Name: Due Date: December 12, 2011 Score: out of a possible 47 Course value: 7.5% Assignment 6: Adjusting Journal Entries and Worksheets A series of transactions are presented and their journal entries are also presented. Your task will be as follows: A) Complete the adjusting journal entries (the initial journal entries are already completed) 15 marks B) Complete the T-accounts/General Ledger include the credit and debit totals for each account. The journal entries made prior to your adjusting journal entries are already included (but not totaled). Make sure the credit or debit balance of each account is presented this total should reflect the balance of the account AFTER the adjusting journal entries and match the adjusted trial balance on the worksheet. 8 marks C) Complete the following elements of the worksheet: 18 marks a. Adjustments b. Adjusted Trial c. Income Statement d. Sheet The Unadjusted Trial has already been completed for you. This is based on the journal entries / general ledger entries made BEFORE the required adjusting journal entries (that you will complete). D) Complete a fully labeled Income Statement and Sheet for WestShore Car Rental: 6 Marks Page 1 of 14
Company Name: WestShore Car Rental Background: WestShore Car Rental (WCR) is a brand new company that is hoping to make big money in the exciting field of car rental. The owner of the company, Jane Smith, has high hopes and has contributed her own money to start the business. The business mainly rents to individuals but has one big client, the airport Chart of Accounts: Assets 1000 Cash 1001 Accounts Receivable 1002 Prepaid Insurance 1003 Vehicles 1004 Accumulated Depreciation: Vehicles 1005 Investments Bonds 1006 Interest Receivable Liabilities 2000 Accounts Payable 2001 Wages Payable 2002 Unearned Rental Revenue Expenses 4000 Depreciation Expense 4001 Insurance Expense 4002 Wages Expense Equity 5000 Owner Contributed Capital (the money the owner contributed to start the business) 5001 Retained Earnings 5002 Owner - Withdrawals 5003 Income Summary Revenues 3000 Rental Revenue 3001 Interest Revenue The company only makes adjusting journal entries once per year (lazy accountant!) at the fiscal year end (December 31). Your job is to make the required adjusting journal entries in the General Journal and reflect this in the General Ledger / T- accounts and complete the worksheet. Page 2 of 14
Selected 2010 Transactions (recorded): These transactions have already been recorded in the general journal (see page 5). January 1: January 1: January 1: January 4: January 8: March 10: The owner, Jane Smith, deposits $100,000 into a bank account for the purposes of starting the business. WCR (WestShore Car Rental) purchases $24,000 of insurance for the next 2 years on credit. WCR purchases a vehicle for $20,000 in cash. The vehicle uses the declining balance method of depreciation at a percentage rate of 10%. WCR purchases (with cash) an extremely risky $10,000 investment bond. This bond will pay the company $4,000 interest in two years time (in other words they will receive a cheque at the end of 2011) The Airport writes a cheque to WCR for $200,000 for a two year rental agreement. Pays the insurance company the full amount for the prepaid insurance (writes a cheque) June 1: Customer rents a car (on account) for $1,000 June 20: Customer from June 1 pays outstanding balance ($1,000) Nov. 30: Dec. 1 Wages paid for period of January to November equal to $50,000 (paid by cheque). The owner takes $10,000 in cash from the business (a withdrawal) Adjusting Journal Entries (not yet recorded): Dec. 31 Dec. 31 Wages that are payable to WCR employees at year end are equal to $6,000, the company will write cheques next year. In addition, adjusting journal entries are also required for the following: Prepaid insurance Depreciation expense Investment bond revenue Rental Revenue from the Airport customer Page 3 of 14
Work Area: Page 4 of 14
Recorded journal entries in the General Journal (all 2010 entries) Date Accounts and Descriptions Credit January 1 Cash 100,000 Owner Contributed Capital 100,000 Startup capital from owner 1 Prepaid Insurance 24,000 Accounts Payable 24,000 Purchasing prepaid insurance 1 Vehicles 20,000 Cash 20,000 Purchase of vehicle expected to last 10 years with no salvage value 4 Investments - Bond 10,000 Cash 10,000 Purchase of investment bond, will pay $4,000 in interest (by cheque) in two years (end of 2011) 8 Cash 200,000 Unearned Rental Revenue 200,000 Airport payment for contracting WCR for two years of work. March 10 Accounts Payable 24,000 Cash 24,000 Paying insurance company for prepaid insurance June 1 Accounts Receivable 1,000 Rental Revenue 1,000 Customer rents a car, pays on credit June 20 Cash 1,000 Accounts Receivable 1,000 Customer from June 1 pays their outstanding invoice Page 5 of 14
Date Accounts and Descriptions Credit November 30 Wages Expense 50,000 Cash 50,000 Company pays wages workers earned January through November December 1 Owner - Withdrawals 10,000 Cash 10,000 Owner withdrawing $10,000 in cash from the company. On the following page, record the required adjusting journal entries. Page 6 of 14
Part A: Adjusting Journal Entries: (15 Marks) General Journal Page Date Accounts and Descriptions Credit Page 7 of 14
Part B: General Ledger/T-Accounts (8 Marks) On the following pages post your journal entries to the appropriate T-Account (General Ledger). The journal entries that were recorded prior to December 31 have already been posted. Include the total balance for each of the accounts after the adjusting journal entries have been posted. Circle debit or credit to indicate the type of balance. Example: An Account Posted from an adjusting journal entry 500,000 200,000 200,000 100,000 Page 8 of 14
General Ledger/T-Accounts 100,000 200,000 1,000 Cash 20,000 10,000 24,000 50,000 10,000 Accounts Receivables 1,000 1,000 Prepaid Insurance 24,000 Vehicles Accumulated Depreciation: Vehicles Investments - Bonds 20,000 10,000 Interest Receivable Wages Payable Accounts Payable 24,000 24,000 Page 9 of 14
Unearned Rental Revenue Rental Revenue Interest Revenue 200,000 1,000 Depreciation Expense Insurance Expense Wages Expense 50,000 Owner - Contributed Capital Retained Earnings Income Summary 100,000 Owner - Withdrawals 10,000 : Page 10 of 14
Part C: Worksheet (18 marks) The Unadjusted Trial has been provided for you. Fill in the remainder of the 10 column worksheet including the following: Adjustments Adjusted Trial Income Statement Sheet Page 11 of 14
Worksheet for WestShore Car Rental Unadjusted Trial Adjustments Adjusted Trial Income Statement Sheet Credit Credit Credit Credit Credit Cash 187,000 Accounts Receivable 0 Prepaid Insurance 24,000 Vehicles 20,000 Accumulated Depreciation: Vehicles 0 Investments - Bonds 10,000 Interest Receivable 0 Accounts Payable 0 Wages Payable 0 Unearned Rental Revenue 200,000 Owner - Contributed Capital 100,000 Owner - Withdrawals 10,000 Retained Earnings +++++++++++++++++++ Not Relevant for this Worksheet Solution ++++++++++++++++ Income Summary +++++++++++++++++++ Not Relevant for this Worksheet Solution ++++++++++++++++ Rental Revenue 1,000 Interest Revenue 0 Depreciation Expense 0 Insurance Expense 0 Wages Expense 50,000 Totals 301,000 301,000 Net Income (not an actual account, will eventually end up in Retained Earnings with journal entries) Financial Statement Totals Page 12 of 14
Part D: Income Statement and Sheet (6 marks) 1) Income Statement Take the information from your completed worksheet and create an income statement (based on a format outlined in Section 4 of the course). 3 Marks Page 13 of 14
Part D continued 1) Sheet Take the information from your completed worksheet and create a balance sheet (based on a format outlined in Section 4 of the course). 3 Marks Page 14 of 14