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.
Rent Expense
Prepaid Rent
To adjust rent expense
Supplies Expense
1,200
Office Supplies
1,200
To adjust office supplies.
Depreciation Expense—Equipment
Accumulated Depreciation—Equipment
To adjust depreciation
Salaries Expense
Salaries Payable
To adjust accrued salaries
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
Office Supplies
Equipment
29,000
Accumulated Depreciation—Equipment
Accounts Payable
Salaries Payable
Unearned Revenue
Common Stock
16,000
Retained Earnings
12,000
Dividends
3,500
Service Revenue
24,400
Salaries Expense
2,830
Rent Expense
Depreciation Expense—Equipment
Supplies Expense
1,200
Total
P4-31A, cont.
Requirement 5
WILLIAMSON ANVILS
Income Statement
Year Ended December 31, 2016
Revenues:
Service Revenue
$ 24,400
Expenses:
Salaries Expense
Supplies Expense
Depreciation Expense—Equipment
Rent Expense
Total Expenses
Net Income
$ 19,890
WILLIAMSON ANVILS
Year Ended December 31, 2016
Retained Earnings, January 1, 2016
$ 12,000
Net income for the year
Dividends
Retained Earnings, December 31, 2016
$ 28,390
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
Office Supplies
Total Current Assets
Plant Assets:
Equipment
29,000
Less: Accumulated Depreciation—Equipment
Total Plant Assets
Total Assets
Current Liabilities:
Accounts Payable
$ 6,600
Salaries Payable
Unearned Revenue
3,300
Total Current Liabilities
Total Liabilities
Common Stock
16,000
Retained Earnings
28,390
Total Liabilities and Stockholders’ Equity
P4-31A, cont.
Requirement 6
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
24,400
Income Summary
24,400
To close revenue.
Income Summary
Salaries Expense
2,830
Rent Expense
Depreciation Expense—Equipment
Supplies Expense
1,200
To close expenses.
Income Summary
19,890
Retained Earnings
19,890
To close Income Summary.
Retained Earnings
Dividends
3,500
To close dividends.
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
Prepaid Rent
Office Supplies
Equipment
29,000
Accumulated Depreciation—Equipment
Accounts Payable
Salaries Payable
Unearned Revenue
Common Stock
Retained Earnings
Total
$ 64,870
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
Equipment
9,000
Cash
9,000
Prepaid Insurance
1,000
Cash
1,000
Land
16,000
Cash
16,000
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
26
Accounts Payable
Cash
28
Utilities Expense
Utilities Payable
31
Cash
20,500
Accounts Receivable
3,300
Service Revenue
23,800
31
Salaries Expense
3,100
Rent Expense
1,000
Cash
4,100
31
Cash
1,050
Unearned Revenue
1,050
31
Dividends
3,500
Cash
3,500
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
Dec. 31
20,500
16,000
Dec. 31
1,050
1,200
Dec. 22
500
Dec. 26
3,500
Dec. 31
16,895
Accounts Receivable
Service Revenue
Dec. 31
3,300
Clos.
23,800
23,800
Dec. 31
Bal.
3,300
0
Bal.
Dec. 10
2,900
Dec. 31
3,100
900
Dec. 1
250
Dec. 31
1,000
Dec. 1
9,000
Dec. 28
230
Clos.
150
Dec. 22
1,200
Clos.
150
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
2,900
Dec. 10
Adj.
250
250
Clos.
Dec. 26
2,400
Bal.
Bal.
0
230
Dec. 28
Adj.
75
75
Clos.
Interest Payable
Depreciation Expense—Equipment
75
Adj.
Adj.
150
150
Clos.
75
Bal.
Bal.
0
1,050
Dec. 31
Bal.
30,000
Dec. 19
55,000
Dec. 1
Bal.
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
Prepaid Insurance
1,000
Equipment
9,000
Land
Accounts Payable
Utilities Payable
Unearned Revenue
Notes Payable
Common Stock
Dividends
3,500
Service Revenue
Salaries Expense
3,100
Rent Expense
1,000
Utilities Expense
Advertising Expense
1,200
Total
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
Land
Service Revenue
23,800
Advertising Expense
1,200
1,200
Dep. Exp.—Equip.
Net Income
P4-32A, cont.
Requirement 4
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Supplies Expense
900
Office Supplies
900
To adjust supplies used.
Depreciation Expense—Equipment
150
Accumulated Depreciation—Equipment
150
To adjust depreciation expense
Insurance Expense
250
Prepaid Insurance
250
To adjust insurance. ($1,000 / 4 mos)
Interest Expense
Interest Payable
75
To adjust interest.
P4-32A, cont.
Requirement 5
WONDER’S QUALITY AUTOMOTIVE
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 71,250
Accounts Receivable
Office Supplies
Prepaid Insurance
Equipment
Accumulated Depreciation—Equipment
$ 150
Land
Accounts Payable
2,400
Utilities Payable
230
Interest Payable
75
Unearned Revenue
1,050
Notes Payable
30,000
Common Stock
55,000
Dividends
Service Revenue
23,800
Salaries Expense
Rent Expense
Utilities Expense
Advertising Expense
Supplies Expense
Insurance Expense
Interest Expense
75
Depreciation Expense—Equipment
Total
P4-32A, cont.
Requirement 6
WONDER’S QUALITY AUTOMOTIVE
Income Statement
Month Ended December 31, 2016
Revenues:
Service Revenue
$ 23,800
Expenses:
Salaries Expense
Advertising Expense
Rent Expense
Supplies Expense
Insurance Expense
Utilities Expense
Depreciation Expense—Equipment
Interest Expense
Total Expenses
Net Income
$ 16,895
WONDER’S QUALITY AUTOMOTIVE
Statement of Retained Earnings
Month Ended December 31, 2016
Retained Earnings, December 1, 2016
$ 0
Net income for the month
16,895
Dividends
Retained Earnings, December 31, 2016
$ 13,395
P4-32A, cont.
Requirement 6, cont.
WONDER’S QUALITY AUTOMOTIVE
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
$ 71,250
Accounts Receivable
Office Supplies
Prepaid Insurance
750
Total Current Assets
$ 77,300
Plant Assets:
Equipment
Less: Accumulated Depreciation—Equipment
Land
Total Plant Assets
24,850
Total Assets
$ 102,150
Liabilities
Current Liabilities:
Accounts Payable
$ 2,400
Utilities Payable
230
Interest Payable
Unearned Revenue
Total Current Liabilities
$ 3,755
Long-term Liabilities:
Notes Payable
30,000
Total Liabilities
33,755
Common Stock
Retained Earnings
68,395
Total Liabilities and Stockholders’ Equity
$ 102,150
P4-32A, cont.
Requirement 7
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Service Revenue
23,800
Income Summary
23,800
To close revenue.
Income Summary
Salaries Expense
3,100
Rent Expense
1,000
Utilities Expense
Advertising Expense
1,200
Supplies Expense
Insurance Expense
Interest Expense
Depreciation Expense—Equipment
To close expenses.
Income Summary
16,895
Retained Earnings
16,895
To close Income Summary.
Retained Earnings
Dividends
3,500
To close dividends.
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
Office Supplies
2,000
Prepaid Insurance
Equipment
9,000
Accumulated Depreciation—Equipment
Land
Accounts Payable
Utilities Payable
Interest Payable
Unearned Revenue
Notes Payable
Common Stock
Retained Earnings
Total
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.