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1. The end-of-period spreadsheet illustrates the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and into the financial statements. In doing so, the spreadsheet illustrates the impact of the adjustments on the financial statements.

2. a. Current assets are composed of cash and other assets that may reasonably be expectedto be realized in cash or sold or used up, usually within one year or less, through the normaloperations of the business.

b. Property, plant, and equipment is composed of assets that are used in the business and that are of a permanent or relatively fixed nature.

3. Current liabilities are liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets. Liabilities that will not be due for a comparatively long time (usually more than one year) are called long-term liabilities.

4. Revenue, expense, and drawing accounts are generally referred to as temporary accounts.

5. Closing entries are necessary at the end of an accounting period (1) to transfer the balances intemporary accounts to permanent accounts and (2) to prepare the temporary accounts for use inrecording transactions for the next accounting period.

6. Adjusting entries bring the accounts up to date, while closing entries reduce the revenue, expense, and drawing accounts to zero balances for use in recording transactions for the next accounting period.

7. The purpose of the post-closing trial balance is to make sure that the ledger is in balance at thebeginning of the next period.

8. a. The financial statements are the most important output of the accounting cycle.

b. Yes, all companies have an accounting cycle that begins with analyzing and journalizing transactions and ends with a post-closing trial balance. However, companies may differ in how they implement the steps in the accounting cycle. For example, while most companies use computerized accounting systems, some companies may use manual systems.

9. The natural business year is the fiscal year that ends when business activities have reached the lowest point in the annual operating cycle.

10. All the companies listed are general merchandisers whose busiest time of the year is during the holiday season, which extends through most of December. Traditionally, the lowest point of business activity for general merchandisers will be near the end of January and the beginning of February. Thus, these companies have chosen their natural business year for their fiscal year.

CHAPTER 4COMPLETING THE ACCOUNTING CYCLE

DISCUSSION QUESTIONS

CHAPTER 4 Completing the Accounting Cycle


PE 4–1A1. Balance sheet 5. Income statement2. Income statement 6. Income statement3. Statement of owner's equity 7. Balance sheet4. Balance sheet 8. Balance sheet

PE 4–1B1. Balance sheet 5. Balance sheet2. Balance sheet 6. Balance sheet3. Income statement 7. Statement of owner’s equity4. Income statement 8. Income statement

PE 4–2A

Marcie Davies, capital, January 1, 2015 $618,500Additional investment during 2015 $ 40,000Net income 92,330

$132,330Less withdrawals 15,000Increase in owner’s equity 117,330Marcie Davies, capital, December 31, 2015 $735,830

PE 4–2B

Blake Knudson, capital, January 1, 2015 $918,000Net loss $43,500Add withdrawals 15,000Decrease in owner’s equity 58,500Blake Knudson, capital, December 31, 2015 $859,500

Grab Bag Delivery ServicesStatement of Owner’s Equity

For the Year Ended December 31, 2015

PRACTICE EXERCISES

Gemini Advertising ServicesStatement of Owner’s Equity




PE 4–3A1. Property, plant, and equipment 5. Current liability2. Owner’s equity 6. Current asset3. Long-term liability 7. Current liability4. Current asset 8. Current liability

PE 4–3B1. Current liability 5. Owner’s equity2. Current asset 6. Long-term liability3. Property, plant, and equipment 7. Current asset4. Current asset 8. Current liability

PE 4–4A

Oct. 31 Fees Earned 1,145,000Income Summary 1,145,000

31 Income Summary 828,550Wages Expense 740,000Rent Expense 65,000Supplies Expense 14,750Miscellaneous Expense 8,800

31 Income Summary 316,450Fraser Smart, Capital 316,450

31 Fraser Smart, Capital 40,000Fraser Smart, Drawing 40,000

Closing Entries



PE 4–4B

Apr. 30 Fees Earned 356,500Income Summary 356,500


30 Felix Godwin, Capital 7,100Income Summary 7,100

30 Felix Godwin, Capital 10,500Felix Godwin, Drawing 10,500

PE 4–5AThe following two steps are missing: (1) posting the transactions to the ledger and (2) the preparation of the financial statements. Transactions should be postedto the ledger after step (a). The financial statements should be prepared after step (f).

PE 4–5BThe following two steps are missing: (1) assembling and analyzing adjustment data and (2) journalizing and posting the closing entries. The adjustment data should be assembled and analyzed after step (c). The closing entries should be journalized and posted to the ledger after step (g).

PE 4–6Aa.

Current assets……………Current liabilitites………Working capital…………

Current ratio………………

b. The change from 1.52 to 1.45 indicates an unfavorable trend.

Closing Entries

2016

$2,175,000

2015

$1,900,0001,500,000

$ 675,000

1.45($2,175,000 ÷ $1,500,000)

1,250,000$ 650,000

1.52($1,900,000 ÷ $1,250,000)



PE 4–6Ba.

Current assets………………Current liabilitites……………Working capital………………

Current ratio…………………

b. The change from 2.20 to 2.25 indicates a favorable trend.

2.25($1,586,250 ÷ $705,000)

2.20($1,210,000 ÷ $550,000)

2016$1,586,250

2015$1,210,000

550,000$ 660,000

705,000$ 881,250



Ex. 4–11. Income statement: 5, 8, 92. Statement of owner’s equity: 43. Balance sheet: 1, 2, 3, 6, 7, 10

Ex. 4–2a. Asset: 1, 2, 5, 6, 10b. Liability: 9, 12c. Revenue: 3, 7d. Expense: 4, 8, 11

EXERCISES



Ex. 4–3

Fees earned $348,500Expenses:

Salary expense $189,000Supplies expense 7,500Depreciation expense 5,600Miscellaneous expense 11,100

Total expenses 213,200Net income $135,300

Lisa Gooch, capital, August 1, 2015 $516,700Net income $135,300Less withdrawals 25,000Increase in owner’s equity 110,300Lisa Gooch, capital, July 31, 2016 $627,000

Current assets: Current liabilities:Cash $ 58,000 Accounts payable $20,500Accounts receivable 106,200 Salaries payable 2,500Supplies 4,400 Total liabilities $ 23,000

Total current assets $168,600Property, plant, and

equipment:Office equipment $515,000Less accum. depr. 33,600

Total property, plant, Lisa Gooch, capital 627,000and equipment 481,400 Total liabilities and

Total assets $650,000 owner’s equity $650,000

Balance SheetJuly 31, 2016

Assets Liabilities

BAMBOO CONSULTINGIncome Statement

For the Year Ended July 31, 2016

Owner’s Equity

BAMBOO CONSULTINGStatement of Owner’s Equity

For the Year Ended July 31, 2016

BAMBOO CONSULTING



Ex. 4–4


Salary expense $32,375Supplies expense 2,100Depreciation expense 1,500Miscellaneous expense 2,000


Jayson Neese, capital, July 1, 2015 $ 82,200Net income $22,025Less withdrawals 2,000Increase in owner’s equity 20,025Jayson Neese, capital, June 30, 2016 $102,225

Current assets: Current liabilities:Cash $27,000 Accounts payable $3,300Accounts receivable 53,500 Salaries payable 375Supplies 900 Total liabilities $ 3,675

Total current assets $ 81,400Property, plant, and equipment:

Office equipment $30,500Less accum. depr. 6,000

Total property, plant, Jayson Neese, capital 102,225 and equipment 24,500 Total liabilities and

Total assets $105,900 owner’s equity $105,900

Owner’s Equity

ELLIPTICAL CONSULTINGStatement of Owner’s Equity

For the Year Ended June 30, 2016

ELLIPTICAL CONSULTINGBalance SheetJune 30, 2016

Assets Liabilities

ELLIPTICAL CONSULTINGIncome Statement




Ex. 4–5


Salaries expense $336,900Rent expense 60,000Utilities expense 41,200Depreciation expense 8,650Supplies expense 4,100Insurance expense 1,500Miscellaneous expense 3,650


Ex. 4–6

Service revenue $448,400Expenses:

Wages expense $360,000Rent expense 54,000Utilities expense 33,900Depreciation expense 7,500Insurance expense 3,000Supplies expense 2,750Miscellaneous expense 8,150

Total expenses 469,300Net loss $ (20,900)

Income StatementFor the Year Ended February 29, 2016

LASER MESSENGER SERVICEIncome Statement

For the Year Ended April 30, 2016

WHOLISTIC HEALTH SERVICES CO.


Ex. 4–7

a.

Revenues $42,680Expenses:

Salaries and employee benefits $16,099Purchased transportation 6,335Fuel expense 4,956Rentals and landing fees 2,487Depreciation expense 2,113Maintenance and repairs expense 1,980Provision for income taxes 1,109Other expense (income) net 5,569

Total expenses 40,648Net income $ 2,032

b. The income statements are very similar. The actual statement, which is for the yearended May 31, includes some additional expense and income classifications. For example, the actual statement reports Income Before Income Taxes and Provision for Income Taxes separately. In addition, the “Other expense (income) net” in the text is a summary of several items, including Intercompany charges, Interest expense, and Interest income.

Ex. 4–8

Bart Nesbit, capital, January 1, 2016 $1,375,000Net income $355,000Less withdrawals 90,000Increase in owner’s equity 265,000Bart Nesbit, capital, December 31, 2016 $1,640,000

APEX SYSTEMS CO.Statement of Owner’s Equity


FEDEX CORPORATIONIncome Statement

(in millions)For the Year Ended May 31




Ex. 4–9

Doug Stone, capital, May 1, 2015 $475,500Net loss $31,200Plus withdrawals 5,000Decrease in owner’s equity 36,200Doug Stone, capital, April 30, 2016 $439,300

Ex. 4–10a. Current asset: 1, 3, 5, 6b. Property, plant, and equipment: 2, 4

Ex. 4–11Because current liabilities are usually due within one year, $15,000 ($1,250 × 12 months) would be reported as a current liability on the balance sheet. The remainder of $360,000 ($375,000 – $15,000) would be reported as a long-term liability on the balance sheet.

RESTORATION ARTSStatement of Owner’s Equity

For the Year Ended April 30, 2016



Ex. 4–12

Current assets: Current liabilities:Cash* $ 37,500 Accounts payable $37,700Accounts receivable 116,750 Salaries payable 9,000Supplies 4,800 Unearned fees 18,000Prepaid insurance 7,200 Total liabilities $ 64,700Prepaid rent 21,000

Total current assets $187,250Property, plant, and equipment:

Land $300,000Equipment $474,150Less accumulated depreciation 186,400 287,750 Cheryl Viers, capital 710,300

Total property, plant, and equipment 587,750 Total liabilities and owner’s

Total assets $775,000 equity $775,000

*$37,500 = $775,000 – $587,750 – $21,000 – $7,200 – $4,800 – $116,750

OPTIMUM WEIGHT LOSS CO.Balance Sheet

November 30, 2016Assets Liabilities

Owner’s Equity



Ex. 4–131. The date of the statement should be "August 31, 2016" and not "For the Year

Ended August 31, 2016."

2. Accounts payable should be a current liability.

3. Land should be classified as property, plant, and equipment.

4. "Accumulated depreciation" should be deducted from the related fixed asset.

5. An adding error was made in determining the amount of the total property, plant, and equipment.

6. Accounts receivable should be a current asset.

7. Net income should be reported on the income statement and statement ofowner's equity.

8. Wages payable should be a current liability.

A corrected balance sheet would be as follows:



Ex. 4–13 (Concluded)

Current assets: Current liabilities:Cash $ 18,500 Accounts payable $31,300Accounts receivable 41,400 Wages payable 6,500Supplies 6,500 Total liabilities $ 37,800Prepaid insurance 16,600


Land $225,000Building $400,000 Ruben Daniel, capital 587,200Less accumulated depreciation 155,000 245,000Equipment $ 97,000Less accumulated depreciation 25,000 72,000

Total property, plant, and equipment 542,000 Total liabilities and owner’s


LABYRINTH SERVICES CO.Balance Sheet

August 31, 2016Assets Liabilities

Owner’s Equity


Ex. 4–14c. Depreciation Expense—Equipment

g. Fees Earned

j. Supplies Expense

k. Wages Expense

Note: Ellen Drake, Drawing is closed to Ellen Drake, Capital rather than to Income Summary.

Ex. 4–15The income summary account is used to close the revenue and expense accounts, and it aids in detecting and correcting errors. The $1,190,500 represents expenseaccount balances, and the $1,476,300 represents revenue account balances thathave been closed. In this case, the company had net income of $285,800 ($1,476,300 – $1,190,500).

Ex. 4–16

a. Income Summary 156,900Debra Allen, Capital 156,900

($955,300 – $798,400).

Debra Allen, Capital 36,000Debra Allen, Drawing 36,000

b. $1,559,900 ($1,439,000 + $156,900 – $36,000)

Ex. 4–17

Oct. 31 Fees Earned 519,300Income Summary 519,300


31 Bonnie Mira, Capital 66,850Income Summary 66,850

31 Bonnie Mira, Capital 16,000Bonnie Mira, Drawing 16,000

Closing Entries




Ex. 4–18a. Accounts Payableb. Accumulated Depreciationc. Ben Crayton, Capitale. Cashh. Office Equipmentj. Salaries Payablek. Supplies

Ex. 4–19

Debit CreditBalances Balances

Cash 46,540Accounts Receivable 122,260Supplies 4,000Equipment 127,200Accumulated Depreciation—Equipment 33,600Accounts Payable 52,100Salaries Payable 6,400Unearned Rent 9,000Sonya Flynn, Capital 198,900

300,000 300,000

Ex. 4–201. i 6. c2. j 7. d3. f 8. h4. b 9. g5. e 10. a

LA CASA SERVICES CO.Post-Closing Trial Balance

March 31, 2016


Ex. 4–21a.

Current assets……………Current liabilitites…………Working capital……………


b. Under Armour’s working capital increased by $96,353 ($506,056 – $409,703)during Year 2. The current ratio increased slightly to 3.76 in Year 2. A current ratio of 3.76 indicates a strong solvency position. Thus, short-term creditors should not be concerned about receiving payment from Under Armour.

Ex. 4–22a.

Current assets……………Current liabilitites…………Working capital……………


b. Starbucks' working capital improved (increased) from Year 1 to Year 2 by $271,300 ($1,990,400 – $1,719,100). Starbucks' current ratio also improved(increased) from 1.83 in Year 1 to 1.90 in Year 2. The improved working capitaland current ratio indicate that short-term creditors should not be concernedabout receiving payment from Starbucks.

Ex. 4–231. i 6. f2. a 7. j3. g 8. e4. d 9. h5. c 10. b

($3,794,900 ÷ $2,075,800)

$1,990,400 $1,719,100

1.90 1.83

December 31

Year 2 Year 1

3.76($689,663 ÷ $183,607)

Year 1Year 2$689,663

183,607$506,056

$4,199,600 $3,794,900

$558,850149,147

2,209,200 2,075,800

($4,199,600 ÷ $2,209,200)

$409,703

3.75($558,850 ÷ $149,147)



Ex. 4–24

Account Title Debit Credit Debit Credit Cash 12 12 Accounts Receivable 90 (a) 13 103 Supplies 8 (b) 4 4 Prepaid Insurance 12 (c) 10 2 Land 190 190 Equipment 50 50 Accum. Depr.—Equipment 4 (d) 3 7 Accounts Payable 36 36 Wages Payable 0 (e) 1 1 Brenda Schultz, Capital 260 260 Brenda Schultz, Drawing 8 8 Fees Earned 200 (a) 13 213 Wages Expense 110 (e) 1 111 Rent Expense 12 12 Insurance Expense 0 (c) 10 10 Utilities Expense 6 6 Supplies Expense 0 (b) 4 4 Depreciation Expense 0 (d) 3 3 Miscellaneous Expense 2 2 Totals 500 500 31 31 517 517

ALERT SECURITY SERVICES CO.End-of-Period Spreadsheet (Work Sheet)

For the Year Ended October 31, 2016Unadjusted Adjusted

Debit CreditTrial Balance Adjustments Trial Balance



Ex. 4–25

Account Title Debit Credit Debit Credit Cash 12 12 Accounts Receivable 103 103 Supplies 4 4 Prepaid Insurance 2 2 Land 190 190 Equipment 50 50 Accum. Depr.—Equipment 7 7 Accounts Payable 36 36 Wages Payable 1 1 Brenda Schultz, Capital 260 260 Brenda Schultz, Drawing 8 8 Fees Earned 213 213 Wages Expense 111 111 Rent Expense 12 12 Insurance Expense 10 10 Utilities Expense 6 6 Supplies Expense 4 4 Depreciation Expense 3 3 Miscellaneous Expense 2 2 Totals 517 517 148 213 369 304 Net income (loss) 65 65

213 213 369 369

ALERT SECURITY SERVICES CO.End-of-Period Spreadsheet (Work Sheet)

For the Year Ended October 31, 2016Adjusted BalanceIncome

Debit CreditTrial Balance Statement Sheet



Ex. 4–26

Fees earned $213Expenses:

Wages expense $111Rent expense 12Insurance expense 10Utilities expense 6Supplies expense 4Depreciation expense 3Miscellaneous expense 2

Total expenses 148Net income $ 65

Brenda Schultz, capital, November 1, 2015 $260Net income $65Less withdrawals 8Increase in owner’s equity 57Brenda Schultz, capital, October 31, 2016 $317

Statement of Owner’s EquityFor the Year Ended October 31, 2016

ALERT SECURITY SERVICES CO.Income Statement

For the Year Ended October 31, 2016

ALERT SECURITY SERVICES CO.



Ex. 4–26 (Concluded)

Current assets: Current liabilities:Cash $ 12 Accounts payable $36Accounts receivable 103 Wages payable 1Supplies 4 Total liabilities $ 37Prepaid insurance 2

Total current assets $121Property, plant, and equipment:

Land $190Equipment $50Less accumulated depreciation 7 43Total property, plant, and Brenda Schultz, capital 317

equipment 233 Total liabilities and owner’sTotal assets $354 equity $354

ALERT SECURITY SERVICES CO.Balance Sheet

October 31, 2016Assets Liabilities

Owner’s Equity



Ex. 4–27

2016 Oct. 31 Accounts Receivable 13

Fees Earned 13Accrued fees.

31 Supplies Expense 4Supplies 4

Supplies used ($8 – $4).

31 Insurance Expense 10Prepaid Insurance 10

Insurance expired.

31 Depreciation Expense 3Accumulated Depreciation—Equipment 3

Equipment depreciation.

31 Wages Expense 1Wages Payable 1

Accrued wages.

Ex. 4–28

2016 Oct. 31 Fees Earned 213

Income Summary 213

31 Income Summary 148Wages Expense 111Rent Expense 12Insurance Expense 10Utilities Expense 6Supplies Expense 4Depreciation Expense 3Miscellaneous Expense 2

31 Income Summary 65Brenda Schultz, Capital 65

31 Brenda Schultz, Capital 8Brenda Schultz, Drawing 8

Adjusting Entries

Closing Entries




Prob. 4–1A

1.

Fees earned $375,000Rent revenue 1,300

Total revenues $376,300Expenses:

Salaries and wages expense $168,000Advertising expense 21,700Utilities expense 11,400Depreciation expense—building 10,100Repairs expense 8,850Depreciation expense—equipment 6,680Insurance expense 3,000Supplies expense 2,250Miscellaneous expense 4,320


2.

Ted Hickman, capital, January 1, 2016 $203,100Net income for the year $140,000Less withdrawals 10,000Increase in owner’s equity 130,000Ted Hickman, capital, December 31, 2016 $333,100

PROBLEMS

LAMP LIGHT COMPANYStatement of Owner’s Equity


LAMP LIGHT COMPANYIncome Statement




Prob. 4–1A (Continued)

3.

Current assets: Current liabilities:Cash $ 10,800 Accounts payable $15,700Accounts receivable 50,200 Salaries and wages payable 4,900Prepaid insurance 1,200 Unearned rent 800Supplies 480 Total liabilities $ 21,400


Land $ 98,000Building $400,000Less accumulated depreciation 215,400 184,600 Ted Hickman, capital 333,100Equipment $101,000Less accumulated depreciation 91,780 9,220

Total property, plant, andequipment 291,820 Total liabilities and owner’s


LAMP LIGHT COMPANYBalance Sheet

December 31, 2016Assets Liabilities

Owner’s Equity


Prob. 4–1A (Concluded)

4. 2016 Dec. 31 Fees Earned 375,000

Rent Revenue 1,300Income Summary 376,300

31 Income Summary 236,300Salaries and Wages Expense 168,000Advertising Expense 21,700Utilities Expense 11,400Depreciation Expense—Building 10,100Repairs Expense 8,850Depreciation Expense—Equipment 6,680Insurance Expense 3,000Supplies Expense 2,250Miscellaneous Expense 4,320

31 Income Summary 140,000Ted Hickman, Capital 140,000

31 Ted Hickman, Capital 10,000Ted Hickman, Drawing 10,000

5.


Cash 10,800Accounts Receivable 50,200Prepaid Insurance 1,200Supplies 480Land 98,000Building 400,000Accumulated Depreciation—Building 215,400Equipment 101,000Accumulated Depreciation—Equipment 91,780Accounts Payable 15,700Salaries and Wages Payable 4,900Unearned Rent 800Ted Hickman, Capital 333,100

661,680 661,680

LAMP LIGHT COMPANYPost-Closing Trial Balance

December 31, 2016

Closing Entries




Prob. 4–2A

1.

Revenues:Service fees $718,000Rent revenue 12,000


Salaries expense $522,100Rent expense 48,000Supplies expense 10,800Depreciation expense—building 8,750Utilities expense 7,150Repairs expense 3,000Insurance expense 2,500Miscellaneous expense 6,200


Stacy Tanner, capital, July 1, 2015 $373,800Net income for the year $121,500Less withdrawals 12,000Increase in owner’s equity 109,500Stacy Tanner, capital, June 30, 2016 $483,300

FINDERS INVESTIGATIVE SERVICESStatement of Owner’s Equity


FINDERS INVESTIGATIVE SERVICESIncome Statement





Current assets: Current liabilities:Cash $28,000 Accounts payable $11,700Accounts receivable 69,600 Salaries payable 3,000Supplies 4,600 Unearned rent 2,000Prepaid insurance 2,500 Total liabilities $ 16,700


Building $439,500Less accum. depreciation 44,200 Stacy Tanner, capital 483,300

Total property, plant, and building 395,300 Total liabilities and owner’s


FINDERS INVESTIGATIVE SERVICESBalance SheetJune 30, 2016

Assets Liabilities

Owner’s Equity




2. 2016 June 30 Service Fees 718,000


30 Income Summary 608,500Salaries Expense 522,100Rent Expense 48,000Supplies Expense 10,800Depreciation Expense—Building 8,750Utilities Expense 7,150Repairs Expense 3,000Insurance Expense 2,500Miscellaneous Expense 6,200

30 Income Summary 121,500Stacy Tanner, Capital 121,500

30 Stacy Tanner, Capital 12,000Stacy Tanner, Drawing 12,000

3. $18,000 ($30,000 – $12,000) net loss. The $30,000 decrease is caused by the $12,000 withdrawals and a $18,000 net loss.

Closing Entries



Prob. 4–3A 1., 3., and 6.

June 30 Bal. 11,000

June 30 Bal. 21,500 June 30 Adj. 17,90030 Adj. Bal. 3,600

June 30 Bal. 9,600 June 30 Adj. 5,70030 Adj. Bal. 3,900

June 30 Bal. 232,600

June 30 Bal. 125,40030 Adj. 6,50030 Adj. Bal. 131,900

June 30 Bal. 11,800

June 30 Adj. 1,100

June 30 Clos. 10,000 June 30 Bal. 105,60030 Clos. 10,70030 Bal. 106,300

June 30 Bal. 10,000 June 30 Clos. 10,000

Cash

Laundry Supplies

Prepaid Insurance

Laundry Equipment

Sophie Perez, Drawing

Accumulated Depreciation

Accounts Payable

Wages Payable

Sophie Perez, Capital




June 30 Clos. 221,500 June 30 Clos. 232,200Clos. 10,700

June 30 Clos. 232,200 June 30 Bal. 232,200

June 30 Bal. 125,200 June 30 Clos. 126,30030 Adj. 1,10030 Adj. Bal. 126,300



June 30 Adj. 17,900 June 30 Clos. 17,900




Laundry Supplies Expense

Depreciation Expense

Insurance Expense

Miscellaneous Expense

Wages Expense

Rent Expense

Utilities Expense

Income Summary

Laundry Revenue


Prob. 4–3A (Continued)2. Optional (Appendix)

Account Title Debit Credit Debit Credit Debit Credit Debit CreditCash 11,000 11,000 11,000Laundry Supplies 21,500 (a) 17,900 3,600 3,600Prepaid Insurance 9,600 (b) 5,700 3,900 3,900Laundry Equipment 232,600 232,600 232,600Accum. Depreciation 125,400 (c) 6,500 131,900 131,900Accounts Payable 11,800 11,800 11,800Wages Payable (d) 1,100 1,100 1,100Sophie Perez, Capital 105,600 105,600 105,600Sophie Perez, Drawing 10,000 10,000 10,000Laundry Revenue 232,200 232,200 232,200Wages Expense 125,200 (d) 1,100 126,300 126,300Rent Expense 40,000 40,000 40,000Utilities Expense 19,700 19,700 19,700Laundry Supplies Exp. (a) 17,900 17,900 17,900Depreciation Expense (c) 6,500 6,500 6,500Insurance Expense (b) 5,700 5,700 5,700Miscellaneous Expense 5,400 5,400 5,400

475,000 475,000 31,200 31,200 482,600 482,600 221,500 232,200 261,100 250,400Net income 10,700 10,700

232,200 232,200 261,100 261,100

SheetTrial BalanceDebit Credit

Trial BalanceIncome

StatementAdjustments

EPICENTER LAUNDRYEnd-of-Period Spreadsheet (Work Sheet)

For the Year Ended June 30, 2016BalanceUnadjusted Adjusted





3. 2016 June 30 Laundry Supplies Expense 17,900

Laundry Supplies 17,900Supplies used ($21,500 – $3,600).

30 Insurance Expense 5,700Prepaid Insurance 5,700

Insurance expired.

30 Depreciation Expense 6,500Accumulated Depreciation 6,500


30 Wages Expense 1,100Wages Payable 1,100

Accrued wages.

4.


Cash 11,000Laundry Supplies 3,600Prepaid Insurance 3,900Laundry Equipment 232,600Accumulated Depreciation 131,900Accounts Payable 11,800Wages Payable 1,100Sophie Perez, Capital 105,600Sophie Perez, Drawing 10,000Laundry Revenue 232,200Wages Expense 126,300Rent Expense 40,000Utilities Expense 19,700Laundry Supplies Expense 17,900Depreciation Expense 6,500Insurance Expense 5,700Miscellaneous Expense 5,400

482,600 482,600

EPICENTER LAUNDRYAdjusted Trial Balance

June 30, 2016

Adjusting Entries




5.

Laundry revenue $232,200Expenses:

Wages expense $126,300Rent expense 40,000Utilities expense 19,700Laundry supplies expense 17,900Depreciation expense 6,500Insurance expense 5,700Miscellaneous expense 5,400


Sophie Perez, capital, July 1, 2015 $105,600Net income for the year $10,700Less withdrawals 10,000Increase in owner’s equity 700Sophie Perez, capital, June 30, 2016 $106,300

Statement of Owner’s EquityFor the Year Ended June 30, 2016

EPICENTER LAUNDRYIncome Statement


EPICENTER LAUNDRY




Current assets: Current liabilities:Cash $ 11,000 Accounts payable $11,800Laundry supplies 3,600 Wages payable 1,100Prepaid insurance 3,900 Total liabilities $ 12,900


Laundry equipment $232,600Less accum. depreciation 131,900

Total property, plant, and Sophie Perez, capital 106,300equipment 100,700 Total liabilities and owner’s


EPICENTER LAUNDRYBalance SheetJune 30, 2016

Assets Liabilities

Owner’s Equity




6. 2016 June 30 Laundry Revenue 232,200

Income Summary 232,200

30 Income Summary 221,500Wages Expense 126,300Rent Expense 40,000Utilities Expense 19,700Laundry Supplies Expense 17,900Depreciation Expense 6,500Insurance Expense 5,700Miscellaneous Expense 5,400

30 Income Summary 10,700Sophie Perez, Capital 10,700

30 Sophie Perez Capital 10,000Sophie Perez, Drawing 10,000

7.


Cash 11,000Laundry Supplies 3,600Prepaid Insurance 3,900Laundry Equipment 232,600Accumulated Depreciation 131,900Accounts Payable 11,800Wages Payable 1,100Sophie Perez, Capital 106,300

251,100 251,100

EPICENTER LAUNDRYPost-Closing Trial Balance

June 30, 2016

Closing Entries



Prob. 4–4A1., 3., and 6.

Account No. 11

Post.Item Ref. Debit Credit Debit Credit

2016 Mar. 31 Balance 12,000

Account No. 13


2016 Mar. 31 Balance 30,000

31 Adjusting 26 22,500 7,500

Account No. 14


2016 Mar. 31 Balance 3,600

31 Adjusting 26 1,800 1,800

Account No. 16


2016 Mar. 31 Balance 110,000

Account No. 17


2016 Mar. 31 Balance 25,000

31 Adjusting 26 8,350 33,350

Account No. 18


2016 Mar. 31 Balance 60,000

BalanceDate

Account: Prepaid Insurance

Account: Accumulated Depreciation—Equipment

BalanceDate

Account: Trucks

BalanceDate

CashAccount:

Account: Supplies

BalanceDate

DateBalance

BalanceDate

Account: Equipment




Account No. 19


2016 Mar. 31 Balance 15,000

31 Adjusting 26 6,200 21,200

Account No. 21


2016 Mar. 31 Balance 4,000

Account No. 22


2016 Mar. 31 Adjusting 26 600 600

Account No. 31


2016 Mar. 31 Balance 96,000

31 Closing 27 51,150 147,15031 Closing 27 15,000 132,150

Account No. 32


2016 Mar. 31 Balance 15,000

31 Closing 27 15,000 — —

Account: Wages Payable

BalanceDate

Account: Kaya Tarango, Capital

BalanceDate

Account: Kaya Tarango, Drawing

Accumulated Depreciation—TrucksAccount:

Account: Accounts Payable

BalanceDate

DateBalance

BalanceDate




Account No. 33


2016 Mar. 31 Closing 27 160,000 160,000

31 Closing 27 108,850 51,15031 Closing 27 51,150 — —

Account No. 41


2016 Mar. 31 Balance 160,000

31 Closing 27 160,000 — —

Account No. 51


2016 Mar. 31 Balance 45,000

31 Adjusting 26 600 45,60031 Closing 27 45,600 — —

Account No. 52


2016 Mar. 31 Adjusting 26 22,500 22,500

31 Closing 27 22,500 — —

Account No. 53


2016 Mar. 31 Balance 10,600

31 Closing 27 10,600 — —

DateBalance

Income SummaryAccount:

BalanceDate

Account: Service Revenue

BalanceDate

BalanceDate

Account: Rent Expense

Account: Wages Expense

BalanceDate

Account: Supplies Expense




Account No. 54


2016 Mar. 31 Balance 9,000

31 Closing 27 9,000 — —

Account No. 55


2016 Mar. 31 Adjusting 26 8,350 8,350

31 Closing 27 8,350 — —

Account No. 56


2016 Mar. 31 Adjusting 26 6,200 6,200

31 Closing 27 6,200 — —

Account No. 57


2016 Mar. 31 Adjusting 26 1,800 1,800

31 Closing 27 1,800 — —

Account No. 59


2016 Mar. 31 Balance 4,800

31 Closing 27 4,800 — —

Account: Insurance Expense

DateBalance

Balance

BalanceDate

Truck ExpenseAccount:

Account: Depreciation Expense—Trucks

Account: Depreciation Expense—Equipment

Date

BalanceDate

Account: Miscellaneous Expense

BalanceDate



Account Title Debit Credit Debit Credit Debit Credit Debit CreditCash 12,000 12,000 12,000Supplies 30,000 (a) 22,500 7,500 7,500Prepaid Insurance 3,600 (b) 1,800 1,800 1,800Equipment 110,000 110,000 110,000Accum. Depr.—Equip. 25,000 (c) 8,350 33,350 33,350Trucks 60,000 60,000 60,000Accum. Depr.—Trucks 15,000 (d) 6,200 21,200 21,200Accounts Payable 4,000 4,000 4,000Wages Payable (e) 600 600 600Kaya Tarango, Capital 96,000 96,000 96,000Kaya Tarango, Drawing 15,000 15,000 15,000Service Revenue 160,000 160,000 160,000Wages Expense 45,000 (e) 600 45,600 45,600Supplies Expense (a) 22,500 22,500 22,500Rent Expense 10,600 10,600 10,600Truck Expense 9,000 9,000 9,000Depr. Exp.—Equipment (c) 8,350 8,350 8,350Depr. Exp.—Trucks (d) 6,200 6,200 6,200Insurance Expense (b) 1,800 1,800 1,800Miscellaneous Expense 4,800 4,800 4,800

300,000 300,000 39,450 39,450 315,150 315,150 108,850 160,000 206,300 155,150Net income 51,150 51,150

160,000 160,000 206,300 206,300


Trial BalanceIncome


LAKOTA FREIGHT CO.End-of-Period Spreadsheet (Work Sheet)

For the Year Ended March 31, 2016BalanceUnadjusted Adjusted




Prob. 4–4A (Continued)3. Page 26

Post.Ref. Debit Credit

2016 Mar. 31 Supplies Expense 52 22,500

Supplies 13 22,500Supplies used ($30,000 – $7,500).

31 Insurance Expense 57 1,800Prepaid Insurance 14 1,800

Insurance expired.

31 Depreciation Expense—Equipment 55 8,350Accumulated Depr.—Equipment 17 8,350


31 Depreciation Expense—Trucks 56 6,200Accumulated Depr.—Trucks 19 6,200

Truck depreciation.

31 Wages Expense 51 600Wages Payable 22 600

Accrued wages.

DateAdjusting Entries

JOURNAL




4.


Cash 12,000Supplies 7,500Prepaid Insurance 1,800Equipment 110,000Accumulated Depreciation—Equipment 33,350Trucks 60,000Accumulated Depreciation—Trucks 21,200Accounts Payable 4,000Wages Payable 600Kaya Tarango, Capital 96,000Kaya Tarango, Drawing 15,000Service Revenue 160,000Wages Expense 45,600Supplies Expense 22,500Rent Expense 10,600Truck Expense 9,000Depreciation Expense—Equipment 8,350Depreciation Expense—Trucks 6,200Insurance Expense 1,800Miscellaneous Expense 4,800

315,150 315,150

Adjusted Trial BalanceMarch 31, 2016

LAKOTA FREIGHT CO.




5.


Wages expense $45,600Supplies expense 22,500Rent expense 10,600Truck expense 9,000Depreciation expense—equipment 8,350Depreciation expense—trucks 6,200Insurance expense 1,800Miscellaneous expense 4,800


Kaya Tarango, capital, April 1, 2015 $ 96,000Net income for the year $51,150Less withdrawals 15,000Increase in owner’s equity 36,150Kaya Tarango, capital, March 31, 2016 $132,150

LAKOTA FREIGHT CO.Income Statement

For the Year Ended March 31, 2016

LAKOTA FREIGHT CO.Statement of Owner’s Equity

For the Year Ended March 31, 2016




Current assets: Current liabilities:Cash $12,000 Accounts payable $4,000Supplies 7,500 Wages payable 600Prepaid insurance 1,800 Total liabilities $ 4,600


Equipment $110,000Less accum. depreciation 33,350 $76,650 Kaya Tarango, capital 132,150Trucks $ 60,000Less accum. depreciation 21,200 38,800



LAKOTA FREIGHT CO.Balance SheetMarch 31, 2016

Assets Liabilities

Owner’s Equity



Prob. 4–4A (Concluded)6. Page 27


2016 Mar. 31 Service Revenue 41 160,000

Income Summary 33 160,000

31 Income Summary 33 108,850Wages Expense 51 45,600Supplies Expense 52 22,500Rent Expense 53 10,600Truck Expense 54 9,000Depreciation Expense—Equipment 55 8,350Depreciation Expense—Trucks 56 6,200Insurance Expense 57 1,800Miscellaneous Expense 59 4,800

31 Income Summary 33 51,150Kaya Tarango, Capital 31 51,150

31 Kaya Tarango, Capital 31 15,000Kaya Tarango, Drawing 32 15,000

7.


Cash 12,000Supplies 7,500Prepaid Insurance 1,800Equipment 110,000Accumulated Depreciation—Equipment 33,350Trucks 60,000Accumulated Depreciation—Trucks 21,200Accounts Payable 4,000Wages Payable 600Kaya Tarango, Capital 132,150

191,300 191,300

JOURNAL

March 31, 2016

Closing EntriesDate

LAKOTA FREIGHT CO.Post-Closing Trial Balance



Prob. 4–5A1. and 2.

Page 1


2016 July 1 Cash 11 13,500

Accounts Receivable 12 20,800Supplies 14 3,200Office Equipment 18 7,500

Steffy Lopez, Capital 31 45,000

1 Prepaid Rent 15 4,800Cash 11 4,800

2 Prepaid Insurance 16 4,500Cash 11 4,500

4 Cash 11 5,500Unearned Fees 23 5,500

5 Office Equipment 18 6,500Accounts Payable 21 6,500

6 Cash 11 15,300Accounts Receivable 12 15,300

10 Miscellaneous Expense 59 400Cash 11 400

12 Accounts Payable 21 5,200Cash 11 5,200

12 Accounts Receivable 12 13,300Fees Earned 41 13,300

14 Salary Expense 51 1,750Cash 11 1,750

Date

JOURNAL



Prob. 4–5A (Continued)Page 2


2016 July 17 Cash 11 9,450

Fees Earned 41 9,450

18 Supplies 14 600Cash 11 600


24 Cash 11 4,000Fees Earned 41 4,000





31 Cash 11 5,200Fees Earned 41 5,200


31 Steffy Lopez, Drawing 32 12,500Cash 11 12,500

Date

JOURNAL



Prob. 4–5A (Continued)2., 6., and 9.

Account No. 11


2016 July 1 1 13,500 13,500

1 1 4,800 8,7002 1 4,500 4,2004 1 5,500 9,7006 1 15,300 25,000

10 1 400 24,60012 1 5,200 19,40014 1 1,750 17,65017 2 9,450 27,10018 2 600 26,50024 2 4,000 30,50026 2 12,000 42,50027 2 1,750 40,75029 2 325 40,42531 2 675 39,75031 2 5,200 44,95031 2 12,500 32,450

Account No. 12


2016 July 1 1 20,800 20,800

6 1 15,300 5,50012 1 13,300 18,80020 2 6,650 25,45026 2 12,000 13,45031 2 3,000 16,450

Account No. 14


2016 July 1 1 3,200 3,200

18 2 600 3,80031 Adjusting 3 2,275 1,525

Account: Supplies

CashAccount:

Account: Accounts Receivable

BalanceDate

DateBalance

BalanceDate




Account No. 15


2016 July 1 1 4,800 4,800

31 Adjusting 3 2,400 2,400

Account No. 16


2016 July 2 1 4,500 4,500

31 Adjusting 3 375 4,125

Account No. 18


2016 July 1 1 7,500 7,500

5 1 6,500 14,000

Account No. 19


2016 July 31 Adjusting 3 750 750

Account No. 21


2016 July 5 1 6,500 6,500

12 1 5,200 1,300

Account No. 22



BalanceDate

DateBalance

Prepaid RentAccount:


BalanceDate

Account: Office Equipment

BalanceDate

Account: Accumulated Depreciation

BalanceDate


BalanceDate

Account: Salaries Payable




Account No. 23


2016 July 4 1 5,500 5,500

31 Adjusting 3 2,750 2,750

Account No. 31


2016 July 1 1 45,000 45,000

31 Closing 4 33,475 78,47531 Closing 4 12,500 65,975

Account No. 32


2016 July 31 2 12,500 12,500

31 Closing 4 12,500 — —

Account No. 33


2016 July 31 Closing 4 44,350 44,350

31 Closing 4 10,875 33,47531 Closing 4 33,475 — —

Account: Steffy Lopez, Drawing

Account: Income Summary

BalanceDate

Unearned FeesAccount:

Account: Steffy Lopez, Capital

BalanceDate

DateBalance

BalanceDate




Account No. 41


2016 July 12 1 13,300 13,300

17 2 9,450 22,75020 2 6,650 29,40024 2 4,000 33,40031 2 5,200 38,60031 2 3,000 41,60031 Adjusting 3 2,750 44,35031 Closing 4 44,350 — —

Account No. 51


2016 July 14 1 1,750 1,750

27 2 1,750 3,50031 Adjusting 3 175 3,67531 Closing 4 3,675 — —

Account No. 52


2016 July 31 Adjusting 3 2,400 2,400

31 Closing 4 2,400 — —

Account No. 53


2016 July 31 Adjusting 3 2,275 2,275

31 Closing 4 2,275 — —

BalanceDate


BalanceDate


DateBalance

Salary ExpenseAccount:

Account: Fees Earned

BalanceDate




Account No. 54



31 Closing 4 750 — —

Account No. 55



31 Closing 4 375 — —

Account No. 59


2016 July 10 1 400 400

29 2 325 72531 2 675 1,40031 Closing 4 1,400 — —

BalanceDate


BalanceDate

Account: Depreciation Expense

BalanceDate





3.


Cash 32,450Accounts Receivable 16,450Supplies 3,800Prepaid Rent 4,800Prepaid Insurance 4,500Office Equipment 14,000Accumulated Depreciation 0Accounts Payable 1,300Salaries Payable 0Unearned Fees 5,500Steffy Lopez, Capital 45,000Steffy Lopez, Drawing 12,500Fees Earned 41,600Salary Expense 3,500Rent Expense 0Supplies Expense 0Depreciation Expense 0Insurance Expense 0Miscellaneous Expense 1,400

93,400 93,400

Unadjusted Trial BalanceJuly 31, 2016

DIAMOND CONSULTING



Account Title Debit Credit Debit Credit Debit Credit Debit CreditCash 32,450 32,450 32,450Accounts Receivable 16,450 16,450 16,450Supplies 3,800 (b) 2,275 1,525 1,525Prepaid Rent 4,800 (e) 2,400 2,400 2,400Prepaid Insurance 4,500 (a) 375 4,125 4,125Office Equipment 14,000 14,000 14,000Accum. Depreciation (c) 750 750 750Accounts Payable 1,300 1,300 1,300Salaries Payable (d) 175 175 175Unearned Fees 5,500 (f) 2,750 2,750 2,750Steffy Lopez, Capital 45,000 45,000 45,000Steffy Lopez, Drawing 12,500 12,500 12,500Fees Earned 41,600 (f) 2,750 44,350 44,350Salary Expense 3,500 (d) 175 3,675 3,675Rent Expense (e) 2,400 2,400 2,400Supplies Expense (b) 2,275 2,275 2,275Depreciation Expense (c) 750 750 750Insurance Expense (a) 375 375 375Miscellaneous Expense 1,400 1,400 1,400

93,400 93,400 8,725 8,725 94,325 94,325 10,875 44,350 83,450 49,975Net income 33,475 33,475

44,350 44,350 83,450 83,450

DIAMOND CONSULTINGEnd-of-Period Spreadsheet (Work Sheet)

For the Month Ended July 31, 2016BalanceUnadjusted Adjusted Income


Trial Balance StatementAdjustments





6. Page 3


2016 July 31 Insurance Expense 55 375

Prepaid Insurance 16 375Insurance expired.

31 Supplies Expense 53 2,275Supplies 14 2,275

Supplies used ($3,800 – $1,525).

31 Depreciation Expense 54 750Accumulated Depreciation 19 750


31 Salary Expense 51 175Salaries Payable 22 175

Accrued salaries.

31 Rent Expense 52 2,400Prepaid Rent 15 2,400

Rent expired.

31 Unearned Fees 23 2,750Fees Earned 41 2,750

Unearned fees earned ($5,500 – $2,750).


JOURNAL




7.


Cash 32,450Accounts Receivable 16,450Supplies 1,525Prepaid Rent 2,400Prepaid Insurance 4,125Office Equipment 14,000Accumulated Depreciation 750Accounts Payable 1,300Salaries Payable 175Unearned Fees 2,750Steffy Lopez, Capital 45,000Steffy Lopez, Drawing 12,500Fees Earned 44,350Salary Expense 3,675Rent Expense 2,400Supplies Expense 2,275Depreciation Expense 750Insurance Expense 375Miscellaneous Expense 1,400

94,325 94,325

Adjusted Trial BalanceJuly 31, 2016

DIAMOND CONSULTING




8.


Salary expense $3,675Rent expense 2,400Supplies expense 2,275Depreciation expense 750Insurance Expense 375Miscellaneous expense 1,400


Steffy Lopez, capital, July 1, 2016 $ 0Investments during month $45,000Net income 33,475

$78,475Less withdrawals 12,500Increase in owner’s equity 65,975Steffy Lopez, capital, July 31, 2016 $65,975

DIAMOND CONSULTINGStatement of Owner’s Equity

For the Month Ended July 31, 2016

DIAMOND CONSULTINGIncome Statement

For the Month Ended July 31, 2016




Current assets: Current liabilities:Cash $32,450 Accounts payable $1,300Accounts receivable 16,450 Salaries payable 175Supplies 1,525 Unearned fees 2,750Prepaid rent 2,400 Total liabilities $ 4,225Prepaid insurance 4,125


Office equipment $14,000Less accum. depreciation 750 Steffy Lopez, capital 65,975



DIAMOND CONSULTINGBalance SheetJuly 31, 2016

Assets Liabilities

Owner’s Equity


Prob. 4–5A (Concluded) 9. Page 4


2016 July 31 Fees Earned 41 44,350


31 Income Summary 33 10,875Salary Expense 51 3,675Rent Expense 52 2,400Supplies Expense 53 2,275Depreciation Expense 54 750Insurance Expense 55 375Miscellaneous Expense 59 1,400

31 Income Summary 33 33,475Steffy Lopez, Capital 31 33,475

31 Steffy Lopez, Capital 31 12,500Steffy Lopez, Drawing 32 12,500

10.


Cash 32,450Accounts Receivable 16,450Supplies 1,525Prepaid Rent 2,400Prepaid Insurance 4,125Office Equipment 14,000Accumulated Depreciation 750Accounts Payable 1,300Salaries Payable 175Unearned Fees 2,750Steffy Lopez, Capital 65,975

70,950 70,950

JOURNAL

July 31, 2016

Closing EntriesDate

DIAMOND CONSULTINGPost-Closing Trial Balance




Prob. 4–1B

1.

Revenues:Fees earned $283,750Rent revenue 3,000


Salaries and wages expense $147,000Advertising expense 86,800Utilities expense 30,000Travel expense 18,750Depreciation expense—equipment 4,550Depreciation expense—building 3,000Supplies expense 1,500Insurance expense 1,300Miscellaneous expense 5,875

Total expenses 298,775Net loss $ 12,025

2.

Tami Garrigan, capital, July 1, 2015 $361,300Net loss for the year $12,025Add withdrawals 20,000Decrease in owner’s equity 32,025Tami Garrigan, capital, June 30, 2016 $329,275

LAST CHANCE COMPANYStatement of Owner’s Equity


LAST CHANCE COMPANYIncome Statement




Prob. 4–1B (Continued)

3.

Current assets: Current liabilities:Cash $ 5,100 Accounts payable $9,750Accounts receivable 26,500 Salaries and wages payable 1,900Prepaid insurance 2,300 Unearned rent 1,500Supplies 525 Total liabilities $ 13,150


Land $ 80,000Building $340,000Less accum. depreciation 193,000 147,000 Tami Garrigan, capital 329,275Equipment $140,000Less accum. depreciation 59,000 81,000



LAST CHANCE COMPANYBalance SheetJune 30, 2016

Assets Liabilities

Owner’s Equity



Prob. 4–1B (Concluded)

4. 2016 June 30 Fees Earned 283,750


30 Income Summary 298,775Salaries and Wages Expense 147,000Advertising Expense 86,800Utilities Expense 30,000Travel Expense 18,750Depreciation Expense—Equipment 4,550Depreciation Expense—Building 3,000Supplies Expense 1,500Insurance Expense 1,300Miscellaneous Expense 5,875

30 Tami Garrigan, Capital 12,025Income Summary 12,025

30 Tami Garrigan, Capital 20,000Tami Garrigan, Drawing 20,000

5.


Cash 5,100Accounts Receivable 26,500Prepaid Insurance 2,300Supplies 525Land 80,000Building 340,000Accumulated Depreciation—Building 193,000Equipment 140,000Accumulated Depreciation—Equipment 59,000Accounts Payable 9,750Salaries and Wages Payable 1,900Unearned Rent 1,500Tami Garrigan, Capital 329,275

594,425 594,425

LAST CHANCE COMPANYPost-Closing Trial Balance

June 30, 2016



Prob. 4–2B1.

Revenues:Service fees $468,000Rent revenue 5,000


Salaries expense $291,000Depreciation expense—equipment 17,500Rent expense 15,500Supplies expense 9,000Utilities expense 8,500Depreciation expense—buildings 6,600Repairs expense 3,450Insurance expense 3,000Miscellaneous expense 5,450


Nicole Gorman, capital, November 1, 2015 $220,000Net income for the year $113,000Less withdrawals 20,000Increase in owner’s equity 93,000Nicole Gorman, capital, October 31, 2016 $313,000

THE GORMAN GROUPStatement of Owner’s Equity


THE GORMAN GROUPIncome Statement





Current assets: Current liabilities:Cash $ 11,000 Accounts payable $33,300Accounts receivable 28,150 Salaries payable 3,300Supplies 6,350 Unearned rent 1,500Prepaid insurance 9,500 Total liabilities $ 38,100


Land $ 75,000Buildings $250,000Less accum. depreciation 117,200 132,800 Nicole Gorman, capital 313,000Equipment $240,000Less accum. depreciation 151,700 88,300



THE GORMAN GROUPBalance Sheet

October 31, 2016Assets Liabilities

Owner’s Equity




2. 2016 Oct. 31 Service Fees 468,000


31 Income Summary 360,000Salaries Expense 291,000Depreciation Expense—Equipment 17,500Rent Expense 15,500Supplies Expense 9,000Utilities Expense 8,500Depreciation Expense—Buildings 6,600Repairs Expense 3,450Insurance Expense 3,000Miscellaneous Expense 5,450

31 Income Summary 113,000Nicole Gorman, Capital 113,000

31 Nicole Gorman, Capital 20,000Nicole Gorman, Drawing 20,000

3. $135,000 ($115,000 + $20,000) net income. The $115,000 increase is caused by the net income of $135,000 less the $20,000 withdrawals.

Closing Entries



Prob. 4–3B 1., 3., and 6.

Aug. 31 Bal. 3,800

Aug. 31 Bal. 9,000 Aug. 31 Adj. 7,00031 Adj. Bal. 2,000

Aug. 31 Bal. 6,000 Aug. 31 Adj. 5,30031 Adj. Bal. 700

Aug. 31 Bal. 180,800

Aug. 31 Bal. 49,20031 Adj. 8,15031 Adj. Bal. 57,350

Aug. 31 Bal. 7,800

Aug. 31 Adj. 2,200

Aug. 31 Clos. 2,400 Aug. 31 Bal. 95,00031 Clos. 27,35031 Bal. 119,950

Aug. 31 Bal. 2,400 Aug. 31 Clos. 2,400Bobbi Downey, Drawing

Accumulated Depreciation

Accounts Payable

Wages Payable

Bobbi Downey, Capital

Cash

Laundry Supplies

Prepaid Insurance

Laundry Equipment




Aug. 31 Clos. 220,650 Aug. 31 Clos. 248,000Clos. 27,350

Aug. 31 Clos. 248,000 Aug. 31 Bal. 248,000

Aug. 31 Bal. 135,800 Aug. 31 Clos. 138,00031 Adj. 2,20031 Adj. Bal. 138,000

Aug. 31 Bal. 43,200 Aug. 31 Clos. 43,200

Aug. 31 Bal. 16,000 Aug. 31 Clos. 16,000

Aug. 31 Adj. 8,150 Aug. 31 Clos. 8,150

Aug. 31 Adj. 7,000 Aug. 31 Clos. 7,000

Aug. 31 Adj. 5,300 Aug. 31 Clos. 5,300

Aug. 31 Bal. 3,000 Aug. 31 Clos. 3,000

Depreciation Expense

Insurance Expense

Miscellaneous Expense

Income Summary

Laundry Revenue

Laundry Supplies Expense

Wages Expense

Rent Expense

Utilities Expense


Prob. 4–3B (Continued)2. Optional (Appendix)

Account Title Debit Credit Debit Credit Debit Credit Debit CreditCash 3,800 3,800 3,800Laundry Supplies 9,000 (c) 7,000 2,000 2,000Prepaid Insurance 6,000 (d) 5,300 700 700Laundry Equipment 180,800 180,800 180,800Accum. Depreciation 49,200 (b) 8,150 57,350 57,350Accounts Payable 7,800 7,800 7,800Wages Payable (a) 2,200 2,200 2,200Bobbi Downey, Capital 95,000 95,000 95,000Bobbi Downey, Drawing 2,400 2,400 2,400Laundry Revenue 248,000 248,000 248,000Wages Expense 135,800 (a) 2,200 138,000 138,000Rent Expense 43,200 43,200 43,200Utilities Expense 16,000 16,000 16,000Depreciation Expense (b) 8,150 8,150 8,150Laundry Supplies Exp. (c) 7,000 7,000 7,000Insurance Expense (d) 5,300 5,300 5,300Miscellaneous Expense 3,000 3,000 3,000

400,000 400,000 22,650 22,650 410,350 410,350 220,650 248,000 189,700 162,350Net income 27,350 27,350

248,000 248,000 189,700 189,700

LA MESA LAUNDRYEnd-of-Period Spreadsheet (Work Sheet)

For the Year Ended August 31, 2016BalanceUnadjusted Adjusted Income







3. 2016 Aug. 31 Wages Expense 2,200

Wages Payable 2,200Accrued wages.

31 Depreciation Expense 8,150Accumulated Depreciation 8,150


31 Laundry Supplies Expense 7,000Laundry Supplies 7,000

Supplies used ($9,000 – $2,000).

31 Insurance Expense 5,300Prepaid Insurance 5,300

Insurance expired.

4.


Cash 3,800Laundry Supplies 2,000Prepaid Insurance 700Laundry Equipment 180,800Accumulated Depreciation 57,350Accounts Payable 7,800Wages Payable 2,200Bobbi Downey, Capital 95,000Bobbi Downey, Drawing 2,400Laundry Revenue 248,000Wages Expense 138,000Rent Expense 43,200Utilities Expense 16,000Depreciation Expense 8,150Laundry Supplies Expense 7,000Insurance Expense 5,300Miscellaneous Expense 3,000

410,350 410,350

LA MESA LAUNDRYAdjusted Trial Balance

August 31, 2016

Adjusting Entries




5.

Laundry revenue $248,000Expenses:

Wages expense $138,000Rent expense 43,200Utilities expense 16,000Depreciation expense 8,150Laundry supplies expense 7,000Insurance expense 5,300Miscellaneous expense 3,000


Bobbi Downey, capital, September 1, 2015 $ 95,000Net income for the year $27,350Less withdrawals 2,400Increase in owner’s equity 24,950Bobbi Downey, capital, August 31, 2016 $119,950

Statement of Owner’s EquityFor the Year Ended August 31, 2016

LA MESA LAUNDRYIncome Statement

For the Year Ended August 31, 2016

LA MESA LAUNDRY




Current assets: Current liabilities:Cash $ 3,800 Accounts payable $7,800Laundry supplies 2,000 Wages payable 2,200Prepaid insurance 700 Total liabilities $ 10,000


Laundry equipment $180,800Less accum. depreciation 57,350

Total property, plant, and Bobbi Downey, capital 119,950equipment 123,450 Total liabilities and owner’s


LA MESA LAUNDRYBalance Sheet

August 31, 2016Assets Liabilities

Owner’s Equity




6. 2016 Aug. 31 Laundry Revenue 248,000

Income Summary 248,000

31 Income Summary 220,650Wages Expense 138,000Rent Expense 43,200Utilities Expense 16,000Depreciation Expense 8,150Laundry Supplies Expense 7,000Insurance Expense 5,300Miscellaneous Expense 3,000

31 Income Summary 27,350Bobbi Downey, Capital 27,350

31 Bobbi Downey, Capital 2,400Bobbi Downey, Drawing 2,400

7.


Cash 3,800Laundry Supplies 2,000Prepaid Insurance 700Laundry Equipment 180,800Accumulated Depreciation 57,350Accounts Payable 7,800Wages Payable 2,200Bobbi Downey, Capital 119,950

187,300 187,300

LA MESA LAUNDRYPost-Closing Trial Balance

August 31, 2016

Closing Entries



Prob. 4–4B1., 3., and 6.

Account No. 11


2016 Jan. 31 Balance 13,100

Account No. 13


2016 Jan. 31 Balance 8,000

31 Adjusting 26 5,150 2,850

Account No. 14


2016 Jan. 31 Balance 7,500

31 Adjusting 26 3,150 4,350

Account No. 16


2016 Jan. 31 Balance 113,000

Account No. 17


2016 Jan. 31 Balance 12,000

31 Adjusting 26 5,250 17,250

Account No. 18


2016 Jan. 31 Balance 90,000

BalanceDate

DateBalance

CashAccount:

Account: Supplies

BalanceDate


BalanceDate

Account: Equipment

BalanceDate

Account: Accumulated Depreciation—Equipment

BalanceDate

Account: Trucks




Account No. 19


2016 Jan. 31 Balance 27,100

31 Adjusting 26 4,000 31,100

Account No. 21


2016 Jan. 31 Balance 4,500

Account No. 22


2016 Jan. 31 Adjusting 26 900 900

Account No. 31


2016 Jan. 31 Balance 126,400

31 Closing 27 46,150 172,55031 Closing 27 3,000 169,550

Account No. 32


2016 Jan. 31 Balance 3,000

31 Closing 27 3,000 — —

DateBalance

Accumulated Depreciation—TrucksAccount:

BalanceDate


BalanceDate

BalanceDate

Account: Jeanne McQuay, Drawing


BalanceDate

Account: Jeanne McQuay, Capital




Account No. 33


2016 Jan. 31 Closing 27 155,000 155,000

31 Closing 27 108,850 46,15031 Closing 27 46,150 — —

Account No. 41


2016 Jan. 31 Balance 155,000

31 Closing 27 155,000 — —

Account No. 51


2016 Jan. 31 Balance 72,000

31 Adjusting 26 900 72,90031 Closing 27 72,900 — —

Account No. 52


2016 Jan. 31 Balance 7,600

31 Closing 27 7,600 — —

Account No. 53


2016 Jan. 31 Balance 5,350

31 Closing 27 5,350 — —

Account: Wages Expense

BalanceDate


BalanceDate

Account: Truck Expense

Income SummaryAccount:

Account: Service Revenue

BalanceDate

DateBalance

BalanceDate




Account No. 54


2016 Jan. 31 Adjusting 26 5,250 5,250

31 Closing 27 5,250 — —

Account No. 55


2016 Jan. 31 Adjusting 26 5,150 5,150

31 Closing 27 5,150 — —

Account No. 56


2016 Jan. 31 Adjusting 26 4,000 4,000

31 Closing 27 4,000 — —

Account No. 57


2016 Jan. 31 Adjusting 26 3,150 3,150

31 Closing 27 3,150 — —

Account No. 59


2016 Jan. 31 Balance 5,450

31 Closing 27 5,450 — —

Account: Depreciation Expense—Equipment

BalanceDate

BalanceDate


BalanceDate



BalanceDate

BalanceDate

Account: Depreciation Expense—Trucks



Account Title Debit Credit Debit Credit Debit Credit Debit CreditCash 13,100 13,100 13,100Supplies 8,000 (a) 5,150 2,850 2,850Prepaid Insurance 7,500 (b) 3,150 4,350 4,350Equipment 113,000 113,000 113,000Accum. Depr.—Equipment 12,000 (c) 5,250 17,250 17,250Trucks 90,000 90,000 90,000Accum. Depr.—Trucks 27,100 (d) 4,000 31,100 31,100Accounts Payable 4,500 4,500 4,500Wages Payable (e) 900 900 900Jeanne McQuay, Capital 126,400 126,400 126,400Jeanne McQuay, Drawing 3,000 3,000 3,000Service Revenue 155,000 155,000 155,000Wages Expense 72,000 (e) 900 72,900 72,900Rent Expense 7,600 7,600 7,600Truck Expense 5,350 5,350 5,350Depr. Exp.—Equipment (c) 5,250 5,250 5,250Supplies Expense (a) 5,150 5,150 5,150Depr. Exp.—Trucks (d) 4,000 4,000 4,000Insurance Expense (b) 3,150 3,150 3,150Miscellaneous Expense 5,450 5,450 5,450

325,000 325,000 18,450 18,450 335,150 335,150 108,850 155,000 226,300 180,150Net income 46,150 46,150

155,000 155,000 226,300 226,300

RECESSIVE INTERIORSEnd-of-Period Spreadsheet (Work Sheet)

For the Year Ended January 31, 2016BalanceUnadjusted Adjusted Income






Prob. 4–4B (Continued)3. Page 26


2016 Jan. 31 Supplies Expense 55 5,150

Supplies 13 5,150Supplies used ($8,000 – $2,850).

31 Insurance Expense 57 3,150Prepaid Insurance 14 3,150

Insurance expired.

31 Depreciation Expense—Equipment 54 5,250Accumulated Depr.—Equipment 17 5,250


31 Depreciation Expense—Trucks 56 4,000Accumulated Depr.—Trucks 19 4,000

Truck depreciation.

31 Wages Expense 51 900Wages Payable 22 900

Accrued wages.


JOURNAL




4.


Cash 13,100Supplies 2,850Prepaid Insurance 4,350Equipment 113,000Accumulated Depreciation—Equipment 17,250Trucks 90,000Accumulated Depreciation—Trucks 31,100Accounts Payable 4,500Wages Payable 900Jeanne McQuay, Capital 126,400Jeanne McQuay, Drawing 3,000Service Revenue 155,000Wages Expense 72,900Rent Expense 7,600Truck Expense 5,350Depreciation Expense—Equipment 5,250Supplies Expense 5,150Depreciation Expense—Trucks 4,000Insurance Expense 3,150Miscellaneous Expense 5,450

335,150 335,150

Adjusted Trial BalanceJanuary 31, 2016

RECESSIVE INTERIORS




5.


Wages expense $72,900Rent expense 7,600Truck expense 5,350Depreciation expense—equipment 5,250Supplies expense 5,150Depreciation expense—trucks 4,000Insurance expense 3,150Miscellaneous expense 5,450


Jeanne McQuay, capital, February 1, 2015 $126,400Net income for the year $46,150Less withdrawals 3,000Increase in owner’s equity 43,150Jeanne McQuay, capital, January 31, 2016 $169,550

RECESSIVE INTERIORSStatement of Owner’s Equity

For the Year Ended January 31, 2016

RECESSIVE INTERIORSIncome Statement

For the Year Ended January 31, 2016




Current assets: Current liabilities:Cash $13,100 Accounts payable $4,500Supplies 2,850 Wages payable 900Prepaid insurance 4,350 Total liabilities $ 5,400


Equipment $113,000Less accum. depreciation 17,250 $95,750 Jeanne McQuay, capital 169,550Trucks $ 90,000Less accum. depreciation 31,100 58,900



RECESSIVE INTERIORSBalance Sheet

January 31, 2016Assets Liabilities

Owner’s Equity



Prob. 4–4B (Concluded)6. Page 27


2016 Jan. 31 Service Revenue 41 155,000


31 Income Summary 33 108,850Wages Expense 51 72,900Rent Expense 52 7,600Truck Expense 53 5,350Depreciation Expense—Equipment 54 5,250Supplies Expense 55 5,150Depreciation Expense—Trucks 56 4,000Insurance Expense 57 3,150Miscellaneous Expense 59 5,450

31 Income Summary 33 46,150Jeanne McQuay, Capital 31 46,150

31 Jeanne McQuay, Capital 31 3,000Jeanne McQuay, Drawing 32 3,000

7.


Cash 13,100Supplies 2,850Prepaid Insurance 4,350Equipment 113,000Accumulated Depreciation—Equipment 17,250Trucks 90,000Accumulated Depreciation—Trucks 31,100Accounts Payable 4,500Wages Payable 900Jeanne McQuay, Capital 169,550

223,300 223,300

JOURNAL

January 31, 2016

Closing EntriesDate

RECESSIVE INTERIORSPost-Closing Trial Balance



Prob. 4–5B1. and 2.

Page 1


2016 Apr. 1 Cash 11 20,000

Accounts Receivable 12 14,700Supplies 14 3,300Office Equipment 18 12,000

Jeff Horton, Capital 31 50,000

1 Prepaid Rent 15 6,000Cash 11 6,000

2 Prepaid Insurance 16 4,200Cash 11 4,200

4 Cash 11 9,400Unearned Fees 23 9,400

5 Office Equipment 18 8,000Accounts Payable 21 8,000



12 Accounts Payable 21 6,400Cash 11 6,400



Date

JOURNAL



Prob. 4–5B (Continued)Page 2


2016 Apr. 17 Cash 11 6,600

Fees Earned 41 6,600

18 Supplies 14 725Cash 11 725


24 Cash 11 4,450Fees Earned 41 4,450





30 Cash 11 5,160Fees Earned 41 5,160


30 Jeff Horton, Drawing 32 18,000Cash 11 18,000

Date

JOURNAL



Prob. 4–5B (Continued)2., 6., and 9.

Account No. 11


2016 Apr. 1 1 20,000 20,000

1 1 6,000 14,0002 1 4,200 9,8004 1 9,400 19,2006 1 11,700 30,900

10 1 350 30,55012 1 6,400 24,15014 1 1,650 22,50017 2 6,600 29,10018 2 725 28,37524 2 4,450 32,82526 2 26,500 59,32527 2 1,650 57,67529 2 540 57,13530 2 760 56,37530 2 5,160 61,53530 2 18,000 43,535

Account No. 12


2016 Apr. 1 1 14,700 14,700

6 1 11,700 3,00012 1 21,900 24,90020 2 16,800 41,70026 2 26,500 15,20030 2 2,590 17,790

Account No. 14


2016 Apr. 1 1 3,300 3,300

18 2 725 4,02530 Adjusting 3 2,800 1,225

BalanceDate


BalanceDate

Account: Supplies

DateBalance

CashAccount:




Account No. 15


2016 Apr. 1 1 6,000 6,000

30 Adjusting 3 2,000 4,000

Account No. 16


2016 Apr. 2 1 4,200 4,200

30 Adjusting 3 350 3,850

Account No. 18


2016 Apr. 1 1 12,000 12,000

5 1 8,000 20,000

Account No. 19


2016 Apr. 30 Adjusting 3 400 400

Account No. 21


2016 Apr. 5 1 8,000 8,000

12 1 6,400 1,600

Account No. 22


2016 Apr. 30 Adjusting 3 275 275

BalanceDate



BalanceDate


BalanceDate



BalanceDate

DateBalance

BalanceDate





Account No. 23


2016 Apr. 4 1 9,400 9,400

30 Adjusting 3 7,050 2,350

Account No. 31


2016 Apr. 1 1 50,000 50,000

30 Closing 4 53,775 103,77530 Closing 4 18,000 85,775

Account No. 32


2016 Apr. 30 2 18,000 18,000

30 Closing 4 18,000 — —

Account No. 33


2016 Apr. 30 Closing 4 64,550 64,550

30 Closing 4 10,775 53,77530 Closing 4 53,775 — —


Account: Jeff Horton, Capital

BalanceDate

BalanceDate

DateBalance

Account: Jeff Horton, Drawing

BalanceDate





Account No. 41


2016 Apr. 12 1 21,900 21,900


Account No. 51


2016 Apr. 14 1 1,650 1,650

27 2 1,650 3,30030 Adjusting 3 275 3,57530 Closing 4 3,575 — —

Account No. 52


2016 Apr. 30 Adjusting 3 2,800 2,800

30 Closing 4 2,800 — —

Account No. 53


2016 Apr. 30 Adjusting 3 2,000 2,000

30 Closing 4 2,000 — —

BalanceDate


BalanceDate

DateBalance



BalanceDate





Account No. 54


2016 Apr. 30 Adjusting 3 400 400

30 Closing 4 400 — —

Account No. 55


2016 Apr. 30 Adjusting 3 350 350

30 Closing 4 350 — —

Account No. 59


2016 Apr. 10 1 350 350

29 2 540 89030 2 760 1,65030 Closing 4 1,650 — —

BalanceDate


BalanceDate


BalanceDate





3.


Cash 43,535Accounts Receivable 17,790Supplies 4,025Prepaid Rent 6,000Prepaid Insurance 4,200Office Equipment 20,000Accumulated Depreciation 0Accounts Payable 1,600Salaries Payable 0Unearned Fees 9,400Jeff Horton, Capital 50,000Jeff Horton, Drawing 18,000Fees Earned 57,500Salary Expense 3,300Supplies Expense 0Rent Expense 0Depreciation Expense 0Insurance Expense 0Miscellaneous Expense 1,650

118,500 118,500

Unadjusted Trial Balance April 30, 2016

ROSEBUD CONSULTING



Account Title Debit Credit Debit Credit Debit Credit Debit CreditCash 43,535 43,535 43,535Accounts Receivable 17,790 17,790 17,790Supplies 4,025 (b) 2,800 1,225 1,225Prepaid Rent 6,000 (e) 2,000 4,000 4,000Prepaid Insurance 4,200 (a) 350 3,850 3,850Office Equipment 20,000 20,000 20,000Accum. Depreciation (c) 400 400 400Accounts Payable 1,600 1,600 1,600Salaries Payable (d) 275 275 275Unearned Fees 9,400 (f) 7,050 2,350 2,350Jeff Horton, Capital 50,000 50,000 50,000Jeff Horton, Drawing 18,000 18,000 18,000Fees Earned 57,500 (f) 7,050 64,550 64,550Salary Expense 3,300 (d) 275 3,575 3,575Supplies Expense (b) 2,800 2,800 2,800Rent Expense (e) 2,000 2,000 2,000Depreciation Expense (c) 400 400 400Insurance Expense (a) 350 350 350Miscellaneous Expense 1,650 1,650 1,650

118,500 118,500 12,875 12,875 119,175 119,175 10,775 64,550 108,400 54,625Net income 53,775 53,775

64,550 64,550 108,400 108,400


Trial BalanceIncome


ROSEBUD CONSULTINGEnd-of-Period Spreadsheet (Work Sheet)

For the Month Ended April 30, 2016BalanceUnadjusted Adjusted




Prob. 4–5B (Continued)6. Page 3


2016 Apr. 30 Insurance Expense 55 350



Supplies used ($4,025 – $1,225).




Accrued salaries.


Rent expired.


Unearned fees earned ($9,400 – $2,350).


JOURNAL




7.


Cash 43,535Accounts Receivable 17,790Supplies 1,225Prepaid Rent 4,000Prepaid Insurance 3,850Office Equipment 20,000Accumulated Depreciation 400Accounts Payable 1,600Salaries Payable 275Unearned Fees 2,350Jeff Horton, Capital 50,000Jeff Horton, Drawing 18,000Fees Earned 64,550Salary Expense 3,575Supplies Expense 2,800Rent Expense 2,000Depreciation Expense 400Insurance Expense 350Miscellaneous Expense 1,650

119,175 119,175

Adjusted Trial BalanceApril 30, 2016

ROSEBUD CONSULTING




8.


Salary expense $3,575Supplies expense 2,800Rent expense 2,000Depreciation expense 400Insurance expense 350Miscellaneous expense 1,650


Jeff Horton, capital, April 1, 2016 $ 0Investment during month $ 50,000Net income 53,775

$103,775Less withdrawals 18,000Increase in owner’s equity 85,775Jeff Horton, capital, April 30, 2016 $85,775

ROSEBUD CONSULTINGIncome Statement

For the Month Ended April 30, 2016

ROSEBUD CONSULTINGStatement of Owner’s Equity

For the Month Ended April 30, 2016




Current assets: Current liabilities:Cash $43,535 Accounts payable $1,600Accounts receivable 17,790 Salaries payable 275Supplies 1,225 Unearned fees 2,350Prepaid rent 4,000 Total liabilities $ 4,225Prepaid insurance 3,850


Office equipment $20,000Less accum. depreciation 400 Jeff Horton, capital 85,775



ROSEBUD CONSULTINGBalance SheetApril 30, 2016

Assets Liabilities

Owner’s Equity



Prob. 4–5B (Concluded) 9. Page 4


2016 Apr. 30 Fees Earned 41 64,550


30 Income Summary 33 10,775Salary Expense 51 3,575Supplies Expense 52 2,800Rent Expense 53 2,000Depreciation Expense 54 400Insurance Expense 55 350Miscellaneous Expense 59 1,650

30 Income Summary 33 53,775Jeff Horton, Capital 31 53,775

30 Jeff Horton, Capital 31 18,000Jeff Horton, Drawing 32 18,000

10.


Cash 43,535Accounts Receivable 17,790Supplies 1,225Prepaid Rent 4,000Prepaid Insurance 3,850Office Equipment 20,000Accumulated Depreciation 400Accounts Payable 1,600Salaries Payable 275Unearned Fees 2,350Jeff Horton, Capital 85,775

90,400 90,400

JOURNAL

April 30, 2016

Closing EntriesDate

ROSEBUD CONSULTINGPost-Closing Trial Balance


1. Optional (Appendix)

Account Title Debit Credit Debit Credit Debit Credit Debit CreditCash 9,945 9,945 9,945Accounts Receivable 2,750 (a) 1,400 4,150 4,150Supplies 1,020 (b) 745 275 275Prepaid Insurance 2,700 (c) 225 2,475 2,475Office Equipment 7,500 7,500 7,500Accum. Depr.—Off. Equip. (d) 50 50 50Accounts Payable 8,350 8,350 8,350Wages Payable (f) 140 140 140Unearned Revenue 7,200 (e) 3,600 3,600 3,600Peyton Smith, Capital 9,000 9,000 9,000Peyton Smith, Drawing 1,750 1,750 1,750Fees Earned 16,200 (a) 1,400 21,200 21,200

(e) 3,600Music Expense 3,610 3,610 3,610Wages Expense 2,800 (f) 140 2,940 2,940Office Rent Expense 2,550 2,550 2,550Advertising Expense 1,500 1,500 1,500Equip. Rent Expense 1,375 1,375 1,375Utilities Expense 1,215 1,215 1,215Supplies Expense 180 (b) 745 925 925Insurance Expense (c) 225 225 225Depreciation Expense (d) 50 50 50Miscellaneous Expense 1,855 1,855 1,855

40,750 40,750 6,160 6,160 42,340 42,340 16,245 21,200 26,095 21,140Net income 4,955 4,955

21,200 21,200 26,095 26,095

Adjustments

For the Two Months Ended July 31, 2016BalanceUnadjusted Adjusted

CONTINUING PROBLEM


Trial BalanceIncome

Statement

PS MUSICEnd-of-Period Spreadsheet (Work Sheet)




Continuing Problem (Continued)

2.


Music expense $3,610Wages expense 2,940Office rent expense 2,550Advertising expense 1,500Equipment rent expense 1,375Utilities expense 1,215Supplies expense 925Insurance expense 225Depreciation expense 50Miscellaneous expense 1,855


Peyton Smith, capital, June 1, 2016 $ 0Investment during month $ 9,000Net income 4,955

$13,955Less withdrawals 1,750Increase in owner’s equity 12,205Peyton Smith, capital, July 31, 2016 $12,205

PS MUSICStatement of Owner’s Equity

For the Two Months Ended July 31, 2016

PS MUSICIncome Statement

For the Two Months Ended July 31, 2016




Current assets: Current liabilities:Cash $9,945 Accounts payable $8,350Accounts receivable 4,150 Wages payable 140Supplies 275 Unearned revenue 3,600Prepaid insurance 2,475 Total liabilities $12,090


Office equipment $7,500Less accum. depreciation 50 Peyton Smith, capital 12,205



PS MUSICBalance SheetJuly 31, 2016

Assets Liabilities

Owner’s Equity



Continuing Problem (Continued)3. Page 4


2016 July 31 Fees Earned 41 21,200


31 Income Summary 33 16,245Wages Expense 50 2,940Office Rent Expense 51 2,550Equipment Rent Expense 52 1,375Utilities Expense 53 1,215Music Expense 54 3,610Advertising Expense 55 1,500Supplies Expense 56 925Insurance Expense 57 225Depreciation Expense 58 50Miscellaneous Expense 59 1,855

31 Income Summary 33 4,955Peyton Smith, Capital 31 4,955

31 Peyton Smith, Capital 31 1,750Peyton Smith, Drawing 32 1,750

Closing EntriesDate

JOURNAL




Account No. 11


2016 July 1 Balance 3,920

1 1 5,000 8,9201 1 1,750 7,1701 1 2,700 4,4702 1 1,000 5,4703 1 7,200 12,6703 1 250 12,4204 1 900 11,5208 1 200 11,320

11 1 1,000 12,32013 1 700 11,62014 1 1,200 10,42016 2 2,000 12,42021 2 620 11,80022 2 800 11,00023 2 750 11,75027 2 915 10,83528 2 1,200 9,63529 2 540 9,09530 2 500 9,59531 2 3,000 12,59531 2 1,400 11,19531 2 1,250 9,945

Account No. 12



2 1 1,000 — —23 2 1,750 1,75030 2 1,000 2,75031 Adjusting 3 1,400 4,150

CashAccount:


BalanceDate

DateBalance




Account No. 14


2016 July 1 Balance 170

18 2 850 1,02031 Adjusting 3 745 275

Account No. 15


2016 July 1 1 2,700 2,700

31 Adjusting 3 225 2,475

Account No. 17


2016 July 5 1 7,500 7,500

Account No. 18



Account No. 21



3 1 250 — —5 1 7,500 7,500

18 2 850 8,350

BalanceDate

BalanceDate

Account: Accumulated Depreciation—Office Equipment

BalanceDate



BalanceDate

Account: Supplies

BalanceDate





Account No. 22



Account No. 23


2016 July 3 1 7,200 7,200

31 Adjusting 3 3,600 3,600

Account No. 31



1 1 5,000 9,00031 Closing 4 4,955 13,95531 Closing 4 1,750 12,205

Account No. 32



31 2 1,250 1,75031 Closing 4 1,750 — —

Account No. 33


2016 July 31 Closing 4 21,200 21,200

31 Closing 4 16,245 4,95531 Closing 4 4,955 — —


BalanceDate

Account: Peyton Smith, Drawing

BalanceDate

Account: Peyton Smith, Capital

BalanceDate

DateBalance

Unearned RevenueAccount:


BalanceDate




Account No. 41



11 1 1,000 7,20016 2 2,000 9,20023 2 2,500 11,70030 2 1,500 13,20031 2 3,000 16,20031 Adjusting 3 1,400 17,60031 Adjusting 3 3,600 21,20031 Closing 4 21,200 — —

Account No. 50



14 1 1,200 1,60028 2 1,200 2,80031 Adjusting 3 140 2,94031 Closing 4 2,940 — —

Account No. 51



1 1 1,750 2,55031 Closing 4 2,550 — —

Account No. 52



13 1 700 1,37531 Closing 4 1,375 — —

BalanceDate

Account: Office Rent Expense

BalanceDate

Account: Equipment Rent Expense

DateBalance

Wages ExpenseAccount:


BalanceDate




Account No. 53



27 2 915 1,21531 Closing 4 1,215 — —

Account No. 54



21 2 620 2,21031 2 1,400 3,61031 Closing 4 3,610 — —

Account No. 55



8 1 200 70022 2 800 1,50031 Closing 4 1,500 — —

Account No. 56



31 Adjusting 3 745 92531 Closing 4 925 — —

BalanceDate

Account: Advertising Expense


BalanceDate

Account: Music Expense

BalanceDate

Account: Utilities Expense

BalanceDate




Account No. 57



31 Closing 4 225 — —

Account No. 58



31 Closing 4 50 — —

Account No. 59



4 1 900 1,31529 2 540 1,85531 Closing 4 1,855 — —

BalanceDate


BalanceDate



BalanceDate



Continuing Problem (Concluded)

4.


Cash 9,945Accounts Receivable 4,150Supplies 275Prepaid Insurance 2,475Office Equipment 7,500Accumulated Depreciation—Office Equipment 50Accounts Payable 8,350Wages Payable 140Unearned Revenue 3,600Peyton Smith, Capital 12,205

24,345 24,345

July 31, 2016

PS MUSICPost-Closing Trial Balance



1. and 2.Page 5


2016 May 3 Cash 11 4,500

Unearned Fees 23 4,500



13 Accounts Payable 21 640Cash 11 640



Cash 11 750

17 Cash 11 8,360Fees Earned 41 8,360

Date

COMPREHENSIVE PROBLEM 1

JOURNAL



Comp. Prob. 1 (Continued)Page 6


2016 May 20 Supplies 14 735

Accounts Payable 21 735


25 Cash 11 7,900Fees Earned 41 7,900


28 Salary Expense 51 750Cash 11 750



31 Cash 11 3,300Fees Earned 41 3,300


31 Kelly Pitney, Drawing 32 10,500Cash 11 10,500

Date

JOURNAL



Comp. Prob. 1 (Continued)2., 6., and 9.

Account No. 11


2016 May 1 Balance 22,100

3 5 4,500 26,6005 5 2,450 29,0509 5 225 28,825

13 5 640 28,18516 5 750 27,43517 5 8,360 35,79525 6 7,900 43,69527 6 9,520 53,21528 6 750 52,46530 6 260 52,20531 6 810 51,39531 6 3,300 54,69531 6 10,500 44,195

Account No. 12



5 5 2,450 95015 5 9,180 10,13021 6 4,820 14,95027 6 9,520 5,43031 6 2,650 8,080

Account No. 14



20 6 735 2,08531 Adjusting 7 1,370 715

Account: Supplies

CashAccount:


BalanceDate

DateBalance

BalanceDate



Comp. Prob. 1 (Continued)

Account No. 15



31 Adjusting 7 1,600 1,600

Account No. 16



31 Adjusting 7 275 1,225

Account No. 18



Account No. 19


2016 May 1 Balance 330

31 Adjusting 7 330 660

Account No. 21



13 5 640 16020 6 735 895

Account No. 22



16 5 120 —31 Adjusting 7 325 325

BalanceDate

DateBalance



BalanceDate


BalanceDate


BalanceDate


BalanceDate





Account No. 23



3 5 4,500 7,00031 Adjusting 7 3,790 3,210

Account No. 31



31 Closing 8 33,425 75,72531 Closing 8 10,500 65,225

Account No. 32


2016 May 31 6 10,500 10,500

31 Closing 8 10,500 — —

Account No. 33


2016 May 31 Closing 8 40,000 40,000

31 Closing 8 6,575 33,42531 Closing 8 33,425 — —

Account: Kelly Pitney, Drawing


BalanceDate


Account: Kelly Pitney, Capital

BalanceDate

DateBalance

BalanceDate




Account No. 41


2016 May 15 5 9,180 9,180


Account No. 51


2016 May 16 5 630 630

28 6 750 1,38031 Adjusting 7 325 1,70531 Closing 8 1,705 — —

Account No. 52


2016 May 31 Adjusting 7 1,600 1,600

31 Closing 8 1,600 — —

Account No. 53


2016 May 31 Adjusting 7 1,370 1,370

31 Closing 8 1,370 — —

BalanceDate


BalanceDate


DateBalance



BalanceDate




Account No. 54


2016 May 31 Adjusting 7 330 330

31 Closing 8 330 — —

Account No. 55


2016 May 31 Adjusting 7 275 275

31 Closing 8 275 — —

Account No. 59


2016 May 9 5 225 225

30 6 260 48531 6 810 1,29531 Closing 8 1,295 — —

BalanceDate


BalanceDate


BalanceDate





3.


Cash 44,195Accounts Receivable 8,080Supplies 2,085Prepaid Rent 3,200Prepaid Insurance 1,500Office Equipment 14,500Accumulated Depreciation 330Accounts Payable 895Salaries Payable 0Unearned Fees 7,000Kelly Pitney, Capital 42,300Kelly Pitney, Drawing 10,500Fees Earned 36,210Salary Expense 1,380Rent Expense 0Supplies Expense 0Depreciation Expense 0Insurance Expense 0Miscellaneous Expense 1,295

86,735 86,735

Unadjusted Trial BalanceMay 31, 2016

KELLY CONSULTING


Comp. Prob. 1 (Continued)5. Optional (Appendix)

Account Title Debit Credit Debit Credit Debit Credit Debit CreditCash 44,195 44,195 44,195Accounts Receivable 8,080 8,080 8,080Supplies 2,085 (b) 1,370 715 715Prepaid Rent 3,200 (e) 1,600 1,600 1,600Prepaid Insurance 1,500 (a) 275 1,225 1,225Office Equipment 14,500 14,500 14,500Accum. Depreciation 330 (c) 330 660 660Accounts Payable 895 895 895Salaries Payable (d) 325 325 325Unearned Fees 7,000 (f) 3,790 3,210 3,210Kelly Pitney, Capital 42,300 42,300 42,300Kelly Pitney, Drawing 10,500 10,500 10,500Fees Earned 36,210 (f) 3,790 40,000 40,000Salary Expense 1,380 (d) 325 1,705 1,705Rent Expense (e) 1,600 1,600 1,600Supplies Expense (b) 1,370 1,370 1,370Depreciation Expense (c) 330 330 330Insurance Expense (a) 275 275 275Miscellaneous Expense 1,295 1,295 1,295

86,735 86,735 7,690 7,690 87,390 87,390 6,575 40,000 80,815 47,390Net income 33,425 33,425

40,000 40,000 80,815 80,815

KELLY CONSULTINGEnd-of-Period Spreadsheet (Work Sheet)

For the Month Ended May 31, 2016BalanceUnadjusted Adjusted Income






Comp. Prob. 1 (Continued)6. Page 7


2016 May 31 Insurance Expense 55 275



Supplies used ($2,085 – $715).




Accrued salaries.


Rent expired.


Unearned fees ($7,000 – $3,210).


JOURNAL




7.


Cash 44,195Accounts Receivable 8,080Supplies 715Prepaid Rent 1,600Prepaid Insurance 1,225Office Equipment 14,500Accumulated Depreciation 660Accounts Payable 895Salaries Payable 325Unearned Fees 3,210Kelly Pitney, Capital 42,300Kelly Pitney, Drawing 10,500Fees Earned 40,000Salary Expense 1,705Rent Expense 1,600Supplies Expense 1,370Depreciation Expense 330Insurance Expense 275Miscellaneous Expense 1,295

87,390 87,390

Adjusted Trial BalanceMay 31, 2016

KELLY CONSULTING




8.


Salary expense $1,705Rent expense 1,600Supplies expense 1,370Depreciation expense 330Insurance expense 275Miscellaneous expense 1,295


Kelly Pitney, capital, May 1, 2016 $42,300Net income for the month $33,425Less withdrawals 10,500Increase in owner’s equity 22,925Kelly Pitney, capital, May 31, 2016 $65,225

KELLY CONSULTINGStatement of Owner’s Equity

For the Month Ended May 31, 2016

KELLY CONSULTINGIncome Statement

For the Month Ended May 31, 2016




Current assets: Current liabilities:Cash $44,195 Accounts payable $ 895Accounts receivable 8,080 Salaries payable 325Supplies 715 Unearned fees 3,210Prepaid rent 1,600 Total liabilities $ 4,430Prepaid insurance 1,225


Office equipment $14,500Less accum. depreciation 660 Kelly Pitney, capital 65,225



KELLY CONSULTINGBalance SheetMay 31, 2016

Assets Liabilities

Owner’s Equity



Comp. Prob. 1 (Concluded) 9. Page 8


2016 May 31 Fees Earned 41 40,000


31 Income Summary 33 6,575Salary Expense 51 1,705Rent Expense 52 1,600Supplies Expense 53 1,370Depreciation Expense 54 330Insurance Expense 55 275Miscellaneous Expense 59 1,295

31 Income Summary 33 33,425Kelly Pitney, Capital 31 33,425

31 Kelly Pitney, Capital 31 10,500Kelly Pitney, Drawing 32 10,500

10.


Cash 44,195Accounts Receivable 8,080Supplies 715Prepaid Rent 1,600Prepaid Insurance 1,225Office Equipment 14,500Accumulated Depreciation 660Accounts Payable 895Salaries Payable 325Unearned Fees 3,210Kelly Pitney, Capital 65,225

70,315 70,315

JOURNAL

May 31, 2016

Closing EntriesDate

KELLY CONSULTINGPost-Closing Trial Balance



CP 4–1It is unacceptable to prepare financial statements in such a way that users of the statements would be misled. The July 31, 2016, balance sheet of PicassoGraphics could be misleading in two ways. First, the account receivable from Becky should be segregated and reported separately from trade (customer) receivables. Such receivables are normally reported as "officer receivables" or "other receivables" and accompanied by a note disclosing the nature of the receivable. Such disclosure is required for what are termed "related-party transactions." Second, given that the receivable has been outstanding since January 2014, it is questionable whether the receivable from Becky should be classified as a current asset. Pablo could justify the classification as "current" if Becky has agreed to a written schedule for repaying within the next year. Alternatively, the receivable could be classified as current if it has been converted to a note receivable with a specific due date within the next year.

In summary, because of the preceding issues, it appears that Pablo is not behaving in a professional manner. Note: It is a criminal offense to submit false or misleading documents to a bank in applying for a loan.

CASES & PROJECTS


CP 4–21. (a) With the decreasing cost of computers and related software, Main Street

Co. may find it desirable to computerize its financial reporting system. In many cases, the computerization of a manual accounting system reduces the overall cost of the accounting function.

(b) A computerized accounting system would allow for eliminating the end-of-period spreadsheet, and thus, financial statements could be prepared with "a push of a button." However, adjustment data would still need to be recorded at the end of the accounting period before the financialstatements could be prepared.

(c) In designing a computerized financial reporting (accounting) system, it is essential that proper accounting principles, concepts, and procedures be followed. At a minimum, basic controls such as the use of the double-entry accounting system should be included. For example, debits must equal credits for all transactions, and assets must equal liabilities plus owner’s equity. In addition, the system should be designed to detect obvious errors, such as a credit (minus) balance for supplies or prepaid insurance. In other words, to design an adequate financial reporting system, a computer programmer must have a thorough understanding of accounting and the accounting cycle.

Note: Numerous accounting software packages, similar to the Cengage Learning General Ledger software package accompanying this text, are available. Therefore, it would probably be better for Main Street Co. to purchase an existing accounting software package rather than trying to design its own.

2. Supplies cannot have a credit balance, because the supplies account is an asset account. A business cannot have a "negative" asset. Thus, the only way that a credit balance could have occurred in Supplies is the result of an error in recording one or more transactions.



CP 4–31. A set of financial statements provides useful information concerning the

economic condition of a company. For example, the balance sheet describes the financial condition of the company as of a given date and is useful in assessing the company’s financial soundness and liquidity. The income statement describes the results of operations for a period and indicates the profitability of the company. The statement of owner’s equity describes the changes in the owner’s interest in the company for a period. Each of these statements is useful in evaluating whether to extend credit to the company.

2. The following adjustments might be necessary before an accurate set of financial statements could be prepared:

No supplies expense is shown. The supplies account should be adjusted for the supplies used during the year.

No depreciation expense or accumulated depreciation is shown for the building or equipment accounts. An adjusting entry should be prepared for depreciation expense on each of these assets.

An inquiry should be made as to whether any accrued expenses, such as wages or utilities, exist at the end of the year.

An inquiry should be made as to whether any prepaid expenses, such as rent or insurance, exist at the end of the year.

An inquiry should be made as to whether the owner withdrew any funds from the company during the year. No drawing account is shown in the "Statement of Accounts."

The following items should be relabeled for greater clarity:

Billings Due from Others—Accounts ReceivableAmounts Owed to Others—Accounts PayableInvestment in Business—Joan Whalen, CapitalOther Expenses—Miscellaneous Expense

Note to Instructors: The preceding items are not intended to include all adjustments that might exist in the Statement of Accounts. The possible adjustments listed include only items that have been covered in Chapters 1–4. For example, uncollectible accounts expense (discussed in a later chapter) is not mentioned.



CP 4–3 (Concluded)3. In general, the decision to extend a loan is based on an assessment of the

profitability and riskiness of the loan. Although the financial statements provide useful data for this purpose, other factors such as the following might also be significant:

The due date and payment terms of the loan.

Security for the loan. For example, whether Joan Whalen is willing to pledge personal assets in support of the loan will affect the riskiness of the loan.

The intended use of the loan. For example, if the loan is to purchase real estate (possibly for a future building site), the real estate could be used as security for the loan.

The projected profitability of the company.

CP 4–4The purpose of this activity is to familiarize students with the information (assets, liabilities, and owner’s equity) that a balance sheet provides about a company. Consider emphasizing the similarities and differences among different company balance sheets. For example, while all companies have cash in their balance sheets, companies in different industries will have different types of assets. Likewise, while all companies have accounts payable in their balance sheets, companies often are financed using different types of liabilities.


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