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P4-31A, cont.
Requirement 3
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Unearned Revenue
3,900
Service Revenue
3,900
To adjust revenue earned.
P4-31A, cont.
Requirement 4
WILLIAMSON ANVILS
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 16,370
Accounts Receivable
16,500
Prepaid Rent
2,400
P4-31A, cont.
Requirement 5
WILLIAMSON ANVILS
Income Statement
Year Ended December 31, 2016
Revenues:
Service Revenue
$ 24,400
P4-31A, cont.
Requirement 5, cont.
WILLIAMSON ANVILS
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
$ 16,370
Accounts Receivable
16,500
Prepaid Rent
2,400
P4-31A, cont.
Requirement 6
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
24,400
Income Summary
24,400
To close revenue.
P4-31A, cont.
Requirement 7
WILLIAMSON ANVILS
Post-Closing Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 16,370
Accounts Receivable
16,500
Requirement 8
Current ratio = Total current assets / Total current liabilities
= ($16,370 + $16,500 + $2,400 + $600) / ($6,600 + $230 + $3,300)
= $35,870 / $10,130 = 3.5
P4-32A 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 $13,395
On December 1, Bob Wonder began an auto repair shop, Wonder’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.
Adjustment data:
a. Office Supplies used during the month, $900.
b. Depreciation for the month, $150.
c. One month insurance has expired.
d. Accrued Interest Expense, $75.
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 and Explanation
Debit
Credit
Dec. 1
Cash
55,000
Common Stock
55,000
10
Office Supplies
2,900
Accounts Payable
2,900
19
Cash
30,000
Notes Payable
30,000
22
Advertising Expenses
1,200
Cash
1,200
P4-32A, cont.
Requirements 1, 4, and 7
Cash
Dividends
Dec. 1
55,000
9,000
Dec. 1
Dec. 31
3,500
3,500
Clos.
Dec. 19
30,000
1,000
Dec. 1
Accounts Receivable
Service Revenue
Dec. 31
3,300
Clos.
23,800
23,800
Dec. 31
Bal.
3,300
0
Bal.
P4-32A, cont.
Requirements 1, 4, and 7, cont.
Land
Supplies Expense
Dec. 9
16,000
Adj.
900
900
Clos.
Bal.
16,000
Bal.
0
Interest Payable
Depreciation Expense—Equipment
75
Adj.
Adj.
150
150
Clos.
75
Bal.
Bal.
0
Retained Earnings
0
Dec. 1
Clos.
3,500
16,895
Clos.
13,395
Bal.
P4-32A, cont.
Requirement 2
WONDER’S QUALITY AUTOMOTIVE
Unadjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 71,250
Accounts Receivable
3,300
Office Supplies
2,900
P4-32A, cont.
Requirement 3
WONDER’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
$ 71,250
$ 71,250
$ 71,250
Accounts Receivable
3,300
3,300
3,300
Office Supplies
2,900
$ 900
a.
2,000
2,000
P4-32A, cont.
Requirement 4
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Supplies Expense
900
Office Supplies
900
To adjust supplies used.
P4-32A, cont.
Requirement 5
WONDER’S QUALITY AUTOMOTIVE
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 71,250
Accounts Payable
2,400
Utilities Payable
230
Interest Payable
75
Unearned Revenue
1,050
Notes Payable
30,000
Common Stock
55,000
P4-32A, cont.
Requirement 6
WONDER’S QUALITY AUTOMOTIVE
Income Statement
Month Ended December 31, 2016
Revenues:
Service Revenue
$ 23,800
Expenses:
WONDER’S QUALITY AUTOMOTIVE
Statement of Retained Earnings
Month Ended December 31, 2016
Retained Earnings, December 1, 2016
$ 0
P4-32A, cont.
Requirement 6, cont.
WONDER’S QUALITY AUTOMOTIVE
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
$ 71,250
Total Plant Assets
24,850
Total Assets
$ 102,150
Liabilities
Current Liabilities:
Accounts Payable
$ 2,400
Utilities Payable
230
P4-32A, cont.
Requirement 7
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
23,800
Income Summary
23,800
To close revenue.
P4-32A, cont.
Requirement 8
WONDER’S QUALITY AUTOMOTIVE
Post-Closing Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 71,250
Accounts Receivable
3,300
P4A-33A Preparing adjusting entries and reversing entries
Learning Objective 7
Appendix 4A
The unadjusted trial balance and adjustment data of Mildred’s Motors at December 31, 2016, follow:
Adjustment data at December 31, 2016:
a. Depreciation on equipment, $1,900.
b. Accrued Wages Expense, $800.
c. Office Supplies on hand, $600.
d. Prepaid Insurance expired during December, $200.
e. Unearned Revenue earned during December, $4,000.
f. Accrued Service Revenue, $700.
2017 transactions:
a. On January 4, Mildred’s Motors paid wages of $1,200. Of this, $800 related to the
accrued wages recorded on December 31.
b. On January 10, Mildred’s Motors received $1,300 for Service Revenue. Of this,
$700 is related to the accrued Service Revenue recorded on December 31.
