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# CHAPTER 4

## Completing the Accounting Cycle

ASSIGNMENT CLASSIFICATION TABLE
Brief
Exercises

Do It!

Exercises

A
Problems

B
Problems

1, 2, 3,
4, 5

1, 2, 3

1, 2, 3, 5,
6, 17

4A, 5A

4B, 5B

## Explain the process

of closing the books.

6, 7, 11,
12

4, 5, 6

4, 7, 8,
11, 19

4A, 5A

4B, 5B

*3.

## Describe the content and

purpose of a post-closing
trial balance.

8, 9

4, 7, 8

4A, 5A

4B, 5B

*4.

## State the required steps

in the accounting cycle.

10, 11, 12

10, 19

5A

5B

*5.

## Explain the approaches

to preparing correcting
entries.

13

12, 13

6A

*6.

## Identify the sections of a

classified statement of
financial position.

17, 18, 19

10, 11

3, 9, 14, 15,
16, 17

4A, 5A

*7.

## Prepare reversing entries.

10, 20, 21

12

Study Objectives

Questions

*1.

Prepare a worksheet.

*2.

3, 4

## 1B, 2B, 3B,

4B, 5B

18, 19

*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix *to the
chapter.

4-1

Problem
Number

Description

Difficulty
Level

Time Allotted
(min.)

Simple

4050

1A

## Prepare worksheet, financial statements, and adjusting

and closing entries.

2A

## Complete worksheet; prepare financial statements,

closing entries, and post-closing trial balance.

Moderate

5060

3A

Moderate

4050

4A

## Complete worksheet; prepare classified statement

of financial position, entries, and post-closing trial
balance.

Moderate

5060

5A

Complex

7090

6A

balance.

Moderate

4050

1B

## Prepare worksheet, financial statements, and adjusting

and closing entries.

Simple

4050

2B

## Complete worksheet; prepare financial statements,

closing entries, and post-closing trial balance.

Moderate

5060

3B

Moderate

4050

4B

## Complete worksheet; prepare classified statement

of financial position, entries, and post-closing trial
balance.

Moderate

5060

5B

Complex

7090

4-2

## (For Instructor Use Only)

WEYGANDT IFRS 1E
CHAPTER 4
COMPLETING THE ACCOUNTING CYCLE
Number

SO

BT

Difficulty

Time (min.)

BE1

Simple

24

BE2

AN

Moderate

68

BE3

Simple

35

BE4

AP

Simple

35

BE5

AP

Simple

46

BE6

AP

Simple

68

BE7

Simple

24

BE8

Simple

35

BE9

AN

Moderate

46

BE10

AP

Simple

46

BE11

Simple

35

BE12

AN

Moderate

46

DI1

Simple

46

DI2

AP

Simple

24

DI3

AP

Simple

68

DI4

Simple

46

EX1

AP

Simple

1215

EX2

AP

Simple

1012

EX3

1, 6

AP

Simple

1215

EX4

2, 3

AP

Simple

1215

EX5

AN

Simple

1012

EX6

AN

Moderate

1215

EX7

2, 3

AP

Simple

810

EX8

2, 3

AP

Simple

1012

EX9

AP

Simple

1215

EX10

Simple

35

EX11

AP

Simple

68

EX12

AN

Moderate

810

EX13

AN

Moderate

46

EX14

AP

Moderate

1012

EX15

Simple

58

EX16

AP

Simple

810

4-3

Number

SO

BT

Difficulty

Time (min.)

EX17

1, 6

AP

Simple

1215

EX18

AN

Moderate

57

EX19

2, 4, 7

AN

Moderate

1012

P1A

1-3, 6

AN

Simple

4050

P2A

1-3, 6

AP

Moderate

5060

P3A

1-3, 6

AP

Moderate

4050

P4A

1-3, 6

AN

Moderate

5060

P5A

1-4, 6

AN

Complex

7090

P6A

AN

Moderate

4050

P1B

1-3, 6

AN

Simple

4050

P2B

1-3, 6

AP

Moderate

5060

P3B

1-3, 6

AP

Moderate

4050

P4B

1-3, 6

AN

Moderate

5060

P5B

1-4, 6

AN

Complex

7090

BYP1

AN

Simple

1012

BYP2

AN

Simple

810

BYP3

Simple

1012

BYP4

AN

Moderate

1520

BYP5

Simple

1520

BYP6

Moderate

1015

4-4

## State the required steps in

the accounting cycle.

## Explain the approaches to

preparing correcting entries.

## Identify the sections of

a classified statement of financial
position.

*4.

*5.

*6.

*7.

## Describe the content and

purpose of a post-closing trial
balance.

## Explain the process of closing

the books.

*2.

*3.

Prepare a worksheet.

*1.

Study Objective

Q4-14
Q4-15
Q4-16

Q4-11
Q4-12
BE4-8

Q4-6
Q4-11
Q4-12

BE4-1

Knowledge

Communication

Q4-10
Q4-20

Q4-17
Q4-18
BE4-11
DI4-4
E4-15

E4-16
E4-17
P4-2A
P4-3A
P4-2B
P4-3B

Financial Reporting
Comparative
Analysis
Decision Making
Across the
Organization

E4-18
E4-19

P4-4B
P4-5B

P4-5B

P4-5A
P4-1B
P4-4B
P4-5B

Analysis

Q4-21
BE4-12

P4-1A
P4-4A
P4-5A
P4-1B
P4-4B
P4-5B

BE4-9
E4-12
E4-13
P4-6A
Q4-19
BE4-10
DI4-3
E4-3
E4-9
E4-14

E4-19
P4-1A
P4-4A
P4-5A
P4-1B
P4-4B

P4-3A P4-1A
P4-2B P4-4A
P4-3B P4-5A
P4-1B

E4-8
E4-11
P4-2A
P4-3A
P4-2B
P4-3B

P4-3A BE4-2
P4-2B E4-5
P4-3B E4-6
P4-1A
P4-4A

Q4-13

E4-4
E4-7
E4-8
P4-2A

BE4-4
BE4-5
BE4-6
DI4-2
E4-4
E4-7

E4-1
E4-2
E4-3
E4-17
P4-2A

E4-19
P4-5A
P4-5B

BE4-3
DI4-1

Application

Q4-10
E4-10

Q4-8
Q4-9
BE4-7

Q4-7

Q4-1
Q4-2
Q4-3
Q4-4
Q4-5

Comprehension

Synthesis

Exploring the
Web
Ethics Case

Evaluation

Correlation Chart between Blooms Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems

## (For Instructor Use Only)

4-5

1.

No. A worksheet is not a permanent accounting record. The use of a worksheet is an optional
step in the accounting cycle.

2.

The worksheet is merely a device used to make it easier to prepare adjusting entries and the
financial statements.

3.

The amount shown in the adjusted trial balance column for an account equals the account
balance in the ledger after adjusting entries have been journalized and posted.

4.

The net income of \$12,000 will appear in the income statement debit column and the statement
of financial position credit column. A net loss will appear in the income statement credit column
and the statement of financial position debit column.

5.

Formal financial statements are needed because the columnar data are not properly arranged
and classified for statement purposes. For example, the Dividends account is listed with assets.

6.

(1)
(2)
(3)
(4)

7.

Income Summary is a temporary account that is used in the closing process. The account is
debited for expenses and credited for revenues. The difference, either net income or loss, is then
closed to the Retained Earnings account.

8.

The post-closing trial balance contains only statement of financial position accounts. Its purpose
is to prove the equality of the permanent account balances that are carried forward into the next
accounting period.

9.

The accounts that will not appear in the post-closing trial balance are Depreciation Expense;
Dividends; and Service Revenue.

10.

A reversing entry is the exact opposite of an adjusting entry and is made at the beginning of the
new accounting period. Reversing entries are an optional step in the accounting cycle.

11.

The steps that involve journalizing are: (1) journalize the transactions, (2) journalize the adjusting
entries, and (3) journalize the closing entries.

12.

The three trial balances are the: (1) trial balance, (2) adjusted trial balance, and (3) post-closing
trial balance.

13.

Correcting entries differ from adjusting entries because they: (1) are not a required part of the
accounting cycle, (2) may be made at any time, and (3) may affect any combination of accounts.

4-6

## (Dr) Individual revenue accounts and (Cr) Income Summary.

(Dr) Income Summary and (Cr) Individual expense accounts.
(Dr) Income Summary and (Cr) Retained Earnings.
(Dr) Retained Earnings and (Cr) Dividends.

## Questions Chapter 4 (Continued)

*14. The standard classifications in a statement of financial position are:
Assets
Intangible Assets
Property, Plant, and Equipment
Long-term Investments
Current Assets

## Equity and Liabilities

Equity
Non-current Liabilities
Current Liabilities

*
15. A companys operating cycle is the average time required to go from cash to cash in producing
revenues. The operating cycle of a company is the average time that it takes to purchase inventory,
sell it on account, and then collect cash from customers.
*16. Current assets are assets that a company expects to convert to cash or use up in one year. Some
companies use a period longer than one year to classify assets and liabilities as current because they
have an operating cycle longer than one year. Companies usually list current assets in the reverse
order in which they expect to convert them into cash.
*17. Long-term investments are generally investments in shares and bonds of other companies that
are normally held for many years. Property, plant, and equipment are assets with relatively long
useful lives that a company is currently using in operating the business.
*18. The two accounts and the purpose of each are: (1) Share capitalordinary is used to record
investments of assets in the business by the owners (shareholders). (2) Retained earnings is used
to record net income retained in the business.
*19.. Cadburys current liabilities at December 31, 2008 and December 31, 2007 were 3,388 million
and 4,614 million respectively. Cadburys current liabilities were higher than its current assets in
both years.
*20. After reversing entries have been made, the balances will be Interest Payable, zero balance;
Interest Expense, a credit balance.
*21. (a) Jan. 10

## Salaries Expense ...................................................................................

Cash ...............................................................................................

8,000
8,000

Because of the January 1 reversing entry that credited Salaries Expense for \$3,500, Salaries
Expense will have a debit balance of \$4,500 which equals the expense for the current period.
(b)

Jan. 10

Salaries Payable.....................................................................................
Salaries Expense ...................................................................................
Cash ...............................................................................................

3,500
4,500
8,000

Note that Salaries Expense will again have a debit balance of \$4,500.

4-7

## SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 4-1
The steps in using a worksheet are performed in the following sequence:
(1) prepare a trial balance on the worksheet, (2) enter adjustment data,
statement columns and (5) total the statement columns, compute net
income (loss), and complete the worksheet. Filling in the blanks, the
answers are 1, 3, 4, 5, 2.
The solution to BRIEF EXERCISE 4-2 is on page 4-9.
BRIEF EXERCISE 4-3

Account
Accumulated Depreciation
Depreciation Expense
Share CapitalOrdinary
Dividends
Service Revenue
Supplies
Accounts Payable

Income Statement
Dr.
Cr.

Statement of
Financial Position
Dr.
Cr.
X

X
X
X
X
X
X

Dec. 31
31

31
31

4-8

## Service Revenue ......................................................

Income Summary ............................................

50,000

## Income Summary .....................................................

Salaries Expense.............................................
Supplies Expense ...........................................

31,000

## Income Summary .....................................................

Retained Earnings ..........................................

19,000

## Retained Earnings ...................................................

Dividends...........................................................

2,000

50,000
27,000
4,000

19,000
2,000

## Copyright 2011 John Wiley & Sons, Inc.

Prepaid Insurance
Service Revenue
Salaries Expense
Accounts Receivable
Salaries Payable
Insurance Expense

Account Titles

25,000

3,000
58,000

Trial Balance
Dr.
Cr.

(a) 1,200

(c)
800
(b) 1,100
(c)

800

(a) 1,200
(b) 1,100

Dr.
Cr.

LEY COMPANY
Worksheet

1,200

25,800
1,100

1,800

800

59,100

Trial Balance
Dr.
Cr.

1,200

25,800

59,100

Income
Statement
Dr.
Cr.

1,100

1,800

800

Statement of
Financial
Position
Dr.
Cr.

4-9

## BRIEF EXERCISE 4-5

Salaries Expense
Bal. 27,000 (2) 27,000

Income Summary
(2) 31,000 (1) 50,000
(3) 19,000
50,000
50,000

Service Revenue
(1) 50,000 Bal. 50,000

Supplies Expense
Bal. 4,000 (2) 4,000

Retained Earnings
(4)
2,000 Bal. 30,000
(3) 19,000
Bal. 47,000

Dividends
Bal. 2,000 (4) 2,000

July 31

31

Date
7/31
7/31

## Green Fee Revenue..................................................

Income Summary.............................................

13,600

Income Summary......................................................
Salaries Expense .............................................
Maintenance Expense ....................................

10,700

Explanation
Balance
Closing entry

Ref.
Debit

13,600

8,200
2,500

Credit
13,600

Balance
13,600
0

Credit

Balance
8,200
0

13,600

Salaries Expense
Ref.
Debit
8,200

Date
7/31
7/31

Explanation
Balance
Closing entry

4-10

8,200

## BRIEF EXERCISE 4-6 (Continued)

Date

Explanation

7/31
7/31

Balance
Closing entry

Maintenance Expense
Ref.
Debit

Credit

Balance

2,500

2,500
0

2,500

## BRIEF EXERCISE 4-7

The accounts that will appear in the post-closing trial balance are:
Accumulated Depreciation
Share CapitalOrdinary
Supplies
Accounts Payable

## BRIEF EXERCISE 4-8

The proper sequencing of the required steps in the accounting cycle is as
follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Journalize the transactions.
Post to ledger accounts.
Prepare a trial balance.
Prepare financial statements.
Journalize and post closing entries.
Prepare a post-closing trial balance.

4-11

1.

2.

## Service Revenue .............................................................................

Accounts Receivable............................................................

780

## Accounts Payable (1,750 1,570) .........................................

Store Supplies ........................................................................

180

780

180

## BRIEF EXERCISE 4-10

DIAZ COMPANY
Partial Statement of Financial Position
Current assets
Prepaid insurance ...............................................................................
Supplies ..................................................................................................
Accounts receivable ...........................................................................
Short-term investments.....................................................................
Cash .........................................................................................................
Total ................................................................................................

3,600
5,200
12,500
6,700
15,400
43,400

## BRIEF EXERCISE 4-11

CL
CA
PPE
PPE
CA
IA

Accounts payable
Accounts receivable
Accumulated depreciation
Building
Cash

CL
LTI
PPE
CA
IA
CA

## Income tax payable

Investment in long-term bonds
Land
Merchandise inventory
Patent
Supplies

Nov. 1

## Salaries Payable.................................................................... 1,400

Salaries Expense .........................................................
1,400

The balances after posting the reversing entry are Salaries Expense (Cr.)
\$1,400 and Salaries Payable \$0.

4-12

## SOLUTIONS FOR DO IT! REVIEW EXERCISES

DO IT! 4-1
Income statement debit columnUtilities Expense
Income statement credit columnService Revenue
Statement of financial position debit columnAccounts Receivable
Statement of financial position credit columnNotes Payable; Accumulated
Depreciation; Share Capital

DO IT! 4-2
Dec. 31

Dec. 31

## Income Summary ................................................

Retained Earnings .......................................

29,000

## Retained Earnings ..............................................

Dividends........................................................

22,000

29,000

22,000

DO IT! 4-3

ZURICH COMPANY
Partial Statement of Financial Position
December 31, 2011
Property, plant and equipment
Equipment............................................................
Less: Accumulated depreciation......
Long-term investments
Investments in ordinary shares .........
Current assets
Inventories ...........................................................
Accounts receivable .........................................
Short-term investments...................................
Cash .......................................................................
Total assets ..................................................................

CHF21,700
5,700

CHF16,000
6,500

2,900
4,300
120
13,400

20,720
CHF43,220

## (For Instructor Use Only)

4-13

DO IT! 4-4
NA
CL
CL
CA
NCL
IA

4-14

Interest revenue
Utilities payable
Accounts payable
Supplies
Bonds payable

## Copyright 2011 John Wiley & Sons, Inc.

E
PPE
PPE
NA
LTI
CL

Share CapitalOrdinary
Accumulated depreciation
Machinery
Salaries expense
Investment in real estate
Unearned rent

## (For Instructor Use Only)

SOLUTIONS TO EXERCISES
EXERCISE 4-1
LIN COMPANY
Worksheet
For the Month Ended June 30, 2011
Statement of
Account Titles

Trial Balance

Dr.

Dr.

Cr.

Cr.

Dr.

Cr.

Income Statement
Dr.

Cr.

Financial Position
Dr.

Cash

2,320

2,320

2,320

Accounts Receivable

2,440

2,440

2,440

Supplies

1,880

Accounts Payable
Unearned Revenue

Totals

140

3,600

Service Revenue
Miscellaneous Expense

300

2,400
560

(b)
(c)

140

280

160
7,360

300
1,120

240 (b)

Share CapitalOrdinary
Salaries Expense

(a) 1,580
1,120

Cr.

1,120

100

100

3,600

3,600

2,540

2,540

840

840

160

160

7,360

Supplies Expense

(a) 1,580

Salaries Payable
Totals

1,580
(c)

2,000

280
2,000

1,580
280

7,640

7,640

280
2,580

Net Loss
Totals

2,580

2,540

5,060

40

40

2,580

5,100

## (For Instructor Use Only)

5,100
5,100

4-15

EXERCISE 4-2
GOODE COMPANY
Worksheet (partial)
For the Month Ended April 30, 2011
Trial Balance
Account Titles
Cash
Accounts Receivable
Prepaid Rent
Equipment
Accum. Depreciation
Notes Payable
Accounts Payable
Share CapitalOrdinary
Retained Earnings
Dividends
Service Revenue
Salaries Expense
Rent Expense
Depreciation Expense
Interest Expense
Interest Payable
Totals
Net Income
Totals

4-16

Dr.
13,752
7,840
2,280
23,050

Cr.

Income
Statement
Dr.

Cr.

Statement of
Financial Position
Dr.
13,752
7,840
2,280
23,050

4,921
5,700
5,672
25,000
5,960

4,921
5,700
5,672
25,000
5,960

3,650

3,650
15,590

10,840
760
671
57
62,900

Cr.

15,590
10,840
760
671
57

57
62,900

12,328
3,262
15,590

15,590

50,572

15,590

50,572

57
47,310
3,262
50,572

## (For Instructor Use Only)

EXERCISE 4-3
GOODE COMPANY
Income Statement
For the Month Ended April 30, 2011
Revenues
Service revenue..................................................................
Expenses
Salaries expense................................................................
Rent expense ......................................................................
Depreciation expense.......................................................
Interest expense.................................................................
Total expenses...........................................................
Net income ....................................................................................

15,590
10,840
760
671
57
12,328
3,262

GOODE COMPANY
Retained Earnings Statement
For the Month Ended April 30, 2011
Retained earnings, April 1 ..................................................................

5,960
3,262
9,222
3,650
5,572

## Less: Dividends ....................................................................................

Retained earnings, April 30................................................................
GOODE COMPANY
Statement of Financial Position
April 30, 2011
Assets
Property, plant, and equipment
Equipment ............................................................................
Less: Accumulated depreciation.................................
Current assets
Prepaid rent .........................................................................
Accounts receivable .........................................................
Cash .......................................................................................
Total assets ..................................................................................

23,050
4,921
2,280
7,840
13,752

18,129

23,872
42,001

4-17

## EXERCISE 4-3 (Continued)

GOODE COMPANY
Statement of Financial Position (Continued)
April 30, 2011
Equity and Liabilities
Equity
Share capitalordinary...................................................
Retained earnings .............................................................
Current liabilities
Notes payable .....................................................................
Accounts payable..............................................................
Interest payable..................................................................
Total equity and liabilities ......................................................

25,000
5,572
5,700
5,672
57

30,572

11,429
42,001

EXERCISE 4-4
(a) Apr. 30

30

30

30

Service Revenue..............................................
Income Summary....................................

15,590

Income Summary.............................................
Salaries Expense ....................................
Rent Expense...........................................
Depreciation Expense...........................
Interest Expense .....................................

12,328

Income Summary.............................................
Retained Earnings..................................

3,262

Retained Earnings...........................................
Dividends ..................................................

3,650

15,590

10,840
760
671
57

3,262

3,650

(b)
(2)
(3)

4-18

Income Summary
12,328 (1)
15,590
3,262
15,590
15,590

## Copyright 2011 John Wiley & Sons, Inc.

(4)

Retained Earnings
3,650 Bal.
(3)
Bal.

5,960
3,262
5,572

## EXERCISE 4-4 (Continued)

(c)

GOODE COMPANY
Post-Closing Trial Balance
April 30, 2011
Cash ................................................................................
Accounts Receivable.................................................
Prepaid Rent.................................................................
Equipment .....................................................................
Accumulated Depreciation ......................................
Notes Payable ..............................................................
Accounts Payable.......................................................
Interest Payable...........................................................
Share CapitalOrdinary...........................................
Retained Earnings ......................................................

Debit
13,752
7,840
2,280
23,050

46,922

Credit

4,921
5,700
5,672
57
25,000
5,572
46,922

EXERCISE 4-5
(a) Accounts Receivable.................................................
Service Revenue .................................................

600

Insurance Expense.....................................................
Prepaid Insurance..............................................

400

## Depreciation Expense ................................................

Accumulated Depreciation .............................

900

## Salaries Expense .........................................................

Salaries Payable..................................................

500

600

400

900

500

4-19

## EXERCISE 4-5 (Continued)

(b)

Income Statement
Dr.
Accounts Receivable
Prepaid Insurance
Accum. Depreciation
Salaries Payable
Service Revenue
Salaries Expense
Insurance Expense
Depreciation Expense

Cr.

Statement of
Financial Position
Dr.
Cr.
X
X
X
X

X
X
X
X

EXERCISE 4-6
(a) Accounts Receivable\$25,000 (\$34,000 \$9,000).
Supplies\$2,000 (\$7,000 \$5,000).
Accumulated Depreciation\$22,000 (\$12,000 + \$10,000).
Insurance Expense\$6,000 (\$26,000 \$20,000).
Salaries Expense\$44,000 (\$49,000 \$5,000).
(b) Accounts Receivable..........................................................
Service Revenue .........................................................

9,000

Insurance Expense..............................................................
Prepaid Insurance ......................................................

6,000

Supplies Expense................................................................
Supplies .........................................................................

5,000

## Depreciation Expense ........................................................

Accumulated Depreciation ......................................

10,000

## Salaries Expense .................................................................

Salaries Payable..........................................................

5,000

4-20

9,000

6,000

5,000

10,000

5,000

## (For Instructor Use Only)

EXERCISE 4-7
(a) Service Revenue .............................................................
Income Summary.....................................................

4,064

Income Summary............................................................
Salaries Expense .....................................................
Miscellaneous Expense.........................................
Supplies Expense....................................................

3,828

Income Summary............................................................
Retained Earnings...................................................

236

## Retained Earnings ..........................................................

Dividends ...................................................................

300

(b)

4,064

1,344
256
2,228

236

300

## RIO DE JANEIRO COMPANY

Post-Closing Trial Balance
June 30, 2011
Account Titles
Cash ....................................................................................
Accounts Receivable.....................................................
Supplies .............................................................................
Accounts Payable...........................................................
Salaries Payable..............................................................
Unearned Revenue.........................................................
Share CapitalOrdinary...............................................
Retained Earnings (R\$760 + R\$236 R\$300) ........

Debit
R\$3,712
3,904
480

Credit

R\$1,792
448
160
5,000
696
R\$8,096 R\$8,096

## (For Instructor Use Only)

4-21

EXERCISE 4-8
(a)
General Journal
Date
Account Titles
July 31 Commission Revenue..............................
Rent Revenue .............................................
Income Summary............................

Ref.
404
429
350

Debit
65,000
6,500

31 Income Summary.......................................
Salaries Expense ............................
Utilities Expense .............................
Depreciation Expense ...................

350
720
732
711

74,600

31 Retained Earnings.....................................
Income Summary............................

320
350

3,100

31 Retained Earnings.....................................
Dividends...........................................

320
332

16,000

J15
Credit

71,500

55,700
14,900
4,000

3,100

16,000

(b)
Retained Earnings
Date
Explanation
Ref.
Debit
July 31 Balance
31 Close net loss
J15
3,100
31 Close dividends
J15
16,000

Income Summary
Date
Explanation
Ref.
Debit
July 31 Close revenue
J15
31 Close expenses
J15
74,600
31 Close net loss
J15

4-22

No. 320
Balance
25,200
22,100
6,100

Credit

Credit
71,500
3,100

No. 350
Balance
71,500
(3,100)
0

## EXERCISE 4-8 (Continued)

(c)

APACHI COMPANY
Post-Closing Trial Balance
July 31, 2011
Cash ................................................................................
Accounts Receivable.................................................
Equipment .....................................................................
Accumulated Depreciation ......................................
Accounts Payable.......................................................
Unearned Rent Revenue...........................................
Share CapitalOrdinary...........................................
Retained Earnings ......................................................

Debit
\$14,840
8,780
15,900

\$39,520

Credit

\$ 7,400
4,220
1,800
20,000
6,100
\$39,520

EXERCISE 4-9
(a)

APACHI COMPANY
Income Statement
For the Year Ended July 31, 2011
Revenues
Commission revenue........................................
Rent revenue .......................................................
Total revenues ...........................................
Expenses
Salaries expense................................................
Utilities expense.................................................
Depreciation expense.......................................
Total expenses...........................................
Net loss ..........................................................................

\$65,000
6,500
\$71,500
55,700
14,900
4,000
74,600
(\$ 3,100)

4-23

## EXERCISE 4-9 (Continued)

APACHI COMPANY
Retained Earnings Statement
For the Year Ended July 31, 2011
Retained earnings, August 1, 2010.......................
Less: Net loss .............................................................
Dividends .........................................................
Retained earnings, July 31, 2011 ..........................

(b)

\$25,200
\$ 3,100
16,000

19,100
\$ 6,100

APACHI COMPANY
Statement of Financial Position
July 31, 2011
Assets
Property, plant, and equipment
Equipment...............................................................
Less: Accumulated depreciation ...................
Current assets
Accounts receivable ............................................
Cash ..........................................................................
Total assets .....................................................................

\$15,900
7,400
8,780
14,840

\$ 8,500

23,620
\$32,120

## Equity and Liabilities

Equity
Share capitalordinary......................................
Retained earnings ................................................
Current liabilities
Accounts payable.................................................
Unearned rent revenue .......................................
Total equity and liabilities...........................................

4-24

\$20,000
6,100
4,220
1,800

\$26,100

6,020
\$32,120

EXERCISE 4-10
1.

cycle.

2.

## False. Reversing entries are an optional step in the accounting cycle.

3.

True.

4.

True.

5.

True.

6.

False. Steps 13 may occur daily in the accounting cycle. Steps 47 are
performed on a periodic basis. Steps 8 and 9 are usually prepared only
at the end of a companys annual accounting period.

7.

False. The step of journalize the transactions occurs before the step
of post to the ledger accounts.

8.

False. Closing entries are prepared after financial statements are prepared.

EXERCISE 4-11
(a) June 30

30

30

30

Service Revenue...........................................
Income Summary ................................

15,100

## Income Summary .........................................

Salaries Expense.................................
Supplies Expense ...............................
Rent Expense .......................................

13,100

## Income Summary .........................................

Retained Earnings ..............................

2,000

## Retained Earnings .......................................

Dividends ...............................................

2,500

15,100

8,800
1,300
3,000

2,000

2,500

(b)
Income Summary
June 30 13,100 June 30
June 30
2,000
15,100

15,100
15,100

## (For Instructor Use Only)

4-25

EXERCISE 4-12
(a) 1.

2.

3.

(b) 1.

2.

3.

4-26

Cash..............................................................................
Equipment.........................................................

600

Salaries Expense......................................................
Cash ....................................................................

600

Service Revenue.......................................................
Cash ....................................................................

100

Cash..............................................................................
Accounts Receivable.....................................

1,000

## Accounts Payable ....................................................

Equipment.........................................................

890

Equipment ..................................................................
Accounts Payable...........................................

980

Salaries Expense......................................................
Equipment.........................................................

600

Service Revenue.......................................................
Cash..............................................................................
Accounts Receivable.....................................

100
900

Equipment ..................................................................
Accounts Payable...........................................

90

600

600

100

1,000

890

980

600

1,000

90

EXERCISE 4-13
1.

2.

3.

## Accounts Payable (R\$630 R\$360).............................

Cash ..............................................................................

270

Supplies ................................................................................
Equipment ...................................................................
Accounts Payable.....................................................

560

Dividends..............................................................................
Salaries Expense ......................................................

400

270

56
504

400

EXERCISE 4-14
(a)

## KARR BOWLING ALLEY

Statement of Financial Position
December 31, 2011
Assets
Property, plant, and equipment
Land......................................................
Building...............................................
Less: Acc. depr.building ..........
Equipment ..........................................
Less: Acc. depr.equipment .....
Current assets
Prepaid insurance............................
Accounts receivable .......................
Cash .....................................................
Total assets ................................................

\$64,000
\$128,800
42,600
62,400
18,720

86,200
43,680
4,680
14,520
18,040

\$193,880

37,240
\$231,120

4-27

## EXERCISE 4-14 (Continued)

KARR BOWLING ALLEY
Statement of Financial Position (Continued)
December 31, 2011
Equity and Liabilities
Equity
Share capitalordinary.....................................
Retained earnings (\$15,000 + \$3,440*)..........
Non-current liabilities
Note payable..........................................................
Current liabilities
Current portion of note payable .....................
Accounts payable................................................
Interest payable....................................................
Total equity and liabilities ...........................................

\$100,000
18,440

\$118,440
83,880

13,900
12,300
2,600

28,800
\$231,120

## *Net income = \$14,180 \$780 \$7,360 \$2,600 = \$3,440

(b) Current assets exceed current liabilities by \$8,440 (\$37,240 \$28,800).
In addition, approximately 50% of current assets are in the form of cash.
In sum, the companys liquidity appears to be reasonably good.

EXERCISE 4-15
CL
CA
PPE
PPE
CA
E
IA
CL

4-28

Accounts payable
Accounts receivable
Accumulated depreciation
Buildings
Cash
Share capitalordinary
Patents
Salaries payable

CA
LTI
PPE
NCL
CA
PPE
CA

Inventories
Investments
Land
Long-term debt
Supplies
Office equipment
Prepaid expenses

## (For Instructor Use Only)

EXERCISE 4-16
R. STEVENS COMPANY
Statement of Financial Position
December 31, 2011
(in thousands)
Assets
Property, plant, and equipment
Equipment ............................................................
Less: Accumulated depreciation.................
Long-term investments.............................................
Current assets
Prepaid expenses ..............................................
Inventories ...........................................................
Accounts receivable .........................................
Short-term investments ...................................
Cash .......................................................................
Total assets ..................................................................

11,500
(5,655)

880
1,256
1,696
3,690
2,668

5,845
264

10,190
16,299

## Equity and Liabilities

Equity
Share capitalordinary ...................................
Retained earnings..............................................
Non-current liabilities
Long-term debt ...................................................
Notes payable (after 2012) ..............................
Current liabilities
Notes payable in 2012 ......................................
Accounts payable ..............................................
Total equity and liabilities........................................

10,000
3,063

13,063

943
368

1,311

481
1,444

1,925
16,299

## (For Instructor Use Only)

4-29

EXERCISE 4-17
(a)
B. SNYDER COMPANY, INC.
Income Statement
For the Year Ended July 31, 2011
Revenues
Commission revenue ...................................
Rent revenue ...................................................
Total revenues .......................................
Expenses
Salaries expense............................................
Utilities expense.............................................
Depreciation expense...................................
Total expense.........................................
Net loss ......................................................................

\$61,100
8,500
\$69,600
51,700
22,600
4,000
78,300
\$ (8,700)

## B. SNYDER COMPANY, INC.

Retained Earnings Statement
For the Year Ended July 31, 2011
Retained earnings, August 1, 2010...................
Less: Net loss .........................................................
Dividends .....................................................
Retained earnings, July 31, 2011.......................

4-30

\$21,200
\$8,700
4,000

12,700
\$ 8,500

## EXERCISE 4-17 (Continued)

(b)
B. SNYDER COMPANY, INC.
Statement of Financial Position
July 31, 2011
Assets
Property, plant, and equipment
Equipment ................................................................
Less: Accumulated depreciation.....................
Current assets
Accounts receivable .............................................
Cash ...........................................................................
Total assets ......................................................................

\$18,500
6,000
9,780
24,200

\$12,500

33,980
\$46,480

## Equity and Liabilities

Equity
Share capitalordinary .......................................
Retained earnings..................................................
Non-current liabilities
Note payable............................................................
Current liabilities
Accounts payable ..................................................
Salaries payable .....................................................
Total equity and liabilities............................................

\$30,000
8,500

\$38,500
1,800

4,100
2,080

6,180
\$46,480

4-31

*EXERCISE 4-18
(a) Dec. 31

Jan. 6

(b) Dec. 31

Jan. 1

Jan. 6

## Salaries Expense (R\$10,000 X 2/5)..........

Salaries Payable ...................................

4,000

## Salaries Payable ............................................

Salaries Expense (R\$10,000 X 3/5)..........
Cash..........................................................

4,000
6,000

Salaries Expense...........................................
Salaries Payable ...................................

4,000

## Salaries Payable ............................................

Salaries Expense..................................

4,000

Salaries Expense...........................................
Cash..........................................................

10,000

4,000

10,000

4,000

4,000

10,000

*EXERCISE 4-19
(a) Dec. 31

31

(b) Jan. 1

4-32

## Commission Revenue .................................

Income Summary .................................

92,000

## Income Summary ..........................................

Interest Expense...................................

7,800

## Commission Revenue .................................

Accounts Receivable ..........................

4,500

Interest Payable.............................................
Interest Expense...................................

1,500

92,000

7,800

4,500

1,500

## *EXERCISE 4-19 (Continued)

(c) & (e)
Accounts Receivable
Dec. 31 Balance
*19,500
4,500
24,000
Jan. 1 Reversing

4,500

*(\$24,000 \$4,500)
Commission Revenue
Dec. 31 Closing
92,000 Dec. 31 Balance
92,000
Jan. 1 Reversing
4,500 Jan. 10

87,500*
4,500
92,000
4,500

*(\$92,000 \$4,500)

Jan. 1

Reversing

Dec. 31 Balance
Jan. 15

Interest Payable
1,500
Interest Expense
*6,300 Dec. 31 Closing
1,500
7,800
2,500 Jan. 1 Reversing

1,500

7,800
7,800
1,500

*(\$7,800 \$1,500)
(d)
Jan. 10

15

(1)
Cash..........................................................................
Commission Revenue................................

4,500

(2)
Interest Expense...................................................
Cash.................................................................

2,500

4,500

2,500

4-33

4-34

Account Titles

2,200
1,300
1,200
200
55,970

600

11,400
5,620
1,050
2,400
30,000

55,970

13,620

10,000
12,350
20,000

530

300
600
3,100

(c)
(d)

(a)
670
(b) 1,000

(e)

530

670
600

(c)

3,100

300

(b) 1,000

(e)

(a)
(d)

Cr.

Dr.

Dr.

Cr.

Trial Balance

600
57,800

300

670
1,000

2,200
1,300
1,200
200

600

11,400
6,150
380
1,800
30,000

Dr.

57,800

300

1,000

14,150

10,000
12,350
20,000

Cr.

Trial Balance

## THOMAS MAGNUM, P.I., INC.

Worksheet
For the Quarter Ended March 31, 2011

600
7,470
6,680
14,150

300

670
1,000

2,200
1,300
1,200
200

Dr.

50,330
50,330

14,150

600

11,400
6,150
380
1,800
30,000

Dr.

43,650
6,680
50,330

300

1,000

10,000
12,350
20,000

Cr.

Statement of
Financial Position

14,150

14,150

Cr.

Income
Statement

Key: (a) Supplies Used; (b) Depreciation Expensed; (c) Accrued Interest on note; (d) Insurance Expired; (e) Service Revenue
Earned but unbilled.

Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
Notes Payable
Accounts Payable
Share CapitalOrdinary
Dividends
Service Revenue
Salaries Expense
Travel Expense
Rent Expense
Miscellaneous Expense
Totals
Supplies Expense
Depreciation Expense
Accumulated Depreciation
Interest Expense
Interest Payable
Insurance Expense
Totals
Net Income
Totals

(a)

SOLUTIONS TO PROBLEMS
PROBLEM 4-1A

(b)

## THOMAS MAGNUM, P.I., INC.

Income Statement
For the Quarter Ended March 31, 2011
Revenues
Service revenue.......................................................
Expenses
Salaries expense.....................................................
Travel expense.........................................................
Rent expense............................................................
Depreciation expense............................................
Supplies expense ...................................................
Insurance expense .................................................
Interest expense......................................................
Miscellaneous expense ........................................
Total expenses................................................
Net income .........................................................................

14,150
2,200
1,300
1,200
1,000
670
600
300
200
7,470
6,680

## THOMAS MAGNUM, P.I., INC.

Retained Earnings Statement
For the Quarter Ended March 31, 2011
Retained earnings, January 1...................................................
Less: Dividends ...........................................................................
Retained earnings, March 31 ....................................................

0
6,680
6,680
600
6,080

4-35

## PROBLEM 4-1A (Continued)

THOMAS MAGNUM, P.I., INC.
Statement of Financial Position
March 31, 2011
Assets
Property, plant, and equipment
Equipment ...............................................................
Less: Accumulated depreciation ....................
Current assets
Prepaid insurance .................................................
Supplies....................................................................
Accounts receivable.............................................
Cash...........................................................................
Total assets......................................................................

30,000
1,000
1,800
380
6,150
11,400

29,000

19,730
48,730

## Equity and Liabilities

Equity
Share capitalordinary ......................................
Retained earnings .................................................
Current liabilities
Notes payable.........................................................
Accounts payable .................................................
Interest payable .....................................................
Total equity and liabilities ...........................................
(c) Mar. 31
31
31
31

4-36

20,000
6,080
10,000
12,350
300

## Supplies Expense .......................................

Supplies ................................................

670

## Depreciation Expense ...............................

Accumulated Depreciation ............

1,000

## Interest Expense .........................................

Interest Payable..................................

300

Insurance Expense.....................................
Prepaid Insurance..............................

600

26,080

22,650
48,730

670

1,000
300
600

## PROBLEM 4-1A (Continued)

Mar. 31

(d) Mar. 31

31

31

31

Accounts Receivable......................................
Service Revenue .....................................

530

## Service Revenue ..............................................

Income Summary....................................

14,150

Income Summary.............................................
Travel Expense........................................
Salaries Expense ....................................
Rent Expense...........................................
Insurance Expense.................................
Depreciation Expense ...........................
Supplies Expense...................................
Interest Expense .....................................
Miscellaneous Expense........................

7,470

Income Summary.............................................
Retained Earnings..................................

6,680

Retained Earnings...........................................
Dividends ..................................................

600

530

14,150

1,300
2,200
1,200
600
1,000
670
300
200

6,680

## (For Instructor Use Only)

600

4-37

PROBLEM 4-2A

(a)

PORTER COMPANY
Partial Worksheet
For the Year Ended December 31, 2011

Account
No. Titles
101
112
126
130
151
152
200
201
212
230
311
320
332
400
610
631
711
722
726
905

4-38

Cash
Accounts Receivable
Supplies
Prepaid Insurance
Office Equipment
Acc. Depr.Off. Equip.
Notes Payable
Accounts Payable
Salaries Payable
Interest Payable
Share CapitalOrdinary
Retained Earnings
Dividends
Service Revenue
Supplies Expense
Depreciation Expense
Insurance Expense
Salaries Expense
Interest Expense
Totals
Net Income
Totals

Trial Balance
Dr.
Cr.

Income
Statement
Dr.
Cr.

18,800
16,200
2,300
4,400
44,000

Statement of
Financial Position
Dr.
Cr.
18,800
16,200
2,300
4,400
44,000

20,000
20,000
8,000
2,600
1,000
30,000
6,000

20,000
20,000
8,000
2,600
1,000
30,000
6,000

12,000

12,000
77,800

12,000
3,700
8,000
4,000
39,000
1,000
165,400 165,400

77,800
12,000
3,700
8,000
4,000
39,000
1,000
67,700
10,100
77,800

77,800

97,700

77,800

97,700

87,600
10,100
97,700

## PROBLEM 4-2A (Continued)

(b)

PORTER COMPANY
Income Statement
For the Year Ended December 31, 2011
Revenues
Service revenue.....................................................
Expenses
Salaries expense...................................................
Depreciation expense..........................................
Insurance expense ...............................................
Supplies expense .................................................
Interest expense....................................................
Total expenses..............................................
Net income .......................................................................

\$77,800
\$39,000
12,000
8,000
4,000
3,700
1,000
67,700
\$10,100

PORTER COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2011
Retained earnings, January 1..........................................................
Less: Dividends ..................................................................................
Retained earnings, December 31 ...................................................

\$ 6,000
10,100
16,100
12,000
\$ 4,100

4-39

## PROBLEM 4-2A (Continued)

PORTER COMPANY
Statement of Financial Position
December 31, 2011
Assets
Property, plant, and equipment
Office equipment ...................................................
Less: Accumulated depreciation ....................
Current assets
Prepaid insurance .................................................
Supplies....................................................................
Accounts receivable.............................................
Cash...........................................................................
Total assets......................................................................

\$44,000
20,000
4,400
2,300
16,200
18,800

\$24,000

41,700
\$65,700

## Equity and Liabilities

Equity
Share capitalordinary ......................................
Retained earnings .................................................
Non-current liabilities
Notes payable.........................................................
Current liabilities
Notes payable.........................................................
Accounts payable .................................................
Salaries payable ....................................................
Interest payable .....................................................
Total equity and liabilities ...........................................

4-40

\$30,000
4,100

\$34,100
10,000

10,000
8,000
2,600
1,000

21,600
\$65,700

## PROBLEM 4-2A (Continued)

(c)
General Journal
Date
Account Titles and Explanation
Dec. 31 Service Revenue ........................................
Income Summary ............................

Ref.
400
350

Debit
77,800

31 Income Summary.......................................
Supplies Expense ...........................
Depreciation Expense ...................
Insurance Expense.........................
Salaries Expense ............................
Interest Expense .............................

350
610
631
711
722
726
905

67,700

31 Income Summary.......................................
Retained Earnings ..........................

350
320

10,100

31 Retained Earnings.....................................
Dividends...........................................

320
332

12,000

J14
Credit
77,800

12,000
3,700
8,000
4,000
39,000
1,000

10,100

12,000

(d)
Date
Explanation
Jan. 31 Balance
Dec. 31 Closing entry
31 Closing entry

Date
Explanation
Dec. 31 Balance
31 Closing entry

## Copyright 2011 John Wiley & Sons, Inc.

Retained Earnings
Ref.
Debit

J14
J14
12,000

Dividends
Ref.

J14

Debit
12,000

Credit
6,000
10,100

Credit
12,000

No. 320
Balance
6,000
16,100
4,100

No. 332
Balance
12,000
0

4-41

## PROBLEM 4-2A (Continued)

Explanation
Closing entry
Closing entry
Closing entry

Income Summary
Ref.
Debit
J14
J14
67,700
J14
10,100

Date
Explanation
Dec. 31 Balance
31 Closing entry

Service Revenue
Ref.
Debit

J14
77,800

Date
Explanation
Dec. 31 Balance
31 Closing entry

Ref.
Debit

12,000
J14

Date
Explanation
Dec. 31 Balance
31 Closing entry

Supplies Expense
Ref.
Debit

3,700
J14

Date
Explanation
Dec. 31 Balance
31 Closing entry

Depreciation Expense
Ref.
Debit

8,000
J14

Date
Dec. 31
31
31

Date
Dec. 31
31

4-42

Explanation
Balance
Closing entry

Insurance Expense
Ref.
Debit

4,000
J14

Credit
77,800

No. 350
Balance
77,800
10,100
0

Credit
77,800

No. 400
Balance
77,800
0

Credit

No. 610
Balance
12,000
0

12,000

Credit
3,700

Credit
8,000

Credit
4,000

No. 631
Balance
3,700
0

No. 711
Balance
8,000
0

No. 722
Balance
4,000
0

## PROBLEM 4-2A (Continued)

Date
Explanation
Dec. 31 Balance
31 Closing entry

Salaries Expense
Ref.
Debit

39,000
J14

Date
Explanation
Dec. 31 Balance
31 Closing entry

Interest Expense
Ref.
Debit

1,000
J14

(e)

Credit
39,000

Credit
1,000

No. 726
Balance
39,000
0

No. 905
Balance
1,000
0

PORTER COMPANY
Post-Closing Trial Balance
December 31, 2011
Cash ................................................................................
Accounts Receivable.................................................
Supplies .........................................................................
Prepaid Insurance ......................................................
Office Equipment ........................................................
Accumulated DepreciationOffice
Equipment ................................................................
Notes Payable ..............................................................
Accounts Payable.......................................................
Salaries Payable..........................................................
Interest Payable...........................................................
Share CapitalOrdinary...........................................
Retained Earnings ......................................................

Debit
\$18,800
16,200
2,300
4,400
44,000

\$85,700

Credit

\$20,000
20,000
8,000
2,600
1,000
30,000
4,100
\$85,700

4-43

PROBLEM 4-3A

(a)

## WOODS COMPANY, INC.

Income Statement
For the Year Ended December 31, 2011
Revenues
Service revenue ..................................................
Expenses
Salaries expense ................................................
Repair expense ...................................................
Utilities expense .................................................
Depreciation expense .......................................
Insurance expense.............................................
Total expenses ...........................................
Net loss...........................................................................

\$44,000
\$35,200
5,400
4,000
2,800
1,200
48,600
\$ (4,600)

WOODS COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2011
Retained earnings, January 1 .................................
Less: Net loss..............................................................
Dividends..........................................................
Retained earnings, December 31...........................

\$14,000
\$4,600
7,200

11,800
\$ 2,200

## WOODS COMPANY, INC.

Statement of Financial Position
December 31, 2011
Assets
Property, plant, and equipment
Equipment ............................................................
Less: Accumulated depreciation .................
Current assets
Prepaid insurance ..............................................
Accounts receivable..........................................
Cash........................................................................
Total assets...................................................................

4-44

\$28,000
8,600
1,800
7,500
8,200

\$19,400

17,500
\$36,900

## PROBLEM 4-3A (Continued)

WOODS COMPANY, INC.
Statement of Financial Position (Continued)
December 31, 2011
Equity and Liabilities
Equity
Share capitalordinary ...................................
Retained earnings..............................................
Current liabilities
Accounts payable ..............................................
Salaries payable .................................................
Total equity and liabilities........................................

\$20,000
2,200
11,700
3,000

\$22,200
14,700
\$36,900

(b)
General Journal
Date
Account Titles
Dec. 31 Service Revenue ........................................
Income Summary ............................

Ref.
400
350

Debit
44,000

Income Summary.......................................
Repair Expense................................
Depreciation Expense ...................
Insurance Expense.........................
Salaries Expense.............................
Utilities Expense..............................

350
622
711
722
726
732

48,600

Retained Earnings.....................................
Income Summary ............................

320
350

4,600

Retained Earnings.....................................
Dividends...........................................

320
332

7,200

31

31

31

Credit
44,000

5,400
2,800
1,200
35,200
4,000

4,600

7,200

4-45

## PROBLEM 4-3A (Continued)

(c)
Retained Earnings No. 320
4,600 12/31 Bal. 14,000
7,200
12/31 Bal.
2,200

12/31
12/31

Repair Expense
5,400 12/31

12/31 Bal.

No. 622
5,400

## Depreciation Expense No. 711

12/31 Bal.
2,800 12/31
2,800
12/31 Bal.

Dividends
7,200 12/31

No. 332
7,200
Insurance Expense
12/31 Bal.
1,200 12/31

12/31

12/31

(d)

Income Summary
48,600 12/31
12/31
48,600

No. 350
44,000
4,600
48,600

Service Revenue
No. 400
44,000 12/31 Bal. 44,000

Salaries Expense
35,200 12/31

No. 726
35,200

Utilities Expense
12/31 Bal.
4,000 12/31

No. 732
4,000

12/31 Bal.

## WOODS COMPANY, INC.

Post-Closing Trial Balance
December 31, 2011
Cash.................................................................................
Accounts Receivable .................................................
Prepaid Insurance.......................................................
Equipment .....................................................................
Accumulated Depreciation.......................................
Accounts Payable .......................................................
Salaries Payable ..........................................................
Share CapitalOrdinary ...........................................
Retained Earnings ......................................................
Totals......................................................................

4-46

No. 722
1,200

Debit
\$ 8,200
7,500
1,800
28,000

\$45,500

Credit

\$ 8,600
11,700
3,000
20,000
2,200
\$45,500

Account Titles

## Weygandt, IFRS, 1/e, Solutions Manual

277,500

36,200
14,600
3,700
50,000
100,000
9,700

Cr.

105,000
30,500
9,400
16,900
18,000
6,000
491,700 491,700

14,000

41,400
18,600
31,900
80,000
120,000

Dr.

Trial Balance

(c)

55,100

6,000
(e)

3,000
55,100

3,000
504,700 504,700

6,000

279,200

Cr.

239,200 279,200
40,000
279,200 279,200

6,000

23,000
17,400
4,000

279,200

23,000
17,400

14,000

Dr.

(b) 23,000
(a) 17,400
4,000

1,700

42,200
14,600
2,000
50,000
100,000
9,700

Cr.

3,000
4,000

(f)

(d)

6,000

41,400
1,200
8,900
80,000
120,000

Dr.

Income
Statement

105,000
30,500
9,400
16,900
21,000
10,000

1,700

(c)

(a) 17,400
(b) 23,000

Cr.

Trial Balance

105,000
30,500
9,400
16,900
21,000
10,000

(e)
(f)

(d)

Dr.

Worksheet
For the Year Ended September 30, 2011

265,500

265,500

14,000

41,400
1,200
8,900
80,000
120,000

Dr.

3,000
225,500
40,000
265,500

4,000

42,200
14,600
2,000
50,000
100,000
9,700

Cr.

Statement of
Financial Position

Key: (a) Supplies Used; (b) Expired Insurance; (c) Depreciation Expensed; (d) Admissions Revenue Earned; (e) Accrued Property Taxes;
(f) Accrued Interest Payable.

Cash
Supplies
Prepaid Insurance
Land
Equipment
Accumulated Depreciation
Accounts Payable
Mortgage Note Payable
Share CapitalOrdinary
Retained Earnings
Dividends
Salaries Expense
Repair Expense
Utilities Expense
Property Taxes Expense
Interest Expense
Totals
Insurance Expense
Supplies Expense
Interest Payable
Depreciation Expense
Property Taxes Payable
Totals
Net Income
Totals

(a)

PROBLEM 4-4A

4-47

## PROBLEM 4-4A (Continued)

(b)

Statement of Financial Position
September 30, 2011
Assets
Property, plant, and equipment
Land......................................................
R\$ 80,000
Equipment .......................................... R\$120,000
Less: Accum. depreciation..........
42,200
77,800 R\$157,800
Current assets
Prepaid insurance............................
8,900
Supplies ..............................................
1,200
Cash......................................................
41,400
51,500
Total assets.................................................
R\$209,300
Equity and Liabilities
Equity
Share capitalordinary .................
Retained earnings............................
Non-current liabilities
Mortgage note payable...................
Current liabilities
Current maturity of mortgage
note payable..................................
Accounts payable ............................
Interest payable ................................
Property taxes payable ..................
revenue ...........................................
Total equity and liabilities ......................

R\$100,000
35,700* R\$135,700
40,000

10,000
14,600
4,000
3,000
2,000

33,600
R\$209,300

4-48

## PROBLEM 4-4A (Continued)

(c) Sept. 30

30

30

30

30

30

(d) Sept. 30

30

30

30

Supplies Expense......................................
Supplies ...............................................

17,400

## Insurance Expense ...................................

Prepaid Insurance ............................

23,000

Depreciation Expense..............................
Accumulated Depreciation ............

6,000

1,700

## Property Taxes Expense .........................

Property Taxes Payable..................

3,000

## Interest Expense ........................................

Interest Payable ................................

4,000

Income Summary..............................

279,200

Income Summary.......................................
Salaries Expense ..............................
Repair Expense .................................
Insurance Expense...........................
Property Taxes Expense ................
Supplies Expense.............................
Utilities Expense ...............................
Interest Expense ...............................
Depreciation Expense .....................

239,200

Income Summary.......................................
Retained Earnings............................

40,000

Retained Earnings.....................................
Dividends ............................................

14,000

17,400

23,000

6,000

1,700

3,000

4,000

279,200

105,000
30,500
23,000
21,000
17,400
16,900
10,000
9,400
6,000

40,000

14,000

4-49

## PROBLEM 4-4A (Continued)

(e)

Post-Closing Trial Balance
September 30, 2011
Cash ...........................................................................
Supplies ....................................................................
Prepaid Insurance..................................................
Land............................................................................
Equipment ................................................................
Accumulated Depreciation .................................
Accounts Payable..................................................
Interest Payable......................................................
Property Taxes Payable.......................................
Mortgage Note Payable........................................
Share CapitalOrdinary......................................
Retained Earnings .................................................

Debit
R\$ 41,400
1,200
8,900
80,000
120,000

R\$251,500

4-50

Credit

R\$ 42,200
14,600
4,000
3,000
2,000
50,000
100,000
35,700
R\$251,500

## (For Instructor Use Only)

PROBLEM 4-5A

(a)
Date
Mar. 1

14

18

20

21

28

31

31

General Journal
Account Titles and Explanation
Cash .............................................................
Share CapitalOrdinary.............

Ref.
101
311

Debit
10,000

Equipment..................................................
Cash ..................................................
Accounts Payable.........................

157
101
201

6,000

## Cleaning Supplies ...................................

Accounts Payable.........................

128
201

1,200

## Prepaid Insurance ...................................

Cash ..................................................

130
101

1,200

## Accounts Receivable .............................

Service Revenue ...........................

112
400

4,800

## Accounts Payable ...................................

Cash ..................................................

201
101

2,000

## Salaries Expense .....................................

Cash ..................................................

726
101

1,800

Cash .............................................................
Accounts Receivable...................

101
112

1,400

## Accounts Receivable .............................

Service Revenue ...........................

112
400

2,500

## Gas & Oil Expense ..................................

Cash ..................................................

633
101

200

Dividends ...................................................
Cash ..................................................

332
101

700

J1
Credit
10,000

3,000
3,000

1,200

1,200

4,800

2,000

1,800

1,400

2,500

200

700

4-51

4-52

Account Titles

200
1,800
19,500

700

2,500
5,900
1,200
1,200
6,000

Dr.

19,500

7,300

2,200
10,000

Cr.

Trial Balance

100
800

(c)
(d)
2,350

250

500

700

(b)

(e)

(a)

Dr.

(e)

(b)

(a)

(d)
(c)

250

700

800
100

500
2,350

Cr.

20,950

100
800

250

200
2,300

700

2,500
6,600
400
1,100
6,000

Dr.

500
20,950

250

8,000

2,200
10,000

Cr.

Trial Balance

## EDDYS CARPET CLEANERS

Worksheet
For the Month Ended March 31, 2011

3,650
4,350
8,000

100
800

250

200
2,300

Dr.

17,300
17,300

8,000

700

2,500
6,600
400
1,100
6,000

Dr.

500
12,950
4,350
17,300

250

2,200
10,000

Cr.

Statement of
Financial Position

8,000

8,000

Cr.

Income
Statement

Key: (a) Service Revenue Earned; (b) Depreciation Expensed; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.

Cash
Accounts Receivable
Cleaning Supplies
Prepaid Insurance
Equipment
Accounts Payable
Share CapitalOrdinary
Dividends
Service Revenue
Gas & Oil Expense
Salaries Expense
Totals
Depreciation Expense
Accum. Depr.Equipment
Insurance Expense
Cleaning Supplies Expense
Salaries Payable
Totals
Net Income
Totals

(b)&(c)

(a), (e) & (f)

Date
Mar. 1
1
5
18
20
21
31
31

Date
Mar. 14
21
28
31

Date
Mar. 3
31

Date
Mar. 5
31

Date
Mar. 1

Explanation

Explanation

Explanation

Explanation

Explanation

## Copyright 2011 John Wiley & Sons, Inc.

Cash
Ref.
J1
J1
J1
J1
J1
J1
J1
J1

Debit
10,000

3,000
1,200
2,000
1,800
1,400
200
700

Accounts Receivable
Ref.
Debit
J1
4,800
J1
J1
2,500
J2
700

Cleaning Supplies
Ref.
Debit
J1
1,200
J2

Prepaid Insurance
Ref.
Debit
J1
1,200
J2

Equipment
Ref.
J1

Credit

Debit
6,000

Credit
1,400

Credit
800

Credit
100

Credit

No. 101
Balance
10,000
7,000
5,800
3,800
2,000
3,400
3,200
2,500

No. 112
Balance
4,800
3,400
5,900
6,600

No. 128
Balance
1,200
400

No. 130
Balance
1,200
1,100

No. 157
Balance
6,000

4-53

## PROBLEM 4-5A (Continued)

Date
Mar. 31

Date
Mar. 1
3
18

Date
Mar. 31

Date
Mar. 1

Date
Mar. 1
31
31

Date
Mar. 31
31

Date
Mar. 31
31
31

4-54

Accumulated DepreciationEquipment
Explanation
Ref.
Debit
Credit
J2
250

Explanation

Explanation

Explanation

Explanation

Accounts Payable
Ref.
Debit
J1
J1
J1
2,000
Salaries Payable
Ref.
Debit
J2
Share CapitalOrdinary
Ref.
Debit
J1
Retained Earnings
Ref.
Debit

Closing
Closing

Explanation
Closing

Explanation
Closing
Closing
Closing

J3
J3
Dividends
Ref.
J1
J3

Credit
500

Credit
10,000

No. 311
Balance
10,000

Credit

700

Debit
700

No. 201
Balance
3,000
4,200
2,200
No. 212
Balance
500

4,350

Income Summary
Ref.
Debit
J3
J3
3,650
J3
4,350

Credit
3,000
1,200

No. 158
Balance
250

Credit
700

Credit
8,000

No. 320
Balance
0
4,350
3,650
No. 332
Balance
700
0
No. 350
Balance
8,000
4,350
0

## PROBLEM 4-5A (Continued)

Date
Mar. 14
28
31
31

Date
Mar. 31
31

Explanation

Closing

Explanation
Closing

Service Revenue
Ref.
Debit
J1
J1
J2
J3
8,000
Gas & Oil Expense
Ref.
Debit
J1
200
J3

Date
Mar. 31
31

## Cleaning Supplies Expense

Explanation
Ref.
Debit
J2
800
Closing
J3

Date
Mar. 31
31

Explanation
Closing

Depreciation Expense
Ref.
Debit
J2
250
J3

Explanation
Closing

Insurance Expense
Ref.
Debit
J2
100
J3

Date
Mar. 31
31

Date
Mar. 20
31
31

Explanation
Closing

Salaries Expense
Ref.
Debit
J1
1,800
J2
500
J3

Credit
4,800
2,500
700

No. 400
Balance
4,800
7,300
8,000
0

Credit

No. 633
Balance
200
0

200

Credit
800

Credit
250

Credit
100

Credit

2,300

No. 634
Balance
800
0
No. 711
Balance
250
0
No. 722
Balance
100
0
No. 726
Balance
1,800
2,300
0

4-55

(d)

## EDDYS CARPET CLEANERS

Income Statement
For the Month Ended March 31, 2011
Revenues
Service revenue.....................................................
Expenses
Salaries expense ...................................................
Cleaning supplies expense................................
Depreciation expense..........................................
Gas & oil expense .................................................
Insurance expense ...............................................
Total expenses..............................................
Net income .......................................................................

\$8,000
\$2,300
800
250
200
100
3,650
\$4,350

## EDDYS CARPET CLEANERS

Retained Earnings Statement
For the Month Ended March 31, 2011
Retained earnings, March 1........................................

\$
0
4,350
4,350
700
\$3,650

Less: Dividends.............................................................
Retained earnings, March 31 .....................................

## EDDYS CARPET CLEANERS

Statement of Financial Position
March 31, 2011
Assets
Property, plant, and equipment
Equipment .................................................................
Less: Accumulated depreciation......................

4-56

\$ 6,000
250

\$ 5,750

## PROBLEM 4-5A (Continued)

EDDYS CARPET CLEANERS
Statement of Financial Position (Continued)
March 31, 2011
Assets (Continued)
Current assets
Prepaid insurance ..................................................
Cleaning supplies...................................................
Accounts receivable ..............................................
Cash ............................................................................
Total assets .......................................................................

1,100
400
6,600
2,500

10,600
\$16,350

## Equity and Liabilities

Equity
Share capitalordinary........................................
Retained earnings ..................................................
Current liabilities
Accounts payable...................................................
Salaries payable......................................................
Total equity and liabilities.............................................

\$10,000
3,650
2,200
500

\$13,650
2,700
\$16,350

(e)
Date
Mar. 31
31

31
31
31

General Journal
Account Titles and Explanation
Accounts Receivable.............................
Service Revenue ...........................

Ref.
112
400

Debit
700

## Depreciation Expense ...........................

Accumulated Depreciation
Equipment ..................................

711

250

Insurance Expense.................................
Prepaid Insurance ........................

722
130

100

## Cleaning Supplies Expense.................

Cleaning Supplies ........................

634
128

800

Salaries Expense.....................................
Salaries Payable ...........................

726
212

500

700

158

J2
Credit

250
100
800

500

4-57

## PROBLEM 4-5A (Continued)

(f)
General Journal
Account Titles and Explanation
Service Revenue ......................................
Income Summary...........................

Ref.
400
350

Debit
8,000

## 31 Income Summary .....................................

Salaries Expense ...........................
Depreciation Expense ..................
Insurance Expense........................
Cleaning Supplies Expense .......
Gas & Oil Expense ........................

350
726
711
722
634
633

3,650

## 31 Income Summary .....................................

Retained Earnings.........................

350
320

4,350

## 31 Retained Earnings ...................................

Dividends .........................................

320
332

700

Date
Mar. 31

(g)

8,000

2,300
250
100
800
200

4,350

700

## EDDYS CARPET CLEANERS

Post-Closing Trial Balance
March 31, 2011

Cash ................................................................................
Accounts Receivable.................................................
Cleaning Supplies.......................................................
Prepaid Insurance.......................................................
Equipment .....................................................................
Accumulated DepreciationEquipment.............
Accounts Payable.......................................................
Salaries Payable..........................................................
Share CapitalOrdinary...........................................
Retained Earnings ......................................................
000,000

4-58

J3
Credit

Debit
\$ 2,500
6,600
400
1,100
6,000

Credit

\$16,600

250
2,200
500
10,000
3,650
\$16,600

## (For Instructor Use Only)

Cash ...........................................
Accts. Receivable ..........

Misc. Expense........................
Cash.....................................

Salaries Expense..................
Cash.....................................

Supplies....................................
Accounts Payable..........

Equipment ...............................
Cash.....................................

2.

3.

4.

5.

1.

(a)

59

290

1,900

65

960

59

290

1,900

65

960

## Repair Expense .....................

Cash.....................................

Equipment ...............................
Accounts Payable..........

Salaries Expense..................
Salaries Payable ...................
Cash.....................................

Cash.....................................

Cash ...........................................
Accts. Receivable ..........

95

290

1,200
700

65

690

95

290

1,900

65

690

65

## Repair Expense ......................

Cash......................................
Equipment..........................

95

## Equipment ................................ 290

Supplies ..............................

## Salaries Payable .................... 700

Salaries Expense ............

Misc. Expense ..................

## Accounts Receivable........... 270

Cash......................................

36
59

290

700

65

270

PROBLEM 4-6A

4-59

(b)

## CLARK CABLE, INC.

Trial Balance
April 30, 2011
Cash (4,100 270 36)....................................
Accounts Receivable (3,200 + 270) ...............
Supplies (800 290) ...........................................
Equipment (10,600 + 290 59)......................
Accumulated Depreciation ...................................
Accounts Payable....................................................
Salaries Payable (700 700) ............................
Unearned Revenue ..................................................
Share CapitalOrdinary........................................
Retained Earnings ...................................................
Service Revenue ......................................................
Salaries Expense (3,300 700) .......................
Miscellaneous Expense (290 65) ................
Depreciation Expense ............................................
Repair Expense.........................................................

4-60

Debit
3,794
3,470
510
10,831

Credit

1,350
2,100
0
890
10,000
2,900
5,450
2,600
665
225
500
95
22,690

22,690

Account Titles

1,300
400
23,500

1,100

4,500
3,200
2,000
11,000

Dr.

23,500

6,300

1,250
2,500
550
12,900

Cr.

Trial Balance

600

380

2,580

(a) 1,350
(b)
250

(d)

(c)

Dr.

(d)

(c)

(b)

600
2,580

380

250

(a) 1,350

Cr.

24,350

1,350
250

1,900
400

1,100

4,500
3,200
650
11,000

Dr.

600
24,350

6,680

1,500
2,500
170
12,900

Cr.

Trial Balance

## SASSE ROOFING, INC.

Worksheet
For the Month Ended March 31, 2011

3,900
2,780
6,680

1,350
250

1,900
400

Dr.

20,450
20,450

6,680

1,100

4,500
3,200
650
11,000

Dr.

600
17,670
2,780
20,450

1,500
2,500
170
12,900

Cr.

Statement of
Financial Position

6,680

6,680

Cr.

Income
Statement

Key: (a) Supplies Used; (b) Depreciation Expensed; (c) Service Revenue Earned; (d) Salaries Accrued.

Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
Share CapitalOrdinary
Dividends
Service Revenue
Salaries Expense
Miscellaneous Expense
Totals
Supplies Expense
Depreciation Expense
Salaries Payable
Totals
Net Income
Totals

(a)

PROBLEM 4-1B

4-61

(b)

## SASSE ROOFING INC.

Income Statement
For the Month Ended March 31, 2011
Revenues
Service revenue ..........................................................
Expenses
Salaries expense ........................................................
Supplies expense.......................................................
Miscellaneous expense............................................
Depreciation expense ...............................................
Total expenses ...................................................
Net income.............................................................................

\$6,680
\$1,900
1,350
400
250
3,900
\$2,780

## SASSE ROOFING INC.

Retained Earnings Statement
For the Month Ended March 31, 2011
Retained earnings, March 1 .................................................................
Less: Dividends......................................................................................
Retained earnings, March 31...............................................................

0
2,780
2,780
1,100
\$1,680

## SASSE ROOFING INC.

Statement of Financial Position
March 31, 2011
Assets
Property, plant, and equipment
Equipment ....................................................................
Less: Accum. depreciationequipment...........
Current assets
Roofing supplies ........................................................
Accounts receivable..................................................
Cash................................................................................
Total assets...........................................................................

4-62

\$11,000
1,500

650
3,200
4,500

\$ 9,500

8,350
\$17,850

## PROBLEM 4-1B (Continued)

SASSE ROOFING INC.
Statement of Financial Position (Continued)
March 31, 2011
Equity and Liabilities
Equity
Share capitalordinary ............................................
Retained earnings.......................................................
Current liabilities
Accounts payable .......................................................
Salaries payable ..........................................................
Unearned revenue ......................................................
Total equity and liabilities ................................................
(c) Mar. 31
31
31
31

(d) Mar. 31
31

31
31

\$12,900
1,680
2,500
600
170

Supplies Expense............................................
Roofing Supplies ....................................

1,350

Depreciation Expense....................................
Accumulated Depreciation ..................

250

Unearned Revenue..........................................
Service Revenue .....................................

380

## Salaries Expense .............................................

Salaries Payable......................................

600

## Service Revenue ..............................................

Income Summary....................................

6,680

Income Summary.............................................
Salaries Expense ....................................
Supplies Expense...................................
Depreciation Expense ...........................
Miscellaneous Expense........................

3,900

Income Summary.............................................
Retained Earnings..................................

2,780

Retained Earnings...........................................
Dividends ..................................................

1,100

\$14,580

3,270
\$17,850

1,350
250
380
600

6,680
1,900
1,350
250
400
2,780

1,100

4-63

PROBLEM 4-2B

(a)

## RACHEL COMPANY INC.

Partial Worksheet
For the Year Ended December 31, 2011
Trial Balance

Account
No.
101
112
126
130
151
152
200
201
212
230
311
320
332
400
610
631
711
722
726
905

4-64

Titles
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Office Equipment
Acc. Depr.Off. Equip.
Notes Payable
Accounts Payable
Salaries Payable
Interest Payable
Share CapitalOrdinary
Retained Earnings
Dividends
Service Revenue
Supplies Expense
Depreciation Expense
Insurance Expense
Salaries Expense
Interest Expense
Totals
Net Income
Totals

Dr.
8,100
10,800
1,500
2,000
24,000

Cr.

Income
Statement
Dr.

Cr.

Statement of
Financial Position
Dr.
8,100
10,800
1,500
2,000
24,000

5,600
15,000
6,100
2,400
600
10,000
5,800

5,600
15,000
6,100
2,400
600
10,000
5,800

7,000

7,000
61,000

8,400
4,000
5,600
3,500
31,000
600
106,500 106,500

Cr.

61,000
8,400
4,000
5,600
3,500
31,000
600
53,100
7,900
61,000

61,000

53,400

61,000

53,400

45,500
7,900
53,400

(b)

## RACHEL COMPANY INC.

Income Statement
For the Year Ended December 31, 2011
Revenues
Service revenue.....................................................
Expenses
Salaries expense...................................................
Depreciation expense..........................................
Supplies expense .................................................
Insurance expense ...............................................
Interest expense....................................................
Total expenses..............................................
Net income .......................................................................

61,000
31,000
8,400
5,600
4,000
3,500
600
53,100
7,900

## RACHEL COMPANY INC.

Retained Earnings Statement
For the Year Ended December 31, 2011
Retained earnings, January 1..........................................................
Less: Dividends ..................................................................................
Retained earnings, December 31 ...................................................

5,800
7,900
13,700
7,000
6,700

4-65

## PROBLEM 4-2B (Continued)

RACHEL COMPANY INC.
Statement of Financial Position
December 31, 2011
Assets
Property, plant, and equipment
Office equipment ...................................................
Less: Accumulated depreciation ....................
Current assets
Prepaid insurance .................................................
Supplies....................................................................
Accounts receivable.............................................
Cash...........................................................................
Total assets......................................................................

24,000
5,600
2,000
1,500
10,800
8,100

18,400

22,400
40,800

## Equity and Liabilities

Equity
Share capitalordinary ......................................
Retained earnings .................................................
Non-current liabilities
Notes payable.........................................................
Current liabilities
Notes payable.........................................................
Accounts payable .................................................
Salaries payable ....................................................
Interest payable .....................................................
Total equity and liabilities ...........................................

4-66

10,000
6,700

16,700
6,000

9,000
6,100
2,400
600

18,100
40,800

## PROBLEM 4-2B (Continued)

(c)
General Journal
Date
Account Titles and Explanation
Dec. 31 Service Revenue ........................................
Income Summary............................

Ref.
400
350

Debit
61,000

31 Income Summary.......................................
Supplies Expense ...........................
Depreciation Expense ...................
Insurance Expense.........................
Salaries Expense ............................
Interest Expense .............................

350
610
631
711
722
726
905

53,100

31 Income Summary.......................................
Retained Earnings ..........................

350
320

7,900

31 Retained Earnings.....................................
Dividends...........................................

320
332

7,000

J14
Credit
61,000

8,400
4,000
5,600
3,500
31,000
600

7,900

7,000

(d)

Date
Jan. 1
Dec. 31
31

Date

Explanation
Balance
Closing entry
Closing entry

Explanation

Dec. 31 Balance
31 Closing entry

## Copyright 2011 John Wiley & Sons, Inc.

Retained Earnings
Ref.
Debit

J14
J14
7,000

Dividends
Ref.

J14

Debit

Credit
5,800
7,900

No. 320
Balance
5,800
13,700
6,700

Credit

No. 332
Balance

7,000

7,000
0

7,000

4-67

## PROBLEM 4-2B (Continued)

Explanation
Closing entry
Closing entry
Closing entry

Income Summary
Ref.
Debit
J14
J14
53,100
J14
7,900

Explanation
Balance
Closing entry

Service Revenue
Ref.
Debit

J14 61,000

Explanation
Balance
Closing entry

Ref.
Debit

8,400
J14

Date
Dec. 31
31

Explanation
Balance
Closing entry

Supplies Expense
Ref.
Debit

4,000
J14

Date
Dec. 31
31

Depreciation Expense
Explanation
Ref.
Debit

Balance
5,600
Closing entry
J14

Date
Dec.

Date
Dec.

Date
Dec.

Date
Dec.

4-68

31
31
31

31
31

31
31

31
31

Explanation
Balance
Closing entry

Insurance Expense
Ref.
Debit

3,500
J14

Credit
61,000

No. 350
Balance
61,000
7,900
0

Credit
61,000

No. 400
Balance
61,000
0

Credit

No. 610
Balance
8,400
0

8,400

Credit
4,000

Credit
5,600

Credit
3,500

No. 631
Balance
4,000
0

No. 711
Balance
5,600
0

No. 722
Balance
3,500
0

Date
Dec. 31
31

Date
Dec. 31
31

Explanation
Balance
Closing entry

Salaries Expense
Ref.
Debit

31,000
J14

Explanation
Balance
Closing entry

Interest Expense
Ref.
Debit

600
J14

(e)

Credit
31,000

Credit
600

No. 726
Balance
31,000
0

No. 905
Balance
600
0

## RACHEL COMPANY INC.

Post-Closing Trial Balance
December 31, 2011
Cash ................................................................................
Accounts Receivable.................................................
Supplies .........................................................................
Prepaid Insurance ......................................................
Office Equipment ........................................................
Accumulated DepreciationOffice
Equipment ................................................................
Notes Payable ..............................................................
Accounts Payable.......................................................
Salaries Payable..........................................................
Interest Payable...........................................................
Share CapitalOrdinary...........................................
Retained Earnings ......................................................
Totals .....................................................................

Debit
8,100
10,800
1,500
2,000
24,000

46,400

Credit

5,600
15,000
6,100
2,400
600
10,000
6,700
46,400

## (For Instructor Use Only)

4-69

PROBLEM 4-3B

(a)

MUDDY COMPANY
Income Statement
For the Year Ended December 31, 2011
Revenues
Service revenue .....................................................
Expenses
Salaries expense ...................................................
Depreciation expense ..........................................
Insurance expense................................................
Repair expense ......................................................
Utilities expense ....................................................
Total expenses ..............................................
Net income........................................................................

\$56,000
\$30,000
2,100
1,800
1,600
1,400
36,900
\$19,100

MUDDY COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2011
Retained earnings, January 1 ..................................................

\$ 8,500
19,100
27,600
11,000
\$16,600

Less: Dividends...........................................................................
Retained earnings, December 31............................................
MUDDY COMPANY
Statement of Financial Position
December 31, 2011
Assets
Property, plant, and equipment
Equipment ...............................................................
Less: Accumulated depreciation ....................
Current assets
Prepaid insurance .................................................
Accounts receivable.............................................
Cash...........................................................................
Total assets......................................................................

4-70

\$21,000
4,500
2,800
10,800
17,900

\$16,500

31,500
\$48,000

## PROBLEM 4-3B (Continued)

MUDDY COMPANY
Statement of Financial Position (Continued)
December 31, 2011
Equity and Liabilities
Equity
Share capitalordinary ....................................... \$20,000
Retained earnings..................................................
16,600
Current liabilities
Accounts payable ..................................................
9,000
Salaries payable .....................................................
2,400
Total equity and liabilities............................................

\$36,600

11,400
\$48,000

(b)
Date
Dec. 31

31

31

31

General Journal
Account Titles and Explanation
Service Revenue ........................................
Income Summary ............................

Ref.
400
350

Debit
56,000

Income Summary.......................................
Repair Expense................................
Depreciation Expense ...................
Insurance Expense.........................
Salaries Expense.............................
Utilities Expense..............................

350
622
711
722
726
732

36,900

Income Summary.......................................
Retained Earnings ..........................

350
320

19,100

Retained Earnings.....................................
Dividends...........................................

320
332

11,000

Credit
56,000

1,600
2,100
1,800
30,000
1,400

19,100

11,000

4-71

## PROBLEM 4-3B (Continued)

(c)
12/31

Retained Earnings
No. 320
11,000 1/1 Bal.
8,500
12/31
19,100
12/31 Bal. 16,600

12/31 Bal.

Repair Expense
1,600 12/31

No. 622
1,600

## Depreciation Expense No. 711

12/31 Bal.
2,100 12/31
2,100
12/31 Bal.

12/31
12/31

12/31

(d)

Dividends
11,000 12/31

No. 332
11,000
Insurance Expense
12/31 Bal.
1,800 12/31

No. 722
1,800

56,000

Salaries Expense
12/31 Bal. 30,000 12/31

No. 726
30,000

Service Revenue
No. 400
56,000 12/31 Bal. 56,000

Utilities Expense
12/31 Bal.
1,400 12/31

No. 732
1,400

Income Summary
36,900 12/31
19,100
56,000

No. 350
56,000

MUDDY COMPANY
Post-Closing Trial Balance
December 31, 2011
Cash.................................................................................
Accounts Receivable .................................................
Prepaid Insurance.......................................................
Equipment .....................................................................
Accumulated Depreciation.......................................
Accounts Payable .......................................................
Salaries Payable ..........................................................
Share CapitalOrdinary ...........................................
Retained Earnings ......................................................
Totals......................................................................

4-72

Debit
\$17,900
10,800
2,800
21,000

\$52,500

Credit

\$ 4,500
9,000
2,400
20,000
16,600
\$52,500

Account Titles

42,000
20,500
19,000
402,200

22,000

13,800
28,300
3,600
67,000
127,000
59,000

Dr.

402,200

90,700
29,000

12,500
6,000
120,000
100,000
44,000

Cr.

Trial Balance

4,700

(c)

23,900

(e) 11,000

1,200
3,000

4,000

(a)
(b)

(d)

Dr.

4,700
(e) 11,000
23,900

(c)

(b) 3,000

(d) 4,000

(a) 1,200

Cr.

420,900

11,000

4,700

1,200
3,000

42,000
20,500
19,000

22,000

13,800
28,300
2,400
67,000
127,000
59,000

Dr.

11,000
420,900

4,700

3,000

90,700
33,000

12,500
2,000
120,000
100,000
44,000

Cr.

Trial Balance

## ROCKFORD MANAGEMENT SERVICES, INC.

Worksheet
For the Year Ended December 31, 2011

101,400
22,300
123,700

11,000

4,700

1,200
3,000

42,000
20,500
19,000

Dr.

319,500
319,500

123,700

22,000

13,800
28,300
2,400
67,000
127,000
59,000

Dr.

11,000
297,200
22,300
319,500

4,700

3,000

12,500
2,000
120,000
100,000
44,000

Cr.

Statement of
Financial Position

123,700

90,700
33,000

Cr.

Income
Statement

Key: (a) Expired Insurance; (b) Depreciation ExpenseBuilding; (c) Depreciation ExpenseEquipment; (d) Rent Revenue Earned; (e) Accrued
Interest Payable.

Cash
Accounts Receivable
Prepaid Insurance
Land
Building
Equipment
Accounts Payable
Unearned Rent Revenue
Mortgage Note Payable
Share CapitalOrdinary
Retained Earnings
Dividends
Service Revenue
Rent Revenue
Salaries Expense
Utilities Expense
Totals
Insurance Expense
Depr. ExpenseBuilding
Accum. Depr.Building
Depr. ExpenseEquipment
Accum. Depr.Equipment
Interest Expense
Interest Payable
Totals
Net Income
Totals

(a)

PROBLEM 4-4B

4-73

(b)

## ROCKFORD MANAGEMENT SERVICES INC.

Statement of Financial Position
December 31, 2011
Assets
Property, plant, and equipment
Land .......................................................
Building ................................................
Less: Accumulated
depreciationbuilding.......
Equipment ...........................................
Less: Accumulated
depreciationequipment ...
Current assets
Prepaid insurance .............................
Accounts receivable.........................
Cash.......................................................
Total assets..................................................

67,000
127,000
3,000
59,000

124,000

4,700

54,300
2,400
28,300
13,800

245,300

44,500
289,800

## Equity and Liabilities

Equity
Share capitalordinary ..................................... 100,000
Retained earnings ................................................
44,300*
Non-current liabilities
Mortgage note payable.......................................
Current liabilities
Current maturity of mortgage
note payable .......................................................
20,000
Accounts payable ................................................
12,500
Interest payable ....................................................
11,000
Unearned rent revenue.......................................
2,000
Total equity and liabilities ..........................................

144,300
100,000

45,500
289,800

4-74

(c) Dec. 31

31

31

31

31

(d) Dec. 31

31

31

31

## Insurance Expense .....................................

Prepaid Insurance ..............................

1,200

Depreciation ExpenseBuilding...........
Accumulated Depreciation
Building.............................................

3,000

## Depreciation ExpenseEquipment ......

Accumulated Depreciation
Equipment........................................

4,700

## Unearned Rent Revenue ...........................

Rent Revenue ......................................

4,000

Interest Expense..........................................
Interest Payable ..................................

11,000

Service Revenue..........................................
Rent Revenue ...............................................
Income Summary ...............................

90,700
33,000

## Income Summary ........................................

Salaries Expense................................
Interest Expense.................................
Utilities Expense.................................
Depreciation Expense
Equipment........................................
Depreciation Expense
Building.............................................
Insurance Expense ............................

101,400

## Income Summary ........................................

Retained Earnings..............................

22,300

## Retained Earnings ......................................

Dividends ..............................................

22,000

1,200

3,000

4,700

4,000

11,000

123,700

42,000
20,500
11,000
19,000
4,700
3,000
1,200

22,300

22,000

4-75

(e)

## ROCKFORD MANAGEMENT SERVICES INC.

Post-Closing Trial Balance
December 31, 2011
Cash.............................................................................
Accounts Receivable .............................................
Prepaid Insurance...................................................
Land.............................................................................
Building ......................................................................
Accumulated DepreciationBuilding..............
Equipment .................................................................
Accumulated DepreciationEquipment .........
Accounts Payable ...................................................
Interest Payable .......................................................
Unearned Rent Revenue .......................................
Mortgage Note Payable .........................................
Share CapitalOrdinary .......................................
Retained Earnings ..................................................

Debit
13,800
28,300
2,400
67,000
127,000

3,000

59,000

297,500

4-76

Credit

4,700
12,500
11,000
2,000
120,000
100,000
44,300
297,500

## (For Instructor Use Only)

PROBLEM 4-5B

(a)
Date
July 1

12

18

20

21

25

31

31

General Journal
Account Titles and Explanation
Cash...............................................................
Share CapitalOrdinary...............

Ref.
101
311

Debit
20,000

Equipment ...................................................
Cash ....................................................
Accounts Payable...........................

157
101
201

9,000

Cleaning Supplies.....................................
Accounts Payable...........................

128
201

2,100

Prepaid Insurance.....................................
Cash ....................................................

130
101

1,800

## Accounts Receivable ...............................

Service Revenue .............................

112
400

4,500

## Accounts Payable .....................................

Cash ....................................................

201
101

2,900

Salaries Expense.......................................
Cash ....................................................

726
101

2,000

Cash...............................................................
Accounts Receivable.....................

101
112

3,400

## Accounts Receivable ...............................

Service Revenue .............................

112
400

9,000

## Gas & Oil Expense ....................................

Cash ....................................................

633
101

350

Dividends .....................................................
Cash ....................................................

332
101

1,600

J1
Credit
20,000

4,000
5,000

2,100

1,800

4,500

2,900

2,000

3,400

9,000

350

1,600

4-77

4-78

350
2,000
37,700

1,600

10,750
10,100
2,100
1,800
9,000

Dr.

37,700

13,500

4,200
20,000

Cr.

Trial Balance

500

5,750

(c)
150
(d) 1,400

(b)

(e) 1,000

(a) 2,700

Dr.

500

(e) 1,000
5,750

(b)

(a) 2,700

(d) 1,400
(c)
150

Cr.

41,900

150
1,400

500

350
3,000

1,600

10,750
12,800
700
1,650
9,000

Dr.

1,000
41,900

500

16,200

4,200
20,000

Cr.

Trial Balance

## CHANGS CLEANING SERVICES INC.

Worksheet
For the Month Ended July 31, 2011

5,400
10,800
16,200

150
1,400

500

350
3,000

Dr.

16,200

16,200

16,200

Cr.

Income
Statement

36,500

36,500

1,600

10,750
12,800
700
1,650
9,000

Dr.

1,000
25,700
10,800
36,500

500

4,200
20,000

Cr.

Statement of
Financial Position

Key: (a) Service Revenue Earned; (b) Depreciation Expense; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.

Cash
Accounts Receivable
Cleaning Supplies
Prepaid Insurance
Equipment
Accounts Payable
Share CapitalOrdinary
Dividends
Service Revenue
Gas & Oil Expense
Salaries Expense
Totals
Depreciation Expense
Accum. Depr.Equipment
Insurance Expense
Cleaning Supplies Expense
Salaries Payable
Totals
Net Income
Totals

Account Titles

(a), (e) & (f)

Date
Explanation
July 1
1
5
18
20
21
31
31

Date
Explanation
July 12
21
25

Date
July 3
31

Explanation

Date
Explanation
July 5

Date

Explanation

July 1

## Copyright 2011 John Wiley & Sons, Inc.

Cash
Ref.
J1
J1
J1
J1
J1
J1
J1
J1

Debit
20,000

4,000
1,800
2,900
2,000
3,400
350
1,600

Accounts Receivable
Ref.
Debit
J1
4,500
J1
J1
9,000
J2
2,700

Cleaning Supplies
Ref.
Debit
J1
2,100
J2

Prepaid Insurance
Ref.
Debit
J1
1,800
J2

Equipment
Ref.
J1

Credit

Debit

Credit
3,400

Credit
1,400

No. 101
Balance
20,000
16,000
14,200
11,300
9,300
12,700
12,350
10,750

No. 112
Balance
4,500
1,100
10,100
12,800

No. 128
Balance
2,100
700

150

No. 130
Balance
1,800
1,650

Credit

No. 157
Balance

Credit

9,000

9,000

4-79

## PROBLEM 4-5B (Continued)

Date
July 31

Date
July 1
3
18

Date
July 31

Date
July 1

Date
July 1
31
31

Date
July 31
31

Date
July 31
31
31
4-80

Accumulated DepreciationEquipment
Explanation
Ref.
Debit
Credit
J2
500

Explanation

Explanation

Explanation

Explanation

Accounts Payable
Ref.
Debit
J1
J1
J1
2,900
Salaries Payable
Ref.
Debit
J2
Share CapitalOrdinary
Ref.
Debit
J1
Retained Earnings
Ref.
Debit

Closing
Closing

Explanation
Closing

Explanation
Closing
Closing
Closing

J3
J3
Dividends
Ref.
J1
J3

Credit
1,000

Credit
20,000

No. 311
Balance
20,000

Credit

No. 320
Balance

1,600

Debit
1,600

No. 201
Balance
5,000
7,100
4,200
No. 212
Balance
1,000

10,800

Income Summary
Ref.
Debit
J3
J3
5,400
J3
10,800

Credit
5,000
2,100

No. 158
Balance
500

Credit
1,600

Credit
16,200

10,800
9,200
No. 332
Balance
1,600
0
No. 350
Balance
16,200
10,800
0

## PROBLEM 4-5B (Continued)

Date
July 12
25
31
31

Date
July 31
31

Date
July 31
31

Date
July 31
31

Date
July 31
31

Date
July 20
31
31

Explanation

Closing

Explanation
Closing

Service Revenue
Ref.
Debit
J1
J1
J2
J3
16,200
Gas & Oil Expense
Ref.
Debit
J1
350
J3

## Cleaning Supplies Expense

Explanation
Ref.
Debit
J2
1,400
Closing
J3

Explanation
Closing

Depreciation Expense
Ref.
Debit
J2
500
J3

Explanation
Closing

Insurance Expense
Ref.
Debit
J2
150
J3

Explanation
Closing

Salaries Expense
Ref.
Debit
J1
2,000
J2
1,000
J3

Credit
4,500
9,000
2,700

No. 400
Balance
4,500
13,500
16,200
0

Credit

No. 633
Balance
350
0

350

Credit
1,400

Credit
500

Credit
150

Credit

3,000

No. 634
Balance
1,400
0
No. 711
Balance
500
0
No. 722
Balance
150
0
No. 726
Balance
2,000
3,000
0

4-81

(d)

## CHANGS CLEANING SERVICE INC.

Income Statement
For the Month Ended July 31, 2011
Revenues
Service revenue.......................................................
Expenses
Salaries expense.....................................................
Cleaning supplies expense .................................
Depreciation expense............................................
Gas & oil expense...................................................
Insurance expense .................................................
Total expenses ...............................................
Net income.........................................................................

\$16,200
\$3,000
1,400
500
350
150
5,400
\$10,800

## CHANGS CLEANING SERVICE INC.

Retained Earnings Statement
For the Month Ended July 31, 2011
Retained earnings, July 1 .............................................

\$
0
10,800
10,800
1,600
\$ 9,200

## Less: Dividends ..............................................................

Retained earnings, July 31 ...........................................

## CHANGS CLEANING SERVICE INC.

Statement of Financial Position
July 31, 2011
Assets
Property, plant, and equipment
Equipment.................................................................
Less: Accumulated depreciation .....................

4-82

\$ 9,000
500

\$ 8,500

## PROBLEM 4-5B (Continued)

CHANGS CLEANING SERVICE INC.
Statement of Financial Position (Continued)
July 31, 2011
Assets (Continued)
Current assets
Prepaid insurance ..................................................
Cleaning supplies ..................................................
Accounts receivable..............................................
Cash............................................................................
Total assets........................................................................

1,650
700
12,800
10,750

25,900
\$34,400

## Equity and Liabilities

Equity
Share capitalordinary .......................................
Retained earnings ..................................................
Current liabilities
Accounts payable ..................................................
Salaries payable .....................................................
Total equity and liabilities ............................................

\$20,000
9,200
4,200
1,000

\$29,200
5,200
\$34,400

(e)
Date
July 31
31

31
31
31

General Journal
Account Titles and Explanation
Accounts Receivable..............................
Service Revenue............................

Ref.
112
400

Debit
2,700

## Depreciation Expense ............................

Accumulated Depreciation
Equipment...................................

711

500

Insurance Expense..................................
Prepaid Insurance.........................

722
130

150

## Cleaning Supplies Expense .................

Cleaning Supplies.........................

634
128

1,400

## Salaries Expense .....................................

Salaries Payable ............................

726
212

1,000

2,700

158

J2
Credit

500
150
1,400

1,000

4-83

## PROBLEM 4-5B (Continued)

(f)
Date
July 31

31

31

31

(g)

General Journal
Account Titles and Explanation
Service Revenue .......................................
Income Summary ...........................

Ref.
400
350

Debit
16,200

Income Summary......................................
Salaries Expense ...........................
Depreciation Expense ..................
Insurance Expense........................
Cleaning Supplies Expense .......
Gas & Oil Expense.........................

350
726
711
722
634
633

5,400

Income Summary......................................
Retained Earnings .........................

350
320

10,800

Retained Earnings....................................
Dividends..........................................

320
332

1,600

16,200

3,000
500
150
1,400
350

10,800

1,600

## CHANGS CLEANING SERVICE INC.

Post-Closing Trial Balance
July 31, 2011
Cash ................................................................................
Accounts Receivable.................................................
Cleaning Supplies ......................................................
Prepaid Insurance ......................................................
Equipment.....................................................................
Accumulated DepreciationEquipment ............
Accounts Payable.......................................................
Salaries Payable..........................................................
Share CapitalOrdinary ..........................................
Retained Earnings......................................................

Debit
\$10,750
12,800
700
1,650
9,000

Credit

\$34,900

4-84

J3
Credit

500
4,200
1,000
20,000
9,200
\$34,900

## COMPREHENSIVE PROBLEM: CHAPTERS 2 TO 4

(a)
Date
July 1

12

18

20

21

25

31

31

General Journal
Account Titles and Explanation
Cash ..............................................................
Share CapitalOrdinary.............

Ref.
101
311

Debit
14,000

Equipment...................................................
Cash ..................................................
Accounts Payable.........................

157
101
201

10,000

## Cleaning Supplies ....................................

Accounts Payable.........................

128
201

800

## Prepaid Insurance ....................................

Cash ..................................................

130
101

1,800

Accounts Receivable...............................
Service Revenue ...........................

112
400

3,800

Accounts Payable.....................................
Cash ..................................................

201
101

1,400

## Salaries Expense ......................................

Cash ..................................................

726
101

1,600

Cash ..............................................................
Accounts Receivable...................

101
112

1,400

Accounts Receivable...............................
Service Revenue ...........................

112
400

1,500

## Gas & Oil Expense ...................................

Cash ..................................................

633
101

400

Dividends ....................................................
Cash ..................................................

332
101

600

J1
Credit
14,000

3,000
7,000

800

1,800

3,800

1,400

1,600

1,400

1,500

400

600

4-85

4-86

400
1,600
25,700

600

6,600
3,900
800
1,800
10,000

Dr.

25,700

5,300

6,400
14,000

Cr.

Trial Balance

150
700

(c)
(d)
2,850

200

500

(b)

(e)

(a) 1,300

Dr.

700
150

(e)

(b)

500
2,850

200

(a) 1,300

(d)
(c)

Cr.

27,700

150
700

200

400
2,100

600

6,600
5,200
100
1,650
10,000

Dr.

500
27,700

200

6,600

6,400
14,000

Cr.

Trial Balance

## JULIES MAIDS CLEANING SERVICE INC.

Worksheet
For the Month Ended July 31, 2011

3,550
3,050
6,600

150
700

200

400
2,100

Dr.

24,150
24,150

6,600

600

6,600
5,200
100
1,650
10,000

Dr.

500
21,100
3,050
24,150

200

6,400
14,000

Cr.

Statement of
Financial Position

6,600

6,600

Cr.

Income
Statement

Key: (a) Service Revenue; (b) Depreciation Expense; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.

Cash
Accounts Receivable
Cleaning Supplies
Prepaid Insurance
Equipment
Accounts Payable
Share CapitalOrdinary
Dividends
Service Revenue
Gas & Oil Expense
Salaries Expense
Total
Depreciation Expense
Accum. Depr.Equipment
Insurance Expense
Cleaning Supplies Expense
Salaries Payable
Totals
Net Income
Totals

Account Titles

(a), (e) & (f)

Date
July 1
1
5
18
20
21
31
31

Date
July 12
21
25
31

Date
July 3
31

Date
July 5
31

Date
July 1

Explanation

Explanation

Explanation

Explanation

Explanation

## Copyright 2011 John Wiley & Sons, Inc.

Cash
Ref.
J1
J1
J1
J1
J1
J1
J1
J1

Debit
14,000

3,000
1,800
1,400
1,600
1,400
400
600

Accounts Receivable
Ref.
Debit
J1
3,800
J1
J1
1,500
J2
1,300

Cleaning Supplies
Ref.
Debit
J1
800
J2

Prepaid Insurance
Ref.
Debit
J1
1,800
J2

Equipment
Ref.
J1

Credit

Debit
10,000

Credit
1,400

Credit
700

Credit
150

Credit

No. 101
Balance
14,000
11,000
9,200
7,800
6,200
7,600
7,200
6,600
No. 112
Balance
3,800
2,400
3,900
5,200

No. 128
Balance
800
100

No. 130
Balance
1,800
1,650

No. 157
Balance
10,000

4-87

## COMPREHENSIVE PROBLEM (Continued)

Date
July 31

Date
July 1
3
18

Date
July 31

Date
July 1

Date
July 31
31

Date
July 31
31

Date
July 31
31
31

4-88

Accumulated DepreciationEquipment
Explanation
Ref.
Debit
Credit
J2
200

Explanation

Explanation

Explanation

Explanation
Closing
Closing

Explanation
Closing

Explanation
Closing
Closing
Closing

Accounts Payable
Ref.
Debit
J1
J1
J1
1,400
Salaries Payable
Ref.
Debit
J2
Share CapitalOrdinary
Ref.
Debit
J1
Retained Earnings
Ref.
Debit
J3
J3
600
Dividends
Ref.
J1
J3

Debit
600

Income Summary
Ref.
Debit
J3
J3
3,550
J3
3,050

Credit
7,000
800

No. 158
Balance
200
No. 201
Balance
7,000
7,800
6,400

Credit
500

No. 212
Balance
500

Credit
14,000

No. 311
Balance
14,000

Credit
3,050

No. 320
Balance
3,050
2,450

Credit

No. 332
Balance
600
0

600

Credit
6,600

No. 350
Balance
6,600
3,050
0

## COMPREHENSIVE PROBLEM (Continued)

Date
July 12
25
31
31

Date
July 31
31

Explanation

Closing

Explanation
Closing

Service Revenue
Ref.
Debit
J1
J1
J2
J3
6,600
Gas & Oil Expense
Ref.
Debit
J1
400
J3

Date
July 31
31

## Cleaning Supplies Expense

Explanation
Ref.
Debit
J2
700
Closing
J3

Date
July 31
31

Explanation
Closing

Depreciation Expense
Ref.
Debit
J2
200
J3

Explanation
Closing

Insurance Expense
Ref.
Debit
J2
150
J3

Date
July 31
31

Date
July 20
31
31

Explanation
Closing

Salaries Expense
Ref.
Debit
J1
1,600
J2
500
J3

Credit
3,800
1,500
1,300

No. 400
Balance
3,800
5,300
6,600
0

Credit

No. 633
Balance
400
0

400

Credit
700

Credit
200

Credit
150

Credit

2,100

No. 634
Balance
700
0
No. 711
Balance
200
0
No. 722
Balance
150
0
No. 726
Balance
1,600
2,100
0

4-89

(d)

## JULIES MAIDS CLEANING SERVICE INC.

Income Statement
For the Month Ended July 31, 2011
Revenues
Service revenue.......................................................
Expenses
Salaries expense.....................................................
Cleaning supplies expense .................................
Gas & oil expense...................................................
Depreciation expense............................................
Insurance expense .................................................
Total expenses ...............................................
Net income.........................................................................

\$6,600
\$2,100
700
400
200
150
3,550
\$3,050

## JULIES MAIDS CLEANING SERVICE INC.

Retained Earnings Statement
For the Month Ended July 31, 2011
Retained earnings, July 1 ..............................................................
Less: Dividends ...............................................................................
Retained earnings, July 31 ............................................................

4-90

\$
0
3,050
3,050
600
\$2,450

## COMPREHENSIVE PROBLEM (Continued)

JULIES MAIDS CLEANING SERVICE INC.
Statement of Financial Position
July 31, 2011
Assets
Property, plant, and equipment
Equipment .................................................................
Less: Accumulated depreciation ......................
Current assets
Prepaid insurance ...................................................
Cleaning supplies ...................................................
Accounts receivable...............................................
Cash.............................................................................
Total assets........................................................................

\$10,000
200
1,650
100
5,200
6,600

\$ 9,800

13,550
\$23,350

## Equity and Liabilities

Equity
Share capitalordinary ........................................
Retained earnings ...................................................
Current liabilities
Accounts payable ...................................................
Salaries payable ......................................................
Total equity and liabilities .............................................

\$14,000
2,450
6,400
500

\$16,450

6,900
\$23,350

4-91

## COMPREHENSIVE PROBLEM (Continued)

(e)
Date
July 31

31

31

31

31

General Journal
Account Titles and Explanation
Accounts Receivable .............................
Service Revenue ...........................

Ref.
112
400

Debit
1,300

## Depreciation Expense ...........................

Accumulated Depreciation
Equipment ..................................

711

200

Insurance Expense.................................
Prepaid Insurance ........................

722
130

150

## Cleaning Supplies Expense.................

Cleaning Supplies ........................

634
128

700

Salaries Expense.....................................
Salaries Payable............................

726
212

500

J2
Credit
1,300

158

200

150

700

500

(f)
Date
July 31

31

31

31

4-92

General Journal
Account Titles and Explanation
Service Revenue......................................
Income Summary..........................

Ref.
400
350

Debit
6,600

## Income Summary ....................................

Salaries Expense ..........................
Depreciation Expense .................
Insurance Expense.......................
Cleaning Supplies Expense ......
Gas & Oil Expense .......................

350
726
711
722
634
633

3,550

## Income Summary ....................................

Retained Earnings........................

350
320

3,050

## Retained Earnings ..................................

Dividends ........................................

320
332

600

J3
Credit
6,600

2,100
200
150
700
400

3,050

600

(g)

## JULIES MAIDS CLEANING SERVICE INC.

Post-Closing Trial Balance
July 31, 2011
Cash.................................................................................
Accounts Receivable .................................................
Cleaning Supplies.......................................................
Prepaid Insurance.......................................................
Equipment .....................................................................
Accumulated DepreciationEquipment .............
Accounts Payable .......................................................
Salaries Payable ..........................................................
Share CapitalOrdinary ...........................................
Retained Earnings ......................................................

Debit
\$ 6,600
5,200
100
1,650
10,000
\$

\$23,550

Credit

200
6,400
500
14,000
2,450
\$23,550

4-93

BYP 4-1

## FINANCIAL REPORTING PROBLEM

(a)

Total current assets were 2,635 million at December 31, 2008, and
2,600 million at December 31, 2007.

(b)

## Current assets are properly listed in the reverse order of liquidity. As

you will learn in the next chapter, inventory is considered to be less
liquid than receivables. Thus, it is listed above receivables.

(c)

The primary asset classifications are similar to the text: (1) goodwill,
(2) intangible assets, (3) property, plant, and equipment, (4) investments,
and (5) current assets.

(d)

## Cash equivalents are investments with original maturities of 3 months

or less that Cadbury does not intend to rollover beyond three months.

(e)

Total current liabilities were 3,388 million at December 31, 2008, and
4,614 million at December 31, 2007.

4-94

BYP 4-2

(a)

(in millions)
1.
2.
3.
4.

Nestl

2,635
1,761
3,388
3,534

CHF33,048
21,097
33,223
54,916

## Total current assets

Net property, plant & equipment
Total current liabilities
Total equity

(b) Current assets are cash and other resources that are reasonably expected to be realized in cash or sold or consumed within one year or
the companys operating cycle, whichever is longer. Current liabilities
are obligations that are reasonably expected to be paid from existing
current assets or through the creation of other current liabilities.
Cadbury current liabilities were 29% greater than its current assets, but
Nestls current assets were approximately the same as its current
liabilities. From this information, it appears that Nestl is in a better

4-95

BYP 4-3

4-96

BYP 4-4

(a)

## WHITEGLOVES JANITORIAL SERVICE INC.

Statement of Financial Position
December 31, 2011
Assets
Property, plant, and equipment
Cleaning equipment
(\$22,000 + \$4,000)............................
Less: Accum. depreciation
cleaning equipment
(\$4,000 + \$2,000).....................
Delivery trucks (\$34,000 + \$5,000) ....
Less: Accum. depreciation
delivery trucks
(\$5,000 + \$5,000).....................
Current assets
Prepaid insurance (\$4,800 X 2/3).........
Janitorial supplies
(\$5,200 \$2,700) ..............................
Accounts receivable
(\$9,000 + \$3,700) ..............................
Cash.........................................................
Total assets....................................................

\$26,000

6,000
39,000

\$20,000

10,000

29,000

\$49,000

3,200
2,500
12,700
6,500

24,900
\$73,900

## Equity and Liabilities

Equity
Share capitalordinary .......................................... \$40,000
Retained earnings .....................................................
4,650* \$44,650
Non-current liabilities
Notes payable, due July 1, 2012...........................
15,000
Current liabilities
Notes payable due within one year ..................... 10,000
Accounts payable (\$2,500 + \$500).......................
3,000
Interest payable (\$25,000 X 10% X 6/12) ............
1,250
14,250
Total equity and liabilities .................................................
\$73,900

4-97

## BYP 4-4 (Continued)

WHITEGLOVES JANITORIAL SERVICE INC.
Statement of Financial Position (Continued)
December 31, 2011
*Retained earnings balance as reported .................
Less: Janitorial supplies used .................................
Insurance expired (\$4,800 X 1/3)..................
Expenses incurred but unpaid .....................
Interest accrued.................................................
Depreciation (\$2,000 + \$5,000)......................
Total..............................................................
Retained earnings balance as adjusted .................

\$14,000
3,700
17,700
\$2,700
1,600
500
1,250
7,000
13,050
\$ 4,650

(b) Whitegloves Janitorial Service met the terms of the bank loan because
current assets exceed current liabilities by \$10,650 (\$24,900 \$14,250)
at December 31, 2011.

4-98

## (For Instructor Use Only)

BYP 4-5

COMMUNICATION ACTIVITY

MEMO
To:

Accounting Instructor

From:

Student

Re:

Accounting Cycle

The required steps in the accounting cycle, in the order in which they
should be completed, are:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Journalize the transactions.
Post to ledger accounts.
Prepare a trial balance.
Prepare financial statements.
Journalize and post closing entries.
Prepare a post-closing trial balance.

## The optional steps in the accounting cycle include preparing a worksheet

and preparing reversing entries. If a worksheet is prepared, it is done after
step 3 above, and it includes steps 4 and 6. The worksheet is a form used
to make it easier to prepare adjusting entries and financial statements. If reversing entries are prepared, they are journalized and posted after step 9,
at the beginning of the next accounting period. A reversing entry is the
exact opposite of a previously recorded adjusting entry and simplifies the
recording of subsequent transactions.

4-99

BYP 4-6

ETHICS CASE

## (a) The stakeholders in this case are:

 You, as controller.
 Jerry McNabb, president.
 Users of the companys financial statements.

## (b) The ethical issue is the continued circulation of significantly misstated

financial statements. As controller, you have just issued misleading
financial statements. You have acted ethically by telling the companys
president. The president has reacted unethically by allowing the misleading financial statements to continue to circulate.
(c) As controller, you should impress upon the president the consequences
of having those misleading financial statements be detected by some
user or securities regulator. Also stress upon him that you have a
professional obligation to correct the statements or to resign.

4-100