Summary
16,600
To close revenue.
Income Summary
Salaries Expense
Supplies Expense
Rent Expense
Advertising Expense
Insurance Expense
Utilities Expense
Income Summary
Retained Earnings
Dividends
To close dividends.
P4-38B, cont.
Requirement 8
WALTON’S QUALITY AUTOMOTIVE
Post-Closing Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 44,800
Accounts Receivable
2,600
Office Supplies
1,000
Equipment
9,000
Accumulated Depreciation—Equipment
Land
Utilities Payable
Interest Payable
Unearned Revenue
1,400
Retained Earnings
P4A-39B Preparing adjusting entries and reversing entries
Learning Objective 7
Appendix 4A
The unadjusted trial balance and adjustment data of Mark’s Motors at December 31, 2016, follow:
Adjustment data at December 31, 2016:
a. Depreciation on equipment, $1,600.
b. Accrued Wages Expense, $1,000.
c. Office Supplies on hand, $100.
d. Prepaid Insurance expired during December, $200.
e. Unearned Revenue earned during December, $4,400.
f. Accrued Service Revenue, $800.
2017 transactions:
a. On January 4, Mark’s Motors paid wages of $1,200. Of this, $1,000 related to the accrued wages
recorded on December 31.
b. On January 10, Mark’s Motors received $1,500 for Service Revenue. Of this, $800 related to the
accrued Service Revenue recorded on December 31.
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.