SOLUTION GENERAL JOURNAL PAGE 4 1 20 Closing Entries 1 2 Dec. 31 Commissions Earned 92,824.00 2 3 Income from Services 23,050.00 3 4 Income Summary 115,874.00 4 5 5 6 31 Income Summary 37,194.00 6 7 Salary Expense 21,600.00 7 8 Rent Expense 11,200.00 8 9 Supplies Expense 1,635.00 9 10 Depreciation Expense, Equipment 2,100.00 10 11 Miscellaneous Expense 659.00 11 12 12 13 31 Income Summary 78,680.00 13 14 L. Thompson, Capital 78,680.00 14 15 15 16 31 L. Thompson, Capital 80,000.00 16 17 L. Thompson, Drawing 80,000.00 17 18 18 DISCUSSION QUESTIONS Suggested Responses DESCRIPTION 1. a. 3 Prepare a trial balance. b. 2 Post journal entries to the accounts in the ledger. c. 7 Journalize and post the adjusting entries from the data on the work sheet. d. 1 Analyze source documents and record business transactions in the journal. e. 6 Prepare financial statements from the data on the work sheet. f. 4 Gather adjustment data and record the adjusting entries on a work sheet. g. 8 Journalize and post the closing entries h. 9 Prepare a post-closing trial balance. i. 5 Complete the work sheet. 2. The steps in the closing procedure are: a. Close the revenue account(s) into Income Summary. b. Close the expense accounts into Income Summary. c. Close the Income Summary account into the Capital account, transferring the net income or net loss to the Capital account. d. Close the Drawing account into the Capital account. 3. The purpose of closing entries is to close out the temporary-equity or nominal accounts (revenue, expense, and Drawing accounts) and to transfer the net income or net loss to the Capital account, which prepares these accounts for the new fiscal period. If the closing entries are not made, proper matching of revenues and expenses in the fiscal period does not occur. 182 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
4. Since the closing procedure causes zero balances in the temporary owner s equity accounts, if you do not print, save, and back up (make a copy of) your financial records, all accounts will be zero if you try to print your income statement. Similarly, in your statement of owner s equity, the net income or net loss and Drawing will be zero. 5. Real accounts, also called permanent accounts, are the balance sheet accounts other than Drawing; they are not closed at the end of the fiscal period. Examples are assets (Cash, Accounts Receivable, Prepaid Insurance, etc.), liabilities (Accounts Payable, etc.), and Capital. Nominal accounts, also called temporary accounts, are the income statement and Drawing accounts; they are closed at the end of the fiscal period. Examples are revenues (Service Revenue, etc.), expenses (Rent Expense, etc.), and Drawing. 6. Income Summary is a place to gather or summarize the revenues and expenses in order to calculate the net income or net loss to be transferred to the Capital account. 7. The purpose of the post-closing trial balance is to make sure that the debit balances equal the credit balances and to check that all nominal accounts have zero balances before proceeding to the next accounting period. The difference between a trial balance and a post-closing trial balance is that a post-closing trial balance contains only the real (permanent) accounts after adjustment, such as the assets, liabilities, and Capital; whereas a trial balance before closing contains all five classifications of accounts: assets, liabilities, revenue, expenses, and Capital (including Drawing). 8. The third closing entry to transfer the net income or net loss to the P. Hernandez, Capital account for the appropriate period. a. With a net income of $3,842. GENERAL JOURNAL PAGE DESCRIPTION 1 20 Closing Entries 1 2 Mar. 31 Income Summary 3,842.00 2 3 P. Hernandez, Capital 3,842.00 3 4 4 b. With a net loss of $1,781. GENERAL JOURNAL PAGE DESCRIPTION 1 20 Closing Entries 1 2 Jun. 30 P. Hernandez, Capital 1,781.00 2 3 Income Summary 1,781.00 3 4 4 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 183
SOLUTIONS TO EXERCISES Exercise 5-1 TITLE CLOSED REAL NOMINAL YES NO 0. Example: Building X X a. Prepaid Insurance X X b. Accounts Payable X X c. Wages Payable X X d. Service Revenue X X e. Rent Expense X X f. Supplies Expense X X g. Accumulated Depreciation, Equipment X X INCOME STATEMENT X X X SHEET X X X X X Exercise 5-2 GENERAL JOURNAL PAGE DESCRIPTION 1 Closing Entries 1 2 (1) Professional Fees 3,850.00 2 3 Income Summary 3,850.00 3 4 4 5 (2) Income Summary 4,455.00 5 6 Wages Expense 3,110.00 6 7 Insurance Expense 460.00 7 8 Depreciation Expense, Equipment 750.00 8 9 Miscellaneous Expense 135.00 9 10 10 11 (3) J. Cortez, Capital 605.00 11 12 Income Summary 605.00 12 13 13 14 (4) J. Cortez, Capital 400.00 14 15 J. Cortez, Drawing 400.00 15 16 16 184 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Exercise 5-3 GENERAL JOURNAL PAGE DESCRIPTION 1 Closing Entries 1 2 Dec. 31 Professional Fees 7,075.00 2 3 Income Summary 7,075.00 3 4 4 5 31 Income Summary 3,846.00 5 6 Wages Expense 1,268.00 6 7 Rent Expense 1,090.00 7 8 Depreciation Expense, Equipment 1,143.00 8 9 Miscellaneous Expense 345.00 9 10 10 11 31 Income Summary 3,229.00 11 12 C. Harris, Capital 3,229.00 12 13 13 14 31 C. Harris, Capital 1,498.00 14 15 C. Harris, Drawing 1,498.00 15 16 16 17 17 18 18 Exercise 5-4 GENERAL JOURNAL PAGE DESCRIPTION 1 Closing Entries 1 2 June 30 Service Revenue 6,797.00 2 3 Rental Revenue 3,576.00 3 4 Income Summary 10,373.00 4 5 5 6 30 Income Summary 5,178.00 6 7 Rent Expense 2,800.00 7 8 Wages Expense 1,854.00 8 9 Utilities Expense 465.00 9 10 Miscellaneous Expense 59.00 10 11 11 12 30 Income Summary 5,195.00 12 13 K. Dunn, Capital 5,195.00 13 14 14 15 30 K. Dunn, Capital 4,000.00 15 16 K. Dunn, Drawing 4,000.00 16 17 17 18 18 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 185
Exercise 5-5 GENERAL JOURNAL PAGE DESCRIPTION 1 Closing Entries 1 2 Dec. 31 Service Revenue 41,740.00 2 3 Rental Revenue 22,000.00 3 4 Income Summary 63,740.00 4 5 5 6 31 Income Summary 57,850.00 6 7 Wages Expense 48,520.00 7 8 Utilities Expense 7,130.00 8 9 Miscellaneous Expense 2,200.00 9 10 10 11 31 Income Summary 5,890.00 11 12 S. Cederblom, Capital 5,890.00 12 13 13 14 31 S. Cederblom, Capital 17,000.00 14 15 S. Cederblom, Drawing 17,000.00 15 16 16 17 17 18 18 Exercise 5-6 a. 12 Dec. 31 D. Mau, Capital 9,030.00 12 13 Income Summary 9,030.00 13 14 14 15 31 D. Mau, Capital 12,000.00 15 16 D. Mau, Drawing 12,000.00 16 17 17 18 18 b. $42,380 ($63,410 $9,030 $12,000) 186 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Exercise 5-7 INCOME STATEMENT STATEMENT OF OWNER'S EQUITY SHEET 0. Example: The total liabilities of the business at the end of the year. X a. The amount of the owner's Capital balance at the end of the year. X X b. The amount of depreciation expense on equipment during the year. X c. The amount of the company's net income for the year. X X d. The book value of the equipment. X e. Total insurance expired during the year. X f. Total accounts receivable at the end of the year. X g. Total withdrawals by the owner. X h. The cost of utilities used during the year. X i. The amount of the owner's Capital balance at the beginning of the year. X Exercise 5-8 The Lindal Clinic Statement of Owner's Equity For Year Ended December 31, P. Lindal, Capital, January 1, $124,000 Investment on May 12, $ 7,000 Net Income for the Year 20,418 Subtotal $27,418 Less Withdrawals for the Year 31,500 Decrease in Capital (4,082) P. Lindal, Capital, December 31, $119,918 187 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-1A Assets Dr. Cr. = Liabilities + Owner's Equity + Revenue Dr. Cr. Dr. Cr. Dr. Cr. + + + + + Expenses Dr. Cr. B. Lyon, Capital Commissions Earned Rent Expense (4) 1,550 Bal. 7,520 (1) 4,679 Bal. 4,679 Bal. 995 (2) 995 (3) 2,281 Bal. 8,251 Supplies Expense B. Lyon, Drawing Bal. 575 (2) 575 Bal. 1,550 (4) 1,550 Depreciation Expense, Income Summary Office Equipment (2) 2,398 (1) 4,679 Bal. 462 (2) 462 (3) 2,281 Utilities Expense Bal. 269 (2) 269 Miscellaneous Expense Bal. 97 (2) 97 188 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-1A (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 Closing Entries 1 1. 2 May 31 Commissions Earned 4,679.00 2 3 Income Summary 4,679.00 3 4 4 2. 5 31 Income Summary 2,398.00 5 6 Rent Expense 995.00 6 7 Supplies Expense 575.00 7 8 Depreciation Expense, Office 8 9 Equipment 462.00 9 10 Utilities Expense 269.00 10 11 Miscellaneous Expense 97.00 11 12 12 3. 13 31 Income Summary 2,281.00 13 14 B. Lyon, Capital 2,281.00 14 15 15 4. 16 31 B. Lyon, Capital 1,550.00 16 17 B. Lyon, Drawing 1,550.00 17 18 18 19 19 20 20 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 189
Problem 5-2A Assets = Liabilities + Owner's Equity + Revenue Expenses Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. + + + + + G. Ho, Capital Consulting Revenue Rent Expense (4) 2,400 Bal. 4,302 (1) 13,060 Bal. 13,060 Bal. 2,200 (2) 2,200 (3) 7,220 Bal. 9,122 Wages Expense G. Ho, Drawing Bal. 1,828 (2) 1,828 Bal. 2,400 (4) 2,400 Income Summary (2) 5,840 (1) 13,060 (3) 7,220 Supplies Expense Bal. 422 (2) 422 Insurance Expense Bal. 325 (2) 325 Depreciation Expense, Equipment Bal. 835 (2) 835 Miscellaneous Expense Bal. 230 (2) 230 190 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-2A (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 Closing Entries 1 1. 2 May 31 Consulting Revenue 13,060.00 2 3 Income Summary 13,060.00 3 4 4 2. 5 31 Income Summary 5,840.00 5 6 Rent Expense 2,200.00 6 7 Wages Expense 1,828.00 7 8 Supplies Expense 422.00 8 9 Insurance Expense 325.00 9 10 Depreciation Expense, Equipment 835.00 10 11 Miscellaneous Expense 230.00 11 12 12 3. 13 31 Income Summary 7,220.00 13 14 G. Ho, Capital 7,220.00 14 15 15 4. 16 31 G. Ho, Capital 2,400.00 16 17 G. Ho, Drawing 2,400.00 17 18 18 19 19 20 20 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 191
Problem 5-3A Valerie Insurance Agency Work Sheet For Year Ended December 31, 20 TRIAL 1 Cash 7,532.00 2 Office Equipment 2,398.00 3 Accumulated Depreciation, Office 4 Equipment 420.00 (a) 420.00 5 M. Valerie, Capital 18,614.00 6 M. Valerie, Drawing 18,000.00 7 Premiums Earned 33,400.00 8 Wages Expense 20,500.00 (b) 428.00 9 Rent Expense 2,200.00 10 Office Supplies Expense 315.00 11 Telephone Expense 736.00 12 Advertising Expense 645.00 13 Miscellaneous Expense 108.00 14 52,434.00 52,434.00 15 16 Depreciation Expense, Office Equipment (a) 420.00 17 Wages Payable (b) 428.00 18 848.00 848.00 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NAME Net Income ADJUSTMENTS 192 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-3A (continued) ADJUSTED TRIAL INCOME STATEMENT SHEET 7,532.00 7,532.00 1 2,398.00 2,398.00 2 840.00 840.00 4 18,614.00 18,614.00 5 18,000.00 18,000.00 6 33,400.00 33,400.00 7 20,928.00 20,928.00 8 2,200.00 2,200.00 9 315.00 315.00 10 736.00 736.00 11 645.00 645.00 12 108.00 108.00 13 420.00 420.00 16 428.00 428.00 17 53,282.00 53,282.00 25,352.00 33,400.00 27,930.00 19,882.00 18 8,048.00 8,048.00 19 33,400.00 33,400.00 27,930.00 27,930.00 20 3 14 15 21 22 23 24 25 26 27 28 29 30 31 32 33 34 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 193
Problem 5-3A (continued) GENERAL JOURNAL PAGE 17 DESCRIPTION 1 Adjusting Entries 1 2 Dec. 31 Depreciation Expense, Office 2 3 Equipment 514 420.00 3 4 Accumulated Depreciation, Office 4 5 Equipment 125 420.00 5 6 6 7 31 Wages Expense 511 428.00 7 8 Wages Payable 222 428.00 8 9 9 10 10 Closing Entries 11 31 Premiums Earned 411 33,400.00 11 12 Income Summary 313 33,400.00 12 13 13 14 31 Income Summary 313 25,352.00 14 15 Wages Expense 511 20,928.00 15 16 Rent Expense 512 2,200.00 16 17 Office Supplies Expense 513 315.00 17 18 Depreciation Expense, Office 18 19 Equipment 514 420.00 19 20 Telephone Expense 515 736.00 20 21 Advertising Expense 516 645.00 21 22 Miscellaneous Expense 519 108.00 22 23 23 24 31 Income Summary 313 8,048.00 24 25 M. Valerie, Capital 311 8,048.00 25 26 26 27 31 M. Valerie, Capital 311 18,000.00 27 28 M. Valerie, Drawing 312 18,000.00 28 29 29 194 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-3A (continued) Cash NO. 111 GENERAL LEDGER Dec. 31 Balance 7,532.00 Office Equipment 124 NO. Dec. 31 Balance 2,398.00 Accumulated Depreciation, Office Equipment NO. 125 Dec. 31 Balance 420.00 31 Adj. 17 420.00 840.00 Wages Payable NO. 222 Dec. 31 Adj. 17 428.00 428.00 M. Valerie, Capital NO. 311 Dec. 31 Balance 18,614.00 31 Closing 17 8,048.00 26,662.00 31 Closing 17 18,000.00 8,662.00 M. Valerie, Drawing NO. 312 Dec. 31 Balance 18,000.00 31 Closing 17 18,000.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 195
Problem 5-3A (continued) Income Summary NO. 313 Dec. 31 Closing 17 33,400.00 33,400.00 31 Closing 17 25,352.00 8,048.00 31 Closing 17 8,048.00 Premiums Earned 411 NO. Dec. 31 Balance 33,400.00 31 Closing 17 33,400.00 Wages Expense NO. 511 Dec. 31 Balance 20,500.00 31 Adj. 17 428.00 20,928.00 31 Closing 17 20,928.00 Rent Expense NO. 512 Dec. 31 Balance 2,200.00 31 Closing 17 2,200.00 Office Supplies Expense NO. 513 Dec. 31 Balance 315.00 31 Closing 17 315.00 196 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-3A (concluded) Depreciation Expense, Office Equipment NO. 514 Dec. 31 Adj. 17 420.00 420.00 31 Closing 17 420.00 Telephone Expense NO. 515 Dec. 31 Balance 736.00 31 Closing 17 736.00 Advertising Expense NO. 516 Dec. 31 Balance 645.00 31 Closing 17 645.00 Miscellaneous Expense 519 NO. Dec. 31 Balance 108.00 31 Closing 17 108.00 NAME Valerie Insurance Agency Post-Closing Trial Balance December 31, Cash 7,532 Office Equipment 2,398 Accumulated Depreciation, Office Equipment 840 Wages Payable 428 M. Valerie, Capital 8,662 9,930 9,930 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 197
Problem 5-4A Bryan Company Work Sheet For Year Ended June 30, TRIAL 1 Cash 5,491.00 2 Accounts Receivable 624.00 3 Prepaid Insurance 1,280.00 (a) 495.00 4 Equipment 6,497.00 5 Accumulated Depreciation, 6 Equipment 2,672.00 (b) 670.00 7 Van 10,989.00 8 Accumulated Depreciation, Van 4,368.00 (c) 1,190.00 9 Accounts Payable 1,036.00 10 B. Bryan, Capital 18,583.00 11 B. Bryan, Drawing 18,000.00 12 Fees Earned 38,417.00 13 Salary Expense 18,600.00 (d) 540.00 14 Advertising Expense 1,887.00 15 Supplies Expense 397.00 16 Van Operating Expense 462.00 17 Utilities Expense 685.00 18 Miscellaneous Expense 164.00 19 65,076.00 65,076.00 20 Insurance Expense (a) 495.00 21 Depreciation Expense, 22 Equipment (b) 670.00 23 Depreciation Expense, Van (c) 1,190.00 24 Salaries Payable (d) 540.00 25 2,895.00 2,895.00 26 Net Income 27 28 29 30 31 32 33 34 35 36 37 38 NAME ADJUSTMENTS 198 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-4A (continued) ADJUSTED TRIAL INCOME STATEMENT SHEET 5,491.00 5,491.00 1 624.00 624.00 2 785.00 785.00 3 6,497.00 6,497.00 4 3,342.00 3,342.00 6 10,989.00 10,989.00 7 5,558.00 5,558.00 8 1,036.00 1,036.00 9 18,583.00 18,583.00 10 18,000.00 18,000.00 11 38,417.00 38,417.00 12 19,140.00 19,140.00 13 1,887.00 1,887.00 14 397.00 397.00 15 462.00 462.00 16 685.00 685.00 17 164.00 164.00 18 495.00 495.00 20 670.00 670.00 22 1,190.00 1,190.00 23 540.00 540.00 24 67,476.00 67,476.00 25,090.00 38,417.00 42,386.00 29,059.00 25 13,327.00 13,327.00 26 38,417.00 38,417.00 42,386.00 42,386.00 27 5 19 21 28 29 30 31 32 33 34 35 36 37 38 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 199
Problem 5-4A (continued) Bryan Company Income Statement For Year Ended June 30, Revenue: Fees Earned $38,417 Expenses: Salary Expense $19,140 Advertising Expense 1,887 Supplies Expense 397 Van Operating Expense 462 Utilities Expense 685 Insurance Expense 495 Depreciation Expense, Equipment 670 Depreciation Expense, Van 1,190 Miscellaneous Expense 164 Total Expenses 25,090 Net Income $13,327 Bryan Company Statement of Owner's Equity For Year Ended June 30, B. Bryan, Capital, July 1, $16,583 Investment on June 10, $ 2,000 Net Income for the Year 13,327 Subtotal $15,327 Less Withdrawals for the Year 18,000 Decrease in Capital (2,673) B. Bryan, Capital, June 30, $13,910 200 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-4A (continued) Bryan Company Balance Sheet June 30, Assets Cash $ 5,491 Accounts Receivable 624 Prepaid Insurance 785 Equipment $ 6,497 Less Accumulated Depreciation 3,342 3,155 Van $10,989 Less Accumulated Depreciation 5,558 5,431 Total Assets $15,486 Liabilities Accounts Payable $ 1,036 Salaries Payable 540 Total Liabilities $ 1,576 Owner's Equity B. Bryan, Capital 13,910 Total Liabilities and Owner's Equity $15,486 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 201
Problem 5-4A (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 Adjusting Entries 1 2 June 30 Insurance Expense 495.00 2 3 Prepaid Insurance 495.00 3 4 4 5 30 Depreciation Expense, Equipment 670.00 5 6 Accumulated Depreciation, 6 7 Equipment 670.00 7 8 8 9 30 Depreciation Expense, Van 1,190.00 9 10 Accumulated Depreciation, Van 1,190.00 10 11 11 12 30 Salary Expense 540.00 12 13 Salaries Payable 540.00 13 14 14 15 15 Closing Entries 16 30 Fees Earned 38,417.00 16 17 Income Summary 38,417.00 17 18 18 19 30 Income Summary 25,090.00 19 20 Salary Expense 19,140.00 20 21 Advertising Expense 1,887.00 21 22 Supplies Expense 397.00 22 23 Van Operating Expense 462.00 23 24 Utilities Expense 685.00 24 25 Insurance Expense 495.00 25 26 Depreciation Expense, Equipment 670.00 26 27 Depreciation Expense, Van 1,190.00 27 28 Miscellaneous Expense 164.00 28 29 29 30 30 Income Summary 13,327.00 30 31 B. Bryan, Capital 13,327.00 31 32 32 33 30 B. Bryan, Capital 18,000.00 33 34 B. Bryan, Drawing 18,000.00 34 35 35 36 36 202 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-1B Assets = Liabilities + Owner's Equity + Revenue Expenses Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. + + + + + M. Wally, Capital Commissions Earned Rent Expense (4) 1,600 Bal. 6,221 (1) 4,997 Bal. 4,997 Bal. 990 (2) 990 (3) 2,713 Bal. 7,334 Supplies Expense M. Wally, Drawing Bal. 480 (2) 480 Bal. 1,600 (4) 1,600 Depreciation Expense, Income Summary Office Equipment (2) 2,284 (1) 4,997 Bal. 420 (2) 420 (3) 2,713 Utilities Expense Bal. 286 (2) 286 Miscellaneous Expense Bal. 108 (2) 108 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 203
Problem 5-1B (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 Closing Entries 1 1. 2 May 31 Commissions Earned 4,997.00 2 3 Income Summary 4,997.00 3 4 4 2. 5 31 Income Summary 2,284.00 5 6 Rent Expense 990.00 6 7 Supplies Expense 480.00 7 8 Depreciation Expense, Office 8 9 Equipment 420.00 9 10 Utilities Expense 286.00 10 11 Miscellaneous Expense 108.00 11 12 12 3. 13 31 Income Summary 2,713.00 13 14 M. Wally, Capital 2,713.00 14 15 15 4. 16 31 M. Wally, Capital 1,600.00 16 17 M. Wally, Drawing 1,600.00 17 18 18 19 19 20 20 204 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-2B Assets = Liabilities + Owner's Equity + Revenue Expenses Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. + + + + + W. Emil, Capital Consulting Revenue Rent Expense (4) 1,700 Bal. 5,367 (1) 9,546 Bal. 9,546 Bal. 1,800 (2) 1,800 (3) 4,616 Bal. 8,283 Wages Expense Bal. 1,533 (2) 1,533 W. Emil, Drawing Bal. 1,700 (4) 1,700 Supplies Expense Bal. 365 (2) 365 Income Summary (2) 4,930 (1) 9,546 (3) 4,616 Insurance Expense Bal. 364 (2) 364 Depreciation Expense, Equipment Bal. 700 (2) 700 Miscellaneous Expense Bal. 168 (2) 168 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 205
Problem 5-2B (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 Closing Entries 1 1. 2 June 30 Consulting Revenue 9,546.00 2 3 Income Summary 9,546.00 3 4 4 2. 5 30 Income Summary 4,930.00 5 6 Rent Expense 1,800.00 6 7 Wages Expense 1,533.00 7 8 Supplies Expense 365.00 8 9 Insurance Expense 364.00 9 10 Depreciation Expense, Equipment 700.00 10 11 Miscellaneous Expense 168.00 11 12 12 3. 13 30 Income Summary 4,616.00 13 14 W. Emil, Capital 4,616.00 14 15 15 4. 16 30 W. Emil, Capital 1,700.00 16 17 W. Emil, Drawing 1,700.00 17 18 18 19 19 20 20 206 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Extra Form GENERAL JOURNAL PAGE DESCRIPTION 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 207
Problem 5-3B Oliver Tour Company Work Sheet For Year Ended December 31, 20 1 Cash 4,827.00 2 Office Equipment 4,042.00 3 Accumulated Depreciation, Office 4 Equipment 546.00 (a) 386.00 5 S. Oliver, Capital 26,756.00 6 S. Oliver, Drawing 24,000.00 7 Tour Revenue 34,057.00 8 Wages Expense 22,820.00 (b) 528.00 9 Rent Expense 2,930.00 10 Office Supplies Expense 360.00 11 Telephone Expense 941.00 12 Advertising Expense 1,237.00 13 Miscellaneous Expense 202.00 14 61,359.00 61,359.00 15 16 Equipment (a) 386.00 17 Wages Payable (b) 528.00 18 914.00 914.00 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 TRIAL ADJUSTMENTS NAME Depreciation Expense, Office Net Income 208 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-3B (continued) ADJUSTED TRIAL INCOME STATEMENT SHEET 4,827.00 4,827.00 1 4,042.00 4,042.00 2 932.00 932.00 4 26,756.00 26,756.00 5 24,000.00 24,000.00 6 34,057.00 34,057.00 7 23,348.00 23,348.00 8 2,930.00 2,930.00 9 360.00 360.00 10 941.00 941.00 11 1,237.00 1,237.00 12 202.00 202.00 13 386.00 386.00 16 528.00 528.00 17 62,273.00 62,273.00 29,404.00 34,057.00 32,869.00 28,216.00 18 4,653.00 4,653.00 19 34,057.00 34,057.00 32,869.00 32,869.00 20 3 14 15 21 22 23 24 25 26 27 28 29 30 31 32 33 34 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 209
Problem 5-3B (continued) GENERAL JOURNAL PAGE 17 DESCRIPTION 1 Adjusting Entries 1 2 Dec. 31 Depreciation Expense, Office 2 3 Equipment 514 386.00 3 4 Accumulated Depreciation, Office 4 5 Equipment 125 386.00 5 6 6 7 31 Wages Expense 511 528.00 7 8 Wages Payable 222 528.00 8 9 9 10 10 Closing Entries 11 31 Tour Revenue 411 34,057.00 11 12 Income Summary 313 34,057.00 12 13 13 14 31 Income Summary 313 29,404.00 14 15 Wages Expense 511 23,348.00 15 16 Rent Expense 512 2,930.00 16 17 Office Supplies Expense 513 360.00 17 18 Depreciation Expense, Office 18 19 Equipment 514 386.00 19 20 Telephone Expense 515 941.00 20 21 Advertising Expense 516 1,237.00 21 22 Miscellaneous Expense 519 202.00 22 23 23 24 31 Income Summary 313 4,653.00 24 25 S. Oliver, Capital 311 4,653.00 25 26 26 27 31 S. Oliver, Capital 311 24,000.00 27 28 S. Oliver, Drawing 312 24,000.00 28 29 29 210 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-3B (continued) GENERAL LEDGER Cash 111 NO. Dec. 31 Balance 4,827.00 Office Equipment NO. 124 Dec. 31 Balance 4,042.00 Accumulated Depreciation, Office Equipment NO. 125 Dec. 31 Balance 546.00 31 Adj. 17 386.00 932.00 Wages Payable NO. 222 Dec. 31 Adj. 17 528.00 528.00 S. Oliver, Capital 311 NO. Dec. 31 Balance 26,756.00 31 Closing 17 4,653.00 31,409.00 31 Closing 17 24,000.00 7,409.00 S. Oliver, Drawing NO. 312 Dec. 31 Balance 24,000.00 31 Closing 17 24,000.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 211
Problem 5-3B (continued) Income Summary 313 NO. Dec. 31 Closing 17 34,057.00 34,057.00 31 Closing 17 29,404.00 4,653.00 31 Closing 17 4,653.00 Tour Revenue NO. 411 Dec. 31 Balance 34,057.00 31 Closing 17 34,057.00 Wages Expense NO. 511 Dec. 31 Balance 22,820.00 31 Adj. 17 528.00 23,348.00 31 Closing 17 23,348.00 Rent Expense NO. 512 Dec. 31 Balance 2,930.00 31 Closing 17 2,930.00 Office Supplies Expense NO. 513 Dec. 31 Balance 360.00 31 Closing 17 360.00 212 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-3B (concluded) Depreciation Expense, Office Equipment NO. 514 Dec. 31 Adj. 17 386.00 386.00 31 Closing 17 386.00 Telephone Expense NO. 515 Dec. 31 Balance 941.00 31 Closing 17 941.00 Advertising Expense NO. 516 Dec. 31 Balance 1,237.00 31 Closing 17 1,237.00 Miscellaneous Expense NO. 519 Dec. 31 Balance 202.00 31 Closing 17 202.00 NAME Oliver Tour Company Post-Closing Trial Balance December 31, Cash 4,827 Office Equipment 4,042 Accumulated Depreciation, Office Equipment 932 Wages Payable 528 S. Oliver, Capital 7,409 8,869 8,869 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 213
Problem 5-4B Miss Beverly's Tutoring Service Work Sheet For Year Ended June 30, TRIAL ADJUSTMENTS NAME 1 Cash 6,491.00 2 Accounts Receivable 624.00 3 Prepaid Insurance 1,280.00 (a) 470.00 4 Equipment 5,497.00 5 Accumulated Depreciation, 6 Equipment 2,472.00 (b) 948.00 7 Van 13,674.00 8 Accumulated Depreciation, Van 4,168.00 (c) 1,490.00 9 Accounts Payable 1,436.00 10 B. Morrow, Capital 14,848.00 11 B. Morrow, Drawing 18,000.00 12 Fees Earned 43,680.00 13 Salary Expense 16,000.00 (d) 574.00 14 Advertising Expense 2,200.00 15 Van Operating Expense 705.00 16 Supplies Expense 527.00 17 Utilities Expense 1,248.00 18 Miscellaneous Expense 358.00 19 66,604.00 66,604.00 20 Insurance Expense (a) 470.00 21 Depreciation Expense, 22 Equipment (b) 948.00 23 Depreciation Expense, Van (c) 1,490.00 24 Salaries Payable (d) 574.00 25 3,482.00 3,482.00 26 Net Income 27 28 29 30 31 32 33 34 35 36 37 38 214 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-4B (continued) ADJUSTED TRIAL INCOME STATEMENT SHEET 6,491.00 6,491.00 1 624.00 624.00 2 810.00 810.00 3 5,497.00 5,497.00 4 3,420.00 3,420.00 6 13,674.00 13,674.00 7 5,658.00 5,658.00 8 1,436.00 1,436.00 9 14,848.00 14,848.00 10 18,000.00 18,000.00 11 43,680.00 43,680.00 12 16,574.00 16,574.00 13 2,200.00 2,200.00 14 705.00 705.00 15 527.00 527.00 16 1,248.00 1,248.00 17 358.00 358.00 18 470.00 470.00 20 948.00 948.00 22 1,490.00 1,490.00 23 574.00 574.00 24 69,616.00 69,616.00 24,520.00 43,680.00 45,096.00 25,936.00 25 19,160.00 19,160.00 26 43,680.00 43,680.00 45,096.00 45,096.00 27 5 19 21 28 29 30 31 32 33 34 35 36 37 38 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 215
Problem 5-4B (continued) Miss Beverly's Tutoring Service Income Statement For Year Ended June 30, Revenue: Fees Earned $43,680 Expenses: Salary Expense $16,574 Advertising Expense 2,200 Van Operating Expense 705 Supplies Expense 527 Utilities Expense 1,248 Insurance Expense 470 Depreciation Expense, Equipment 948 Depreciation Expense, Van 1,490 Miscellaneous Expense 358 Total Expenses 24,520 Net Income $19,160 Miss Beverly's Tutoring Service Statement of Owner's Equity For Year Ended June 30, B. Morrow, Capital, July 1, $11,848 Investment on June 10, $ 3,000 Net Income for the Year 19,160 Subtotal $22,160 Less Withdrawals for the Year 18,000 Increase in Capital 4,160 B. Morrow, Capital, June 30, $16,008 216 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Problem 5-4B (continued) Miss Beverly's Tutoring Service Balance Sheet June 30, Assets Cash $ 6,491 Accounts Receivable 624 Prepaid Insurance 810 Equipment $ 5,497 Less Accumulated Depreciation 3,420 2,077 Van $13,674 Less Accumulated Depreciation 5,658 8,016 Total Assets $18,018 Liabilities Accounts Payable $ 1,436 Salaries Payable 574 Total Liabilities $ 2,010 Owner's Equity B. Morrow, Capital 16,008 Total Liabilities and Owner's Equity $18,018 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 217
Problem 5-4B (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 Adjusting Entries 1 2 June 30 Insurance Expense 470.00 2 3 Prepaid Insurance 470.00 3 4 4 5 30 Depreciation Expense, Equipment 948.00 5 6 Accumulated Depreciation, 6 7 Equipment 948.00 7 8 8 9 30 Depreciation Expense, Van 1,490.00 9 10 Accumulated Depreciation, Van 1,490.00 10 11 11 12 30 Salary Expense 574.00 12 13 Salaries Payable 574.00 13 14 14 15 15 Closing Entries 16 30 Fees Earned 43,680.00 16 17 Income Summary 43,680.00 17 18 18 19 30 Income Summary 24,520.00 19 20 Salary Expense 16,574.00 20 21 Advertising Expense 2,200.00 21 22 Van Operating Expense 705.00 22 23 Supplies Expense 527.00 23 24 Utilities Expense 1,248.00 24 25 Insurance Expense 470.00 25 26 Depreciation Expense, Equipment 948.00 26 27 Depreciation Expense, Van 1,490.00 27 28 Miscellaneous Expense 358.00 28 29 29 30 30 Income Summary 19,160.00 30 31 B. Morrow, Capital 19,160.00 31 32 32 33 30 B. Morrow, Capital 18,000.00 33 34 B. Morrow, Drawing 18,000.00 34 35 35 36 36 218 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A SURF'S UP! Suggested Audit Questions 1. What was the amount incurred for advertising on July 5? 2. How much of the concessions income was received in cash? 3. What was the amount of the principal paid on the mortgage? 4. How much did Lacy withdraw from the business? 5. What is the amount of accrued wages? 6. How much insurance expired during the month? 7. What is the amount of depreciation of the pool/slide facility? 8. What is the ending balance of Lacy's Capital account? 9. As of the end of the month, what is the amount of the book value of the pool/slide facility? 10. How much cash did Lacy pay as a down payment on the purchase of Surf's Up!? Answers 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. $1,320 $250 $1,910 $4,700 $920 $1,020 $675 $163,691 $149,830 $120,000 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 219
ING CYCLE REVIEW PROBLEM A (continued) GENERAL JOURNAL PAGE 1 DESCRIPTION 1 1 2 July 1 Cash 111 150,000.00 2 3 L. Lacy, Capital 311 150,000.00 3 4 Invested cash in business. 4 5 5 6 2 Pool Furniture 126 3,800.00 6 7 Pool/Slide Facility 124 148,800.00 7 8 Building 122 96,200.00 8 9 Land 121 292,000.00 9 10 Cash 111 120,000.00 10 11 Mortgage Payable 223 420,800.00 11 12 Bought Surfs Up!. 12 13 13 14 2 Prepaid Insurance 114 12,240.00 14 15 Cash 111 12,240.00 15 16 Paid one-year premium for 16 17 insurance. 17 18 18 19 2 Pool/Slide Facility 124 1,225.00 19 20 Cash 111 500.00 20 21 Accounts Payable 221 725.00 21 22 Bought inner tubes from Worn Tires. 22 23 23 24 3 Cash 111 250.00 24 25 Concessions Income 412 250.00 25 26 Received payment for rental space 26 27 for video games and food 27 28 concessions. 28 29 29 30 5 Advertising Expense 513 1,320.00 30 31 Accounts Payable 221 1,320.00 31 32 Grand opening expenses from 32 33 Party Rentals ($620) and 33 34 City Star ($700). 34 35 35 36 6 Pool Maintenance Expense 511 800.00 36 37 Cash 111 800.00 37 38 July payment on contract to 38 39 All-Around Maintenance. 39 40 40 220 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A (continued) GENERAL JOURNAL PAGE 2 DESCRIPTION 1 1 2 July 6 Miscellaneous Expense 522 128.00 2 3 Cash 111 128.00 3 4 Paid for employee picnic. 4 5 5 6 7 Cash 111 12,086.00 6 7 Income from Services 411 12,086.00 7 8 For services rendered. 8 9 9 10 9 Pool Maintenance Expense 511 646.00 10 11 Accounts Payable 221 646.00 11 12 Bought parts on account from 12 13 Arlen's Pool Supply. 13 14 14 15 14 Cash 111 10,445.00 15 16 Income from Services 411 10,445.00 16 17 For services rendered. 17 18 18 19 15 Wages Expense 512 8,460.00 19 20 Cash 111 8,460.00 20 21 For period July 1 through July 14. 21 22 22 23 16 Accounts Payable 221 1,150.00 23 24 Cash 111 1,150.00 24 25 Paid Party Rentals and City 25 26 Star on account. 26 27 27 28 16 L. Lacy, Drawing 312 2,500.00 28 29 Cash 111 2,500.00 29 30 Withdrawal for personal use. 30 31 31 32 17 Pool Furniture 126 2,100.00 32 33 Accounts Payable 221 2,100.00 33 34 Bought pool furniture from Pool 34 35 Suppliers. 35 36 36 37 37 38 38 39 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 221
ING CYCLE REVIEW PROBLEM A (continued) GENERAL JOURNAL PAGE 3 DESCRIPTION 1 1 2 July 18 Miscellaneous Expense 522 248.00 2 3 Cash 111 248.00 3 4 Paid for costume alterations. 4 5 5 6 21 Cash 111 10,330.00 6 7 Income from Services 411 10,330.00 7 8 For services rendered. 8 9 9 10 21 Accounts Payable 221 600.00 10 11 Cash 111 600.00 11 12 Partial payment to Worn Tires. 12 13 13 14 23 Accounts Payable 221 225.00 14 15 Pool Furniture 126 225.00 15 16 Received allowance from Pool 16 17 Suppliers for damaged chairs. 17 18 18 19 25 Utilities Expense 514 292.00 19 20 Cash 111 292.00 20 21 Received and paid telephone bill. 21 22 22 23 29 Wages Expense 512 8,227.00 23 24 Cash 111 8,227.00 24 25 For period July 15 through 28. 25 26 26 27 31 Cash 111 11,870.00 27 28 Income from Services 411 11,870.00 28 29 For services rendered. 29 30 30 31 31 Accounts Payable 221 360.00 31 32 Cash 111 360.00 32 33 Paid Arlen's Pool Supply on account. 33 34 34 35 31 Utilities Expense 514 684.00 35 36 Cash 111 684.00 36 37 Received and paid water bill. 37 38 38 39 39 40 40 222 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A (continued) GENERAL JOURNAL PAGE 4 DESCRIPTION 1 1 2 July 31 Mortgage Payable 223 1,910.00 2 3 Interest Expense 515 1,980.00 3 4 Cash 111 3,890.00 4 5 Paid installment on mortgage. 5 6 6 7 31 Utilities Expense 514 824.00 7 8 Cash 111 824.00 8 9 Received and paid electric bill. 9 10 10 11 31 Pool/Slide Facility 124 480.00 11 12 Cash 111 100.00 12 13 Accounts Payable 221 380.00 13 14 Bought inner tubes from Worn 14 15 Tires. 15 16 16 17 31 L. Lacy, Drawing 312 2,200.00 17 18 Cash 111 2,200.00 18 19 Withdrawal for personal use. 19 20 20 21 31 Accounts Receivable 112 234.00 21 22 Concessions Income 412 234.00 22 23 Additional revenue from 23 24 concessions. 24 25 25 Adjusting Entries 26 26 27 31 Insurance Expense 517 1,020.00 27 28 Prepaid Insurance 114 1,020.00 28 29 29 30 31 Depreciation Expense, Building 518 480.00 30 31 Accumulated Depreciation, Building 123 480.00 31 32 32 33 31 Depreciation Expense, Pool/Slide Facility 519 675.00 33 34 Accumulated Depreciation, Pool/Slide 34 35 Facility 125 675.00 35 36 36 37 31 Depreciation Expense, Pool Furniture 520 120.00 37 38 Accumulated Depreciation, Pool 38 39 Furniture 127 120.00 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 223
ING CYCLE REVIEW PROBLEM A (continued) GENERAL JOURNAL PAGE 5 DESCRIPTION 1 Adjusting Entries (continued) 1 2 July 2 3 31 Wages Expense 512 920.00 3 4 Wages Payable 222 920.00 4 5 5 6 6 Closing Entries 7 31 Income from Services 411 44,731.00 7 8 Concessions Income 412 484.00 8 9 Income Summary 313 45,215.00 9 10 10 11 31 Income Summary 313 26,824.00 11 12 Pool Maintenance Expense 511 1,446.00 12 13 Wages Expense 512 17,607.00 13 14 Advertising Expense 513 1,320.00 14 15 Utilities Expense 514 1,800.00 15 16 Interest Expense 515 1,980.00 16 17 Insurance Expense 517 1,020.00 17 18 Depreciation Expense, Building 518 480.00 18 19 Depreciation Expense, Pool/Slide 19 20 Facility 519 675.00 20 21 Depreciation Expense, Pool Furniture 520 120.00 21 22 Miscellaneous Expense 522 376.00 22 23 23 24 31 Income Summary 313 18,391.00 24 25 L. Lacy, Capital 311 18,391.00 25 26 26 27 31 L. Lacy, Capital 311 4,700.00 27 28 L. Lacy, Drawing 312 4,700.00 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 224 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A (continued) GENERAL LEDGER Cash NO. 111 July 1 1 150,000.00 150,000.00 2 1 120,000.00 30,000.00 2 1 12,240.00 17,760.00 2 1 500.00 17,260.00 3 1 250.00 17,510.00 6 1 800.00 16,710.00 6 2 128.00 16,582.00 7 2 12,086.00 28,668.00 14 2 10,445.00 39,113.00 15 2 8,460.00 30,653.00 16 2 1,150.00 29,503.00 16 2 2,500.00 27,003.00 18 3 248.00 26,755.00 21 3 10,330.00 37,085.00 21 3 600.00 36,485.00 25 3 292.00 36,193.00 29 3 8,227.00 27,966.00 31 3 11,870.00 39,836.00 31 3 360.00 39,476.00 31 3 684.00 38,792.00 31 4 3,890.00 34,902.00 31 4 824.00 34,078.00 31 4 100.00 33,978.00 31 4 2,200.00 31,778.00 Accounts Receivable NO. 112 July 31 4 234.00 234.00 Prepaid Insurance NO. 114 July 2 1 12,240.00 12,240.00 31 Adj. 4 1,020.00 11,220.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 225
ING CYCLE REVIEW PROBLEM A (continued) Land 121 NO. July 2 1 292,000.00 292,000.00 Building 122 NO. July 2 1 96,200.00 96,200.00 Accumulated Depreciation, Building NO. 123 July 31 Adj. 4 480.00 480.00 Pool/Slide Facility NO. 124 July 2 1 148,800.00 148,800.00 2 1 1,225.00 150,025.00 31 4 480.00 150,505.00 Accumulated Depreciation, Pool/Slide Facility NO. 125 July 31 Adj. 4 675.00 675.00 226 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A (continued) Pool Furniture 126 NO. July 2 1 3,800.00 3,800.00 17 2 2,100.00 5,900.00 23 3 225.00 5,675.00 Accumulated Depreciation, Pool Furniture NO. 127 July 31 Adj. 4 120.00 120.00 Accounts Payable NO. 221 July 2 1 725.00 725.00 5 1 1,320.00 2,045.00 9 2 646.00 2,691.00 16 2 1,150.00 1,541.00 17 2 2,100.00 3,641.00 21 3 600.00 3,041.00 23 3 225.00 2,816.00 31 3 360.00 2,456.00 31 4 380.00 2,836.00 Wages Payable NO. 222 July 31 Adj. 5 920.00 920.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 227
ING CYCLE REVIEW PROBLEM A (continued) Mortgage Payable 223 NO. July 2 1 420,800.00 420,800.00 31 4 1,910.00 418,890.00 L. Lacy, Capital NO. 311 July 1 1 150,000.00 150,000.00 31 Closing 5 18,391.00 168,391.00 31 Closing 5 4,700.00 163,691.00 L. Lacy, Drawing NO. 312 July 16 2 2,500.00 2,500.00 31 4 2,200.00 4,700.00 31 Closing 5 4,700.00 Income Summary NO. 313 July 31 Closing 5 45,215.00 45,215.00 31 Closing 5 26,824.00 18,391.00 31 Closing 5 18,391.00 Income from Services 411 NO. July 7 2 12,086.00 12,086.00 14 2 10,445.00 22,531.00 21 3 10,330.00 32,861.00 31 3 11,870.00 44,731.00 31 Closing 5 44,731.00 228 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A (continued) Concessions Income 412 NO. July 3 1 250.00 250.00 31 4 234.00 484.00 31 Closing 5 484.00 Pool Maintenance Expense NO. 511 July 6 1 800.00 800.00 9 2 646.00 1,446.00 31 Closing 5 1,446.00 Wages Expense NO. 512 July 15 2 8,460.00 8,460.00 29 3 8,227.00 16,687.00 31 Adj. 5 920.00 17,607.00 31 Closing 5 17,607.00 Advertising Expense NO. 513 July 5 1 1,320.00 1,320.00 31 Closing 5 1,320.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 229
ING CYCLE REVIEW PROBLEM A (continued) Utilities Expense NO. 514 July 25 3 292.00 292.00 31 3 684.00 976.00 31 4 824.00 1,800.00 31 Closing 5 1,800.00 Interest Expense NO. 515 July 31 4 1,980.00 1,980.00 31 Closing 5 1,980.00 Insurance Expense NO. 517 July 31 Adj. 4 1,020.00 1,020.00 31 Closing 5 1,020.00 Depreciation Expense, Building 518 NO. July 31 Adj. 4 480.00 480.00 31 Closing 5 480.00 Depreciation Expense, Pool/Slide Facility NO. 519 July 31 Adj. 4 675.00 675.00 31 Closing 5 675.00 230 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A (continued) Depreciation Expense, Pool Furniture 520 NO. July 31 Adj. 4 120.00 120.00 31 Closing 5 120.00 Miscellaneous Expense NO. 522 July 6 2 128.00 128.00 18 3 248.00 376.00 31 Closing 5 376.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 231
ING CYCLE REVIEW PROBLEM A (continued) Surf's Up! Work Sheet For Month Ended July 31, 1 Cash 31,778.00 TRIAL 2 Accounts Receivable 234.00 3 Prepaid Insurance 12,240.00 (a) 1,020.00 4 Land 292,000.00 5 Building 96,200.00 6 Pool/Slide Facility 150,505.00 7 Pool Furniture 5,675.00 8 Accounts Payable 2,836.00 9 Mortgage Payable 418,890.00 10 L. Lacy, Capital 150,000.00 11 L. Lacy, Drawing 4,700.00 12 Income from Services 44,731.00 13 Concessions Income 484.00 14 Pool Maintenance Expense 1,446.00 15 Wages Expense 16,687.00 (e) 920.00 16 Advertising Expense 1,320.00 17 Utilities Expense 1,800.00 18 Interest Expense 1,980.00 19 Miscellaneous Expense 376.00 20 616,941.00 616,941.00 21 Insurance Expense (a) 1,020.00 22 Depreciation Expense, 23 Building (b) 480.00 24 Accumulated Depreciation, 25 Building (b) 480.00 26 Depreciation Expense, 27 Pool/Slide Facility (c) 675.00 28 Accumulated Depreciation, 29 Pool/Slide Facility (c) 675.00 30 Depreciation Expense, 31 Pool Furniture (d) 120.00 32 Accumulated Depreciation, 33 Pool Furniture (d) 120.00 34 Wages Payable (e) 920.00 35 3,215.00 3,215.00 36 Net Income 37 38 39 40 NAME ADJUSTMENTS 232 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A (continued) ADJUSTED TRIAL INCOME STATEMENT SHEET 31,778.00 31,778.00 1 234.00 234.00 2 11,220.00 11,220.00 3 292,000.00 292,000.00 4 96,200.00 96,200.00 5 150,505.00 150,505.00 6 5,675.00 5,675.00 7 2,836.00 2,836.00 8 418,890.00 418,890.00 9 150,000.00 150,000.00 10 4,700.00 4,700.00 11 44,731.00 44,731.00 12 484.00 484.00 13 1,446.00 1,446.00 14 17,607.00 17,607.00 15 1,320.00 1,320.00 16 1,800.00 1,800.00 17 1,980.00 1,980.00 18 376.00 376.00 19 1,020.00 1,020.00 21 480.00 480.00 23 480.00 480.00 25 675.00 675.00 27 675.00 675.00 29 120.00 120.00 31 120.00 120.00 33 920.00 920.00 34 619,136.00 619,136.00 26,824.00 45,215.00 592,312.00 573,921.00 35 18,391.00 18,391.00 36 45,215.00 45,215.00 592,312.00 592,312.00 37 20 22 24 26 28 30 32 38 39 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 233
ING CYCLE REVIEW PROBLEM A (continued) Surf's Up! Income Statement For Month Ended July 31, Revenue: Income from Services $44,731 Concessions Income 484 Total Revenue $45,215 Expenses: Pool Maintenance Expense $ 1,446 Wages Expense 17,607 Advertising Expense 1,320 Utilities Expense 1,800 Interest Expense 1,980 Insurance Expense 1,020 Depreciation Expense, Building 480 Depreciation Expense, Pool/Slide Facility 675 Depreciation Expense, Pool Furniture 120 Miscellaneous Expense 376 Total Expenses 26,824 Net Income $18,391 Surf's Up! Statement of Owner's Equity For Month Ended July 31, L. Lacy, Capital, July 1, $ 0 Investment on July 1, $150,000 Net Income for July 18,391 Subtotal $168,391 Less Withdrawals for July 4,700 Increase in Capital 163,691 L. Lacy, Capital, July 31, $163,691 234 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM A (continued) Surf's Up! Balance Sheet July 31, Assets Cash $ 31,778 Accounts Receivable 234 Prepaid Insurance 11,220 Land 292,000 Building $ 96,200 Less Accumulated Depreciation 480 95,720 Pool/Slide Facility $150,505 Less Accumulated Depreciation 675 149,830 Pool Furniture $ 5,675 Less Accumulated Depreciation 120 5,555 Total Assets $586,337 Liabilities Accounts Payable $ 2,836 Wages Payable 920 Mortgage Payable 418,890 Total Liabilities $422,646 Owner's Equity L. Lacy, Capital 163,691 Total Liabilities and Owner's Equity $586,337 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 235
ING CYCLE REVIEW PROBLEM A (concluded) Surf's Up! Post-Closing Trial Balance July 31, NAME Cash 31,778 Accounts Receivable 234 Prepaid Insurance 11,220 Land 292,000 Building 96,200 Accumulated Depreciation, Building 480 Pool/Slide Facility 150,505 Accumulated Depreciation, Pool/Slide Facility 675 Pool Furniture 5,675 Accumulated Depreciation, Pool Furniture 120 Accounts Payable Wages Payable Mortgage Payable L. Lacy, Capital 2,836 920 418,890 163,691 587,612 587,612 236 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM B WIND SAILORS Suggested Audit Questions 1. What was the amount of cash paid for advertising on June 3? 2. How much of the concession income was received in cash? 3. What was the amount of the principal paid on the mortgage? 4. How much did Arden withdraw from the business? 5. What is the amount of accrued wages? 6. How much insurance expired during the month? 7. What is the amount of depreciation of the fan system in June? 8. What is the ending balance of Arden s Capital account? 9. As of the end of the month, what is the amount of the book value of the pool structure? 10. How much cash did Arden pay as a down payment on the purchase of Wind Sailors? Answers 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. $350 $150 $497 $2,700 $790 $1,000 $260 $87,591 $139,285 $60,000 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 237
ING CYCLE REVIEW PROBLEM B (continued) GENERAL JOURNAL PAGE 1 DESCRIPTION 1 1 2 June 1 Cash 111 85,000.00 2 3 R. Arden, Capital 311 85,000.00 3 4 Invested cash in business. 4 5 5 6 2 Sailboats 129 25,800.00 6 7 Fan System 127 13,300.00 7 8 Pool Structure 125 140,000.00 8 9 Land 121 37,000.00 9 10 Cash 111 60,000.00 10 11 Mortgage Payable 223 156,100.00 11 12 Bought Wind Sailors. 12 13 13 14 3 Advertising Expense 513 350.00 14 15 Cash 111 350.00 15 16 Paid bill for newspaper 16 17 advertising. 17 18 18 19 3 Prepaid Insurance 114 12,000.00 19 20 Cash 111 12,000.00 20 21 Paid one-year premium for 21 22 insurance. 22 23 23 24 3 Sailboats 129 7,200.00 24 25 Cash 111 3,200.00 25 26 Accounts Payable 221 4,000.00 26 27 Bought additional boats from 27 28 Larkin Manufacturing Co. 28 29 29 30 3 Cash 111 150.00 30 31 Concessions Income 412 150.00 31 32 Received payment for rental 32 33 space for vending machines. 33 34 34 35 3 Advertising Expense 513 460.00 35 36 Accounts Payable 221 460.00 36 37 Promotional handouts from 37 38 Quick Printing. 38 39 39 40 40 238 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ING CYCLE REVIEW PROBLEM B (continued) GENERAL JOURNAL PAGE 2 DESCRIPTION 1 1 2 June 3 Sailboat Rental Expense 511 700.00 2 3 Cash 111 700.00 3 4 Leased sailboats from K. Erdmon 4 5 Boat Co. 5 6 6 7 5 Miscellaneous Expense 522 96.00 7 8 Cash 111 96.00 8 9 Paid miscellaneous expenses. 9 10 10 11 8 Cash 111 2,855.00 11 12 Income from Services 411 2,855.00 12 13 For services rendered. 13 14 14 15 9 Fan System 127 745.00 15 16 Accounts Payable 221 745.00 16 17 Bought an addition to fan system 17 18 on account from Stark Pool Supply. 18 19 19 20 15 Wages Expense 512 3,900.00 20 21 Cash 111 3,900.00 21 22 For period June 1 through June 14. 22 23 23 24 16 Accounts Payable 221 460.00 24 25 Cash 111 460.00 25 26 Paid Quick Printing on account. 26 27 27 28 16 R. Arden, Drawing 312 1,200.00 28 29 Cash 111 1,200.00 29 30 Withdrawal for personal use. 30 31 31 32 16 Sailboats 129 850.00 32 33 Accounts Payable 221 850.00 33 34 Bought sails on account from 34 35 Canvas Products, Inc. 35 36 36 37 16 Cash 111 4,850.00 37 38 Income from Services 411 4,850.00 38 39 For services rendered. 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 239