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CHAPTER
Page 121
6
Chapter Opener: Thinking Critically
Fast Facts
Students should recognize that financial statements can be used to evaluate net profit or loss, return on investments, expense trends, or growth in company net assets. The income statement is used to measure net income or loss, while the balance sheet can be used to measure growth in assets or liabilities. Executives and managers would use financial statements to make decisions about expanding business, investing in new ventures, or hiring new employees. ❏ ❏ ❏ ❏
❏
Managerial Implications: Thinking Critically Discussion Questions
Closing Entries and the Postclosing Trial Balance
Carnival has 80,000 employees world wide. Of the 3 million passengers Carnival serves annually, approximately 1,000,000 are seniors and 500,000 are children. Carnival became a publicly traded company in 1987. Carnival Corporation is comprised of distinct brands operating in North and South America, the United Kingdom, Germany, Italy, France, Spain and Australia, which account for nearly 90 percent of cruise passengers worldwide. Carnival Corporation operates 84 ships with 21 new vessels scheduled for delivery between now and 2011.
Answers will vary but could include monthly or quarterly. Students should want financial statements frequently so that trends can be observed and timely decisions made before the business is negatively impacted. These questions are designed to check the students’ understanding of the new terms, concepts, and procedures presented in the chapter. 1. Avoids errors, proves total debits and credits are equal after the closing process. 2. Asset, liability, and owner’s capital. 3. Steps to classify, record, and summarize financial data. 4. (1) analyze (2) journalize (3) post (4) prepare worksheet (5) prepare financial statements (6) journalize and post adjusting entries (7) journalize and post closing entries (8) prepare postclosing trial balance (9) interpret financial information. 5. Source document info to general journal, to general ledger, to worksheet, to financial statements. 6. Journalize and post adjusting entries; Journalize and post closing entries; Prepare a postclosing trial balance. 7. Adjustments columns of the worksheet. 8. Transfer results of operations to the owner’s capital account; Reduce balances of revenue, expense, and drawing accounts to zero. 9. Balances of revenue and expense accounts are transferred to Income Summary. Next the balance of the Income Summary account is transferred to the owner’s equity account. 10. Worksheet.
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EXERCISE 6.1 4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Dec.
1 2
31 Fees Income
97 5 0 0 00
Income Summary
4
3
97 5 0 0 00
5
4 5
31 Income Summary
6 7
Depreciation Expense
8 9
54 0 0 0 00
6
4 5 0 0 00
7
Salaries Expense
32 0 0 0 00
8
Supplies Expense
5 0 0 0 00
9
10
Telephone Expense
4 2 0 0 00
10
11
Utilities Expense
8 3 0 0 00
11
12
12
31 Income Summary
13
43 5 0 0 00
Hayward Anderson, Capital
14
13
43 5 0 0 00
15
14 15
31 Hayward Anderson, Capital
16
25 0 0 0 00
Hayward Anderson, Drawing
17
16
25 0 0 0 00
17
18
18
19
19
20
20
21
21
EXERCISE 6.2 1. Cash
5. Accumulated Depreciation
2. Accounts Receivable
6. Accounts Payable
3. Supplies
7. Sally Harris, Capital
4. Equipment
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■ Chapter 6
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EXERCISE 6.3 1. Analyze transactions. 2. Journalize the transactions. 3. Post the journal entries. 4. Prepare a worksheet. 5. Prepare financial statements. 6. Record adjusting entries. 7. Record closing entries. 8. Prepare a postclosing trial balance. 9. Interpret the financial information.
EXERCISE 6.4 1. B
6. B
11. I, E
2. I
7. E
12. B, E
3. B
8. B
13. B
4. B
9. I
14. I
5. I
10. B
15. B
EXERCISE 6.5 $46,500
1. Total revenue for the period is 2. Total expenses for the period are 3. Net income for the period is
.
$30,300
$16,200
4. Owner’s withdrawals for the period are
.
. $5,000
.
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EXERCISE 6.6 4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Mar.
1 2
31 Fees Income
401
Income Summary
4
276 0 0 0 00
399
3
276 0 0 0 00
5 6
4 5
31 Income Summary
399
206 5 8 0 00
6
7
Depreciation Expense—Equipment
510
10 0 8 0 00
7
8
Insurance Expense
511
9 6 0 0 00
8
9
Rent Expense
514
28 8 0 0 00
9
10
Salaries Expense
517
141 6 0 0 00
10
11
Supplies Expense
518
3 9 0 0 00
11
12
Telephone Expense
519
5 4 0 0 00
12
13
Utilities Expense
523
7 2 0 0 00
13
14 15
14
31 Income Summary Elizabeth Chavez, Capital
16
399
69 4 2 0 00
301
15
69 4 2 0 00
17 18
16 17
31 Elizabeth Chavez, Capital Elizabeth Chavez, Drawing
19
301 302
6 0 0 0 00
18
6 0 0 0 00
19
20
20
21
21
22
22
23
23
24
24
25
25
26
26
27
27
28
28
29
29
30
30
31
31
32
32
33
33
34
34
35
35
36
36
37
37
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EXERCISE 6.6 (continued) GENERAL LEDGER Elizabeth Chavez, Capital ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
301 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
31 Closing
J4
117 6 0 0 00 69 4 2 0 00 6 0 0 0 00
181 0 2 0 00
Elizabeth Chavez, Drawing ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
187 0 2 0 00
DEBIT
CREDIT
302 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
6 0 0 0 00 6 0 0 0 00
Income Summary ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
399 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Closing
J4
276 0 0 0 00
31 Closing
J4
206 5 8 0 00
69 4 2 0 00
31 Closing
J4
69 4 2 0 00
– 0 – 00
Fees Income ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
276 0 0 0 00
401 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
276 0 0 0 00 276 0 0 0 00
– 0 – 00
Depreciation Expense—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
510 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
10 0 8 0 00 10 0 8 0 00
– 0 – 00
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EXERCISE 6.6 (continued) GENERAL LEDGER Insurance Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
511 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
9 6 0 0 00 9 6 0 0 00
Rent Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
514 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
28 8 0 0 00 28 8 0 0 00
Salaries Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
517 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
141 6 0 0 00 141 6 0 0 00
Supplies Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
518 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
3 9 0 0 00 3 9 0 0 00
Telephone Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
519 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
126
31 Balance
✔
31 Closing
J4
■ Chapter 6
5 4 0 0 00 5 4 0 0 00
– 0 – 00
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EXERCISE 6.6 (continued) GENERAL LEDGER Utilities Expense ACCOUNT ________________________________________________________________ DATE
POST. REF.
DESCRIPTION
DEBIT
CREDIT
523 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Mar.
31 Balance
✔
31 Closing
J4
7 2 0 0 00 7 2 0 0 00
– 0 – 00
EXERCISE 6.7 4 PAGE __________
GENERAL JOURNAL DATE
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Dec.
4
DESCRIPTION
1 2
31 Gladys Zamarripa, Capital
54 0 0 0 00
Income Summary
3
54 0 0 0 00
5 6 7
4 5
31 Gladys Zamarripa, Capital
6 0 0 0 00
Gladys Zamarripa, Drawing
6
6 0 0 0 00
8
7 8
The new balance of Gladys Zamarripa, Capital is $36,000 ($96,000 – $54,000 – $6,000).
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EXERCISE 6.8
Analyze transactions
Journalize transactions
Post transactions
Prepare a worksheet
Prepare financial statements
Record adjusting entries
Record closing entries
Prepare postclosing trial balance
Interpret financial information
128
■ Chapter 6
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PROBLEM 6.1A 3 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Adjusting Entries
1 2
2010
3
Jan.
1 2
31 Supplies Expense
1 1 2 0 00
Supplies
4
3
1 1 2 0 00
5
4 5
31 Rent Expense
6
6 0 0 0 00
Prepaid Rent
7
6
6 0 0 0 00
8
7 8
31 Depreciation Expense—Office Equipment
9
2 2 4 0 00
Accumulated Depreciation—Office Equipment
10
9
2 2 4 0 00
11
10 11
4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Jan.
4
1 2
31 Fees Income
87 0 0 0 00
Income Summary
3
87 0 0 0 00
5 6
4 5
31 Income Summary
66 7 4 5 00
6
7
Depreciation Expense—Office Equipment
2 2 4 0 00
7
8
Rent Expense
6 0 0 0 00
8
9
Salaries Expense
46 2 0 0 00
9
10
Supplies Expense
1 1 2 0 00
10
11
Telephone Expense
9 8 5 00
11
12
Travel Expense
9 2 8 0 00
12
13
Utilities Expense
9 2 0 00
13
14 15 16
14
31 Income Summary
20 2 5 5 00
Jeff Sager, Capital
15
20 2 5 5 00
17 18 19
17
31 Jeff Sager, Capital Jeff Sager, Drawing
5 4 0 0 00
18
5 4 0 0 00
20
Analyze:
16
19 20
Credit the drawing account; debit the capital account.
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PROBLEM 6.2A 3 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Adjusting Entries
1 2
2010
3
Dec.
1 2
31 Supplies Expense
517
Supplies
4
1 2 0 0 00
121
3
1 2 0 0 00
5
4 5
31 Advertising Expense
6
526
Prepaid Advertising
7
1 5 0 0 00
131
6
1 5 0 0 00
8
7 8
31 Depreciation Expense—Equipment
9
Accumulated Depreciation—Equipment
10
523
1 2 0 0 00
142
9
1 2 0 0 00
11
10 11
4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Dec.
1 2
31 Fees Income
401
Income Summary
4
37 5 0 0 00
309
3
37 5 0 0 00
5 6
4 5
31 Income Summary
309
12 0 0 0 00
6
7
Supplies Expense
517
1 2 0 0 00
7
8
Advertising Expense
526
1 5 0 0 00
8
9
Depreciation Expense—Equipment
523
1 2 0 0 00
9
10
Salaries Expense
511
7 2 0 0 00
10
11
Utilities Expense
514
9 0 0 00
11
12 13
12
31 Income Summary Patonia Bell, Capital
14
309
25 5 0 0 00
301
13
25 5 0 0 00
15 16
15
31 Patonia Bell, Capital Patonia Bell, Drawing
17 18
130
14
301 302
4 2 0 0 00
16
4 2 0 0 00
17 18
■ Chapter 6
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PROBLEM 6.2A (continued) GENERAL LEDGER Supplies ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
121 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Adjusting
J3
3 0 0 0 00 1 2 0 0 00
Prepaid Advertising ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
1 8 0 0 00
131 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Adjusting
J3
12 0 0 0 00 1 5 0 0 00
Accumulated Depreciation—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
10 5 0 0 00
142 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
1 2 0 0 00
Patonia Bell, Capital ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
1 2 0 0 00
301 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
31 Closing
J4
66 0 0 0 00 25 5 0 0 00 4 2 0 0 00
87 3 0 0 00
Patonia Bell, Drawing ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
91 5 0 0 00
DEBIT
CREDIT
302 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
4 2 0 0 00 4 2 0 0 00
– 0 – 00
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PROBLEM 6.2A (continued) GENERAL LEDGER Income Summary ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
399 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Closing
J4
37 5 0 0 00
31 Closing
J4
12 0 0 0 00
25 5 0 0 00
31 Closing
J4
25 5 0 0 00
– 0 – 00
Fees Income ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
37 5 0 0 00
401 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
37 5 0 0 00 37 5 0 0 00
– 0 – 00
GENERAL LEDGER Salaries Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
511 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
7 2 0 0 00 7 2 0 0 00
Utilities Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
514 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
9 0 0 00 9 0 0 00
Supplies Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
517 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
132
31 Adjusting
J3
31 Closing
J4
■ Chapter 6
1 2 0 0 00
1 2 0 0 00 1 2 0 0 00
– 0 – 00
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PROBLEM 6.2A (continued) Depreciation Expense—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
523 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
31 Closing
J4
1 2 0 0 00
1 2 0 0 00 1 2 0 0 00
Advertising Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
526 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
31 Closing
J4
1 5 0 0 00
1 5 0 0 00 1 5 0 0 00
– 0 – 00
Bell Enterprises Postclosing Trial Balance December 31, 2010 ACCOUNT NAME
Cash
DEBIT
CREDIT
46 2 0 0 00
Accounts Receivable
6 0 0 0 00
Supplies
1 8 0 0 00
Prepaid Advertising
10 5 0 0 00
Equipment
30 0 0 0 00
Accumulated Depreciation—Equipment
1 2 0 0 00
Accounts Payable
6 0 0 0 00
Patonia Bell, Capital Totals
Analyze:
87 3 0 0 00 94 5 0 0 00
94 5 0 0 00
Fifteen accounts are listed in the Adjusted Trial Balance section. Eight accounts are listed on the postclosing trial balance.
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PROBLEM 6.3A 4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Dec.
1 2
31 Fees Income
401
Income Summary
4
138 0 0 0 00
399
3
138 0 0 0 00
5 6
4 5
31 Income Summary
399
44 8 2 0 00
6
7
Advertising Expense
511
4 8 0 0 00
7
8
Depreciation Expense—Equipment
514
9 0 0 00
8
9
Rent Expense
517
3 6 0 0 00
9
10
Salaries Expense
519
28 8 0 0 00
10
11
Utilities Expense
523
6 7 2 0 00
11
12 13
12
31 Income Summary Monica Cavazos, Capital
14
399
93 1 8 0 00
301
13
93 1 8 0 00
15 16
14 15
31 Monica Cavazos, Capital Monica Cavazos, Drawing
17
301 302
7 2 0 0 00
16
7 2 0 0 00
17
18
18
19
19
20
20
21
21
22
22
23
23
24
24
25
25
26
26
27
27
28
28
29
29
30
30
31
31
32
32
33
33
34
34
35
35
36
36
37
37
134
■ Chapter 6
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PROBLEM 6.3A (continued) GENERAL LEDGER Monica Cavazos, Capital ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
301 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
31 Closing
J4
55 6 2 0 00 93 1 8 0 00 7 2 0 0 00
141 6 0 0 00
Monica Cavazos, Drawing ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
148 8 0 0 00
DEBIT
CREDIT
302 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
7 2 0 0 00 7 2 0 0 00
Income Summary ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
399 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Closing
J4
138 0 0 0 00
31 Closing
J4
44 8 2 0 00
93 1 8 0 00
31 Closing
J4
93 1 8 0 00
– 0 – 00
Fees Income ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
138 0 0 0 00
401 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
138 0 0 0 00 138 0 0 0 00
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
– 0 – 00
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PROBLEM 6.3A (continued) GENERAL LEDGER Advertising Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
511 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
4 8 0 0 00 4 8 0 0 00
Depreciation Expense—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
514 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
9 0 0 00 9 0 0 00
Rent Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
517 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
136
31 Balance
✔
31 Closing
J4
■ Chapter 6
3 6 0 0 00 3 6 0 0 00
– 0 – 00
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PROBLEM 6.3A (continued) GENERAL LEDGER ACCOUNT ________________________________________________________________ Salaries Expense DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
ACCOUNT NO. ______________ 519 BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
28 8 0 0 00 28 8 0 0 00
Utilities Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
523 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
Analyze:
31 Balance
✔
31 Closing
J4
6 7 2 0 00 6 7 2 0 00
– 0 – 00
The balance in the Salaries Expense account is $0.0
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PROBLEM 6.4A Nationwide Auto Detailing Service Worksheet Month Ended December 31, 2010 ACCOUNT NAME
TRIAL BALANCE DEBIT CREDIT
ADJUSTMENTS DEBIT CREDIT
1
Cash
2
31 0 5 0 00
Accounts Receivable
4 9 5 0 00
3
Supplies
4 0 0 0 00
(a) 1 6 0 0 00
4
Prepaid Advertising
3 0 0 0 00
(b) 1 4 0 0 00
5
Equipment
6
Accumulated Depreciation—Equipment
7
Accounts Payable
8
Richard Harris, Capital
9
Richard Harris, Drawing
20 0 0 0 00 (c)
4 8 0 00
5 0 0 0 00 35 5 0 0 00 2 0 0 0 00
10
Fees Income
11
30 0 0 0 00
Supplies Expense
(a) 1 6 0 0 00
12
Advertising Expense
(b) 1 4 0 0 00
13
Depreciation Expense—Equipment
(c)
14
Salaries Expense
4 8 0 0 00
15
Utilities Expense
7 0 0 00
16
Totals
17
Net Income
70 5 0 0 00
70 5 0 0 00
4 8 0 00
3 4 8 0 00
3 4 8 0 00
18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
138
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PROBLEM 6.4A (continued)
ADJUSTED TRIAL BALANCE DEBIT CREDIT
INCOME STATEMENT DEBIT CREDIT
BALANCE SHEET DEBIT CREDIT
31 0 5 0 00
31 0 5 0 00
1
4 9 5 0 00
4 9 5 0 00
2
2 4 0 0 00
2 4 0 0 00
3
1 6 0 0 00
1 6 0 0 00
4
20 0 0 0 00
20 0 0 0 00
5
4 8 0 00
4 8 0 00
6
5 0 0 0 00
5 0 0 0 00
7
35 5 0 0 00
35 5 0 0 00
8
2 0 0 0 00
2 0 0 0 00 30 0 0 0 00
9
30 0 0 0 00
10
1 6 0 0 00
1 6 0 0 00
11
1 4 0 0 00
1 4 0 0 00
12
4 8 0 00
4 8 0 00
13
4 8 0 0 00
4 8 0 0 00
14
7 0 0 00
7 0 0 00
15
70 9 8 0 00
70 9 8 0 00
8 9 8 0 00
30 0 0 0 00
62 0 0 0 00
21 0 2 0 00 30 0 0 0 00
30 0 0 0 00
62 0 0 0 00
40 9 8 0 00
16
21 0 2 0 00
17
62 0 0 0 00
18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
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Chapter 6 ■
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PROBLEM 6.4A (continued) 3 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Adjusting Entries
1 2
2010
3
Dec.
1
(a)
2
31 Supplies Expense
517
Supplies
4
1 6 0 0 00
121
3
1 6 0 0 00
5
4 5
(b)
6
6
31 Advertising Expense
7
526
Prepaid Advertising
8
1 4 0 0 00
131
7
1 4 0 0 00
9
8 9
(c)
10
10
31 Depreciation Expense—Equipment
11
Accumulated Depreciation—Equipment
12
523
4 8 0 00
142
11
4 8 0 00
13
12 13
4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Dec.
1 2
31 Fees Income
401
Income Summary
4
30 0 0 0 00
309
3
30 0 0 0 00
5 6
4 5
31 Income Summary
309
8 9 8 0 00
6
7
Salaries Expense
511
4 8 0 0 00
7
8
Utilities Expense
514
7 0 0 00
8
9
Supplies Expense
517
1 6 0 0 00
9
10
Depreciation Expense—Equipment
523
4 8 0 00
10
11
Advertising Expense
526
1 4 0 0 00
11
12 13
12
31 Income Summary Richard Harris, Capital
14
309
21 0 2 0 00
301
13
21 0 2 0 00
15 16
15
31 Richard Harris, Capital Richard Harris, Drawing
17 18
140
14
301 302
2 0 0 0 00
16
2 0 0 0 00
17 18
■ Chapter 6
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Page 141
PROBLEM 6.4A (continued) GENERAL LEDGER Supplies ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
121 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Adjusting
J3
4 0 0 0 00 1 6 0 0 00
Prepaid Advertising ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
2 4 0 0 00
131 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Adjusting
J3
3 0 0 0 00 1 4 0 0 00
Accumulated Depreciation—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
1 6 0 0 00
142 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
4 8 0 00
Richard Harris, Capital ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
4 8 0 00
301 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
31 Closing
J4
35 5 0 0 00 21 0 2 0 00 2 0 0 0 00
54 5 2 0 00
Richard Harris, Drawing ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
56 5 2 0 00
DEBIT
CREDIT
302 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
2 0 0 0 00 2 0 0 0 00
– 0 – 00
Chapter 6 ■
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PROBLEM 6.4A (continued) GENERAL LEDGER Income Summary ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
399 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Closing
J4
30 0 0 0 00
31 Closing
J4
8 9 8 0 00
21 0 2 0 00
31 Closing
J4
21 0 2 0 00
– 0 – 00
Fees Income ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
30 0 0 0 00
401 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
30 0 0 0 00 30 0 0 0 00
– 0 – 00
GENERAL LEDGER Salaries Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
511 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
4 8 0 0 00 4 8 0 0 00
Utilities Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
514 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
7 0 0 00 7 0 0 00
Supplies Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
517 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
142
31 Adjusting
J3
31 Closing
J4
■ Chapter 6
1 6 0 0 00
1 6 0 0 00 1 6 0 0 00
– 0 – 00
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Page 143
PROBLEM 6.4A (continued) Depreciation Expense—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
523 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
31 Closing
J4
4 8 0 00
4 8 0 00 4 8 0 00
Advertising Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
526 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
31 Closing
J4
1 4 0 0 00
1 4 0 0 00 1 4 0 0 00
– 0 – 00
Nationwide Auto Detailing Service Postclosing Trial Balance December 31, 2010 ACCOUNT NAME
Cash
DEBIT
CREDIT
31 0 5 0 00
Accounts Receivable
4 9 5 0 00
Supplies
2 4 0 0 00
Prepaid Advertising
1 6 0 0 00
Equipment
20 0 0 0 00
Accumulated Depreciation—Equipment
4 8 0 00
Accounts Payable
5 0 0 0 00
Richard Harris, Capital Totals
Analyze:
54 5 2 0 00 60 0 0 0 00
60 0 0 0 00
Total debits of $62,000 were posted to the general ledger to complete the closing entries.
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 6 ■
143
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PROBLEM 6.1B 3 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Adjusting Entries
1 2
2010
3
Jan.
1
(a)
2
31 Supplies Expense
523
Supplies
4
2 8 6 0 00
121
3
2 8 6 0 00
4
(b)
5
5
31 Insurance Expense
6
514
Prepaid Insurance
7
1 4 8 0 00
134
6
1 4 8 0 00
7
(c)
8
8
31 Depreciation Expense—Machinery
9
Accumulated Depreciation—Machinery
10
511
1 1 2 0 00
142
9
1 1 2 0 00
11
10 11
4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Jan.
1 2
31 Fees Income
401
Income Summary
4
32 8 0 0 00
309
3
32 8 0 0 00
4
5
5
31 Income Summary
6
309
25 3 1 0 00
6
7
Depreciation Expense—Machinery
511
1 1 2 0 00
7
8
Insurance Expense
514
1 4 8 0 00
8
9
Rent Expense
517
3 0 0 0 00
9
10
Salaries Expense
520
16 0 0 0 00
10
11
Supplies Expense
523
2 8 6 0 00
11
12
Telephone Expense
526
2 1 0 00
12
13
Utilities Expense
529
6 4 0 00
13
14
14
31 Income Summary
15
James Wilson, Capital
16
309
7 4 9 0 00
301
15
7 4 9 0 00
17
16 17
31 James Wilson, Capital
18
James Wilson, Drawing
19 20
301 302
2 4 0 0 00
18
2 4 0 0 00
19 20
Analyze:
The adjusting entry for expired insurance created a debit to Insurance Expense, increasing the Insurance Expense account balance to $1,480.
144
■ Chapter 6
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Page 145
PROBLEM 6.2B 3 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Adjusting Entries
1 2
2010
3
Dec.
1
(a)
2
31 Supplies Expense
517
Supplies
4
3 0 0 0 00
121
3
3 0 0 0 00
(b)
5
5
31 Advertising Expense
6
526
Prepaid Advertising
7
1 2 0 0 00
131
6
1 2 0 0 00
(c)
8
Accumulated Depreciation—Equipment
10
523
1 5 0 0 00
142
9
1 5 0 0 00
11
DATE
DESCRIPTION
4 PAGE __________ POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Dec.
1 2
31 Fees Income Income Summary
401
46 8 0 0 00
399
3
46 8 0 0 00
5 6
10 11
GENERAL JOURNAL
4
7 8
31 Depreciation Expense—Equipment
9
4
4 5
31 Income Summary
399
21 9 0 0 00
6
7
Salaries Expense
511
14 4 0 0 00
7
8
Utilities Expense
514
1 8 0 0 00
8
9
Supplies Expense
517
3 0 0 0 00
9
10
Depreciation Expense—Equipment
523
1 5 0 0 00
10
11
Advertising Expense
526
1 2 0 0 00
11
12 13 14
12
31 Income Summary James McDonald, Capital
399
24 9 0 0 00
301
13
24 9 0 0 00
15 16 17
14 15
31 James McDonald, Capital James McDonald, Drawing
301 302
8 4 0 0 00
16
8 4 0 0 00
18
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
17 18
Chapter 6 ■
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PROBLEM 6.2B (continued) GENERAL LEDGER Supplies ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
121 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Adjusting
J3
6 0 0 0 00 3 0 0 0 00
Prepaid Advertising ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
3 0 0 0 00
131 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Adjusting
J3
9 0 0 0 00 1 2 0 0 00
Accumulated Depreciation—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
7 8 0 0 00
142 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
1 5 0 0 00
James McDonald, Capital ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
1 5 0 0 00
301 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
31 Closing
J4
82 2 0 0 00 24 9 0 0 00 8 4 0 0 00
98 7 0 0 00
James McDonald, Drawing ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
107 1 0 0 00
DEBIT
CREDIT
302 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
146
31 Balance
✔
31 Closing
J4
■ Chapter 6
8 4 0 0 00 8 4 0 0 00
– 0 – 00
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
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PROBLEM 6.2B (continued) GENERAL LEDGER Income Summary ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
399 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Closing
J4
46 8 0 0 00
31 Closing
J4
21 9 0 0 00
24 9 0 0 00
31 Closing
J4
24 9 0 0 00
– 0 – 00
Fees Income ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
46 8 0 0 00
401 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
46 8 0 0 00 46 8 0 0 00
– 0 – 00
Salaries Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
511 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
14 4 0 0 00 14 4 0 0 00
Utilities Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
514 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
1 8 0 0 00 1 8 0 0 00
Supplies Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
517 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
31 Closing
J4
3 0 0 0 00
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
3 0 0 0 00 3 0 0 0 00
– 0 – 00
Chapter 6 ■
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PROBLEM 6.2B (continued) GENERAL LEDGER Depreciation Expense—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
523 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
31 Closing
J4
1 5 0 0 00
1 5 0 0 00 1 5 0 0 00
Advertising Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
526 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Adjusting
J3
31 Closing
J4
1 2 0 0 00
1 2 0 0 00 1 2 0 0 00
– 0 – 00
Big Valley Nursery and Landscape Postclosing Trial Balance December 31, 2010 ACCOUNT NAME
Cash
DEBIT
CREDIT
32 4 0 0 00
Accounts Receivable
6 0 0 0 00
Supplies
3 0 0 0 00
Prepaid Advertising
7 8 0 0 00
Equipment
60 0 0 0 00
Accumulated Depreciation—Equipment
1 5 0 0 00
Accounts Payable
9 0 0 0 00
James McDonald, Capital Totals
Analyze:
148
98 7 0 0 00 109 2 0 0 00
109 2 0 0 00
Total credits of $102,000 were posted to the general ledger to complete the closing entries.
■ Chapter 6
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
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PROBLEM 6.3B 4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Dec.
4
POST. REF.
1 2
31 Fees Income Income Summary
401
108 0 0 0 00
399
3
108 0 0 0 00
5 6
4 5
31 Income Summary
399
41 4 0 0 00
6
7
Advertising Expense
511
6 6 0 0 00
7
8
Depreciation Expense—Equipment
514
1 8 0 0 00
8
9
Rent Expense
517
4 2 0 0 00
9
10
Salaries Expense
519
21 6 0 0 00
10
11
Utilities Expense
523
7 2 0 0 00
11
12 13 14
12
31 Income Summary Patty Slade, Capital
399
66 6 0 0 00
301
13
66 6 0 0 00
15 16 17
14 15
31 Patty Slade, Capital Patty Slade, Drawing
301 302
7 2 0 0 00
16
7 2 0 0 00
17
18
18
19
19
20
20
21
21
22
22
23
23
24
24
25
25
26
26
27
27
28
28
29
29
30
30
31
31
32
32
33
33
34
34
35
35
36
36
37
37
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Chapter 6 ■
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PROBLEM 6.3B (continued) GENERAL LEDGER Supplies ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
121 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
6 0 0 0 00
Prepaid Rent ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
131 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
46 2 0 0 00
Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
141 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
72 0 0 0 00
Accumulated Depreciation—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
142 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
1 8 0 0 00
Patty Slade, Capital ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
301 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
150
1 Balance
✔
31 Closing
J4
31 Closing
J4
■ Chapter 6
114 9 0 0 00 66 6 0 0 00 7 2 0 0 00
181 5 0 0 00 174 3 0 0 00
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PROBLEM 6.3B (continued) GENERAL LEDGER Patty Slade, Drawing ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
302 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
7 2 0 0 00 7 2 0 0 00
Income Summary ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
399 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Closing
J4
108 0 0 0 00
31 Closing
J4
41 4 0 0 00
66 6 0 0 00
31 Closing
J4
66 6 0 0 00
– 0 – 00
Fees Income ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
108 0 0 0 00
401 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
108 0 0 0 00 108 0 0 0 00
– 0 – 00
Advertising Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
511 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
6 6 0 0 00 6 6 0 0 00
– 0 – 00
Chapter 6 ■
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PROBLEM 6.3B (continued) GENERAL LEDGER Depreciation Expense—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
514 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
1 8 0 0 00 1 8 0 0 00
Rent Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
517 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
152
31 Balance
✔
31 Closing
J4
■ Chapter 6
4 2 0 0 00 4 2 0 0 00
– 0 – 00
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
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Page 153
PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT ________________________________________________________________ Salaries Expense DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
ACCOUNT NO. ______________ 519 BALANCE DEBIT
CREDIT
2010 Dec.
31 Balance
✔
31 Closing
J4
21 6 0 0 00 21 6 0 0 00
Utilities Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
523 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Dec.
Analyze:
31 Balance
✔
31 Closing
J4
7 2 0 0 00 7 2 0 0 00
– 0 – 00
Fees Income, Income Summary, Patty Slade—Capital, Patty Slade—Drawing, Advertising, Depreciation, Rent, Salaries, and Utilities Expense.
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Chapter 6 ■
153
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Page 154
PROBLEM 6.4B Scott Wilson, CPA Worksheet Month Ended June 30, 2010 ACCOUNT NAME
TRIAL BALANCE DEBIT CREDIT
1
Cash
31 9 5 0 00
2
Accounts Receivable
11 3 4 0 00
3
Supplies
15 7 5 0 00
4
Computers
28 8 0 0 00
5
Accumulated Depreciation—Computers
6
Accounts Payable
12 6 0 0 00
7
Scott Wilson, Capital
62 2 3 5 00
8
Scott Wilson, Drawing
9
Fees Income
ADJUSTMENTS DEBIT CREDIT
(a) 2 7 0 0 00 2 8 8 0 00
(b)
2 4 0 00
12 0 0 0 00 67 9 5 0 00
10
Salaries Expense
11
37 7 2 5 00
Supplies Expense
(a) 2 7 0 0 00
12
Depreciation Expense—Computers
(b)
13
Travel Expense
5 4 0 0 00
14
Utilities Expense
2 7 0 0 00
15
Totals
16
Net Income
145 6 6 5 00
145 6 6 5 00
2 4 0 00
2 9 4 0 00
2 9 4 0 00
17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
154
■ Chapter 6
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
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Page 155
PROBLEM 6.4B (continued)
ADJUSTED TRIAL BALANCE DEBIT CREDIT
INCOME STATEMENT DEBIT CREDIT
BALANCE SHEET DEBIT CREDIT
31 9 5 0 00
31 9 5 0 00
1
11 3 4 0 00
11 3 4 0 00
2
13 0 5 0 00
13 0 5 0 00
3
28 8 0 0 00
28 8 0 0 00
4
3 1 2 0 00
3 1 2 0 00
5
12 6 0 0 00
12 6 0 0 00
6
62 2 3 5 00
62 2 3 5 00
7
12 0 0 0 00
12 0 0 0 00 67 9 5 0 00
8
67 9 5 0 00
9
37 7 2 5 00
37 7 2 5 00
10
2 7 0 0 00
2 7 0 0 00
11
2 4 0 00
2 4 0 00
12
5 4 0 0 00
5 4 0 0 00
13
2 7 0 0 00
2 7 0 0 00
14
145 9 0 5 00
145 9 0 5 00
48 7 6 5 00
67 9 5 0 00
97 1 4 0 00
19 1 8 5 00 67 9 5 0 00
67 9 5 0 00
97 1 4 0 00
77 9 5 5 00
15
19 1 8 5 00
16
97 1 4 0 00
17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
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PROBLEM 6.4B (continued) 3 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Adjusting Entries
1 2
2010
3
Jun.
1 2
30 Supplies Expense
517
Supplies
4
2 7 0 0 00
121
3
2 7 0 0 00
4
5
5
6
6
30 Depreciation Expense—Computers
7
Accumulated Depreciation—Computers
8
523
2 4 0 00
142
7
2 4 0 00
8
9
9
10
10
11
11
12
12
13
13
4 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Jun.
1 2
30 Fees Income
401
Income Summary
4
67 9 5 0 00
309
3
67 9 5 0 00
5 6
4 5
30 Income Summary
309
48 7 6 5 00
6
7
Salaries Expense
511
37 7 2 5 00
7
8
Supplies Expense
517
2 7 0 0 00
8
9
Depreciation Expense—Computers
523
2 4 0 00
9
10
Travel Expense
519
5 4 0 0 00
10
11
Utilities Expense
514
2 7 0 0 00
11
12 13
12
30 Income Summary Scott Wilson, Capital
14
309
19 1 8 5 00
301
13
19 1 8 5 00
15 16
15
30 Scott Wilson, Capital Scott Wilson, Drawing
17 18
156
14
301 302
12 0 0 0 00
16
12 0 0 0 00
17 18
■ Chapter 6
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PROBLEM 6.4B (continued) GENERAL LEDGER Supplies ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
121 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
30 Adjusting
J3
15 7 5 0 00 2 7 0 0 00
Computers ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
13 0 5 0 00
131 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
28 8 0 0 00
Accumulated Depreciation—Computers ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
142 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
30 Adjusting
J3
2 8 8 0 00 2 4 0 00
Scott Wilson, Capital ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
3 1 2 0 00
301 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
30 Closing
J4
30 Closing
J4
62 2 3 5 00 19 1 8 5 00 12 0 0 0 00
69 4 2 0 00
Scott Wilson, Drawing ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
81 4 2 0 00
DEBIT
CREDIT
302 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
30 Closing
J4
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
12 0 0 0 00 12 0 0 0 00
– 0 – 00
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PROBLEM 6.4B (continued) GENERAL LEDGER Income Summary ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
309 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Closing
J4
67 9 5 0 00
30 Closing
J4
48 7 6 5 00
19 1 8 5 00
30 Closing
J4
19 1 8 5 00
– 0 – 00
Fees Income ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
67 9 5 0 00
401 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
30 Closing
J4
67 9 5 0 00 67 9 5 0 00
– 0 – 00
Salaries Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
511 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
30 Closing
J4
37 7 2 5 00 37 7 2 5 00
Utilities Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
514 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
30 Closing
J4
2 7 0 0 00 2 7 0 0 00
Supplies Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
517 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
158
30 Adjusting
J3
30 Closing
J4
■ Chapter 6
2 7 0 0 00
2 7 0 0 00 2 7 0 0 00
– 0 – 00
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PROBLEM 6.4B (continued) GENERAL LEDGER Travel Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
519 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Balance
✔
30 Closing
J4
5 4 0 0 00 5 4 0 0 00
Depreciation Expense—Computers ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
523 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2010 Jun.
30 Adjusting
J3
30 Closing
J4
2 4 0 00
2 4 0 00 2 4 0 00
– 0 – 00
Scott Wilson, CPA Postclosing Trial Balance June 30, 2010 ACCOUNT NAME
DEBIT
Cash
31 9 5 0 00
Accounts Receivable
11 3 4 0 00
Supplies
13 0 5 0 00
Computers
28 8 0 0 00
Accumulated Depreciation—Computers
CREDIT
3 1 2 0 00
Accounts Payable
12 6 0 0 00
Scott Wilson, Capital
69 4 2 0 00
Totals
Analyze:
85 1 4 0 00
85 1 4 0 00
Net Income for Scott Wilson, CPA for the month of June 2010 was $19,185.
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CRITICAL THINKING PROBLEM 6.1 The Style Shop Worksheet Month Ended December 31, 2010 ACCOUNT NAME
TRIAL BALANCE DEBIT CREDIT
ADJUSTMENTS DEBIT CREDIT
1
Cash
81 6 0 0 00
2
Accounts Receivable
18 0 0 0 00
3
Supplies
14 4 0 0 00
(a) 7 2 0 0 00
4
Prepaid Insurance
21 6 0 0 00
(b) 4 8 0 0 00
5
Machinery
6
Accumulated Depreciation—Machinery
7
Accounts Payable
8
Sarah Palmer, Capital
9
Sarah Palmer, Drawing
168 0 0 0 00 (c) 2 4 0 0 00 27 0 0 0 00 149 1 6 0 00 12 0 0 0 00
10
Fees Income
165 0 0 0 00
11
Supplies Expense
(a) 7 2 0 0 00
12
Insurance Expense
(b) 4 8 0 0 00
13
Salaries Expense
14
Depreciation Expense—Machinery
15
Utilities Expense
16
Totals
17
Net Income
22 2 0 0 00 (c) 2 4 0 0 00 3 3 6 0 00 341 1 6 0 00
341 1 6 0 00
14 4 0 0 00
14 4 0 0 00
18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
160
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CRITICAL THINKING PROBLEM 6.1 (continued)
ADJUSTED TRIAL BALANCE DEBIT CREDIT
INCOME STATEMENT DEBIT CREDIT
BALANCE SHEET DEBIT CREDIT
81 6 0 0 00
81 6 0 0 00
1
18 0 0 0 00
18 0 0 0 00
2
7 2 0 0 00
7 2 0 0 00
3
16 8 0 0 00
16 8 0 0 00
4
168 0 0 0 00
168 0 0 0 00
5
2 4 0 0 00
2 4 0 0 00
6
27 0 0 0 00
27 0 0 0 00
7
149 1 6 0 00
149 1 6 0 00
8
12 0 0 0 00
12 0 0 0 00 165 0 0 0 00
9
165 0 0 0 00
10
7 2 0 0 00
7 2 0 0 00
11
4 8 0 0 00
4 8 0 0 00
12
22 2 0 0 00
22 2 0 0 00
13
2 4 0 0 00
2 4 0 0 00
14
3 3 6 0 00
3 3 6 0 00
15
343 5 6 0 00
343 5 6 0 00
39 9 6 0 00
165 0 0 0 00
303 6 0 0 00
125 0 4 0 00 165 0 0 0 00
165 0 0 0 00
303 6 0 0 00
178 5 6 0 00
16
125 0 4 0 00
17
303 6 0 0 00
18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
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CRITICAL THINKING PROBLEM 6.1 (continued) The Style Shop Income Statement Month Ended December 31, 2010 Revenue Fees Income
165 0 0 0 00
Expenses Supplies Expense
7 2 0 0 00
Insurance Expense
4 8 0 0 00
Salaries Expense
22 2 0 0 00
Depreciation Expense—Machinery
2 4 0 0 00
Utilities Expense
3 3 6 0 00
Total Expenses
39 9 6 0 00
Net Income
125 0 4 0 00
The Style Shop Statement of Owner’s Equity Month Ended December 31, 2010 Sarah Palmer, Capital, December 1, 2010 Net Income for December Less Withdrawals for December
149 1 6 0 00 125 0 4 0 00 12 0 0 0 00
Increase in Capital
113 0 4 0 00
Sarah Palmer, Capital, December 31, 2010
262 2 0 0 00
162
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CRITICAL THINKING PROBLEM 6.1 (continued) The Style Shop Balance Sheet December 31, 2010 Assets Cash
81 6 0 0 00
Accounts Receivable
18 0 0 0 00
Supplies
7 2 0 0 00
Prepaid Insurance
16 8 0 0 00
Machinery
168 0 0 0 00
Accumulated Depreciation—Machinery
2 4 0 0 00
Total Assets
165 6 0 0 00 289 2 0 0 00
Liabilities and Owner’s Equity Liabilities Accounts Payable
27 0 0 0 00
Owner’s Equity Sarah Palmer, Capital
262 2 0 0 00
Total Liabilities and Owner’s Equity
289 2 0 0 00
3 PAGE __________
GENERAL JOURNAL DATE
DESCRIPTION
DEBIT
CREDIT
Adjusting Entries
1 2
2010
3
Dec.
4
POST. REF.
1 2
31 Supplies Expense
7 2 0 0 00
Supplies
3
7 2 0 0 00
5 6 7
5
31 Insurance Expense
4 8 0 0 00
Prepaid Insurance
6
4 8 0 0 00
8 9 10
4
7 8
31 Depreciation Expense—Machinery Accumulated Depreciation—Machinery
2 4 0 0 00
9
2 4 0 0 00
10
11
11
12
12
13
13
14
14
15
15
16
16
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CRITICAL THINKING PROBLEM 6.1 (continued) 4 PAGE __________
GENERAL JOURNAL DATE
POST. REF.
DESCRIPTION
DEBIT
CREDIT
Closing Entries
1 2
2010
3
Dec.
1 2
31 Fees Income
165 0 0 0 00
Income Summary
4
3
165 0 0 0 00
5
4 5
31 Income Summary
6
39 9 6 0 00
6
7
Supplies Expense
7 2 0 0 00
7
8
Insurance Expense
4 8 0 0 00
8
9
Salaries Expense
22 2 0 0 00
9
10
Depreciation Expense—Machinery
2 4 0 0 00
10
11
Utilities Expense
3 3 6 0 00
11
12
12
31 Income Summary
13
125 0 4 0 00
Sarah Palmer, Capital
14
13
125 0 4 0 00
15
14 15
31 Sarah Palmer, Capital
16
12 0 0 0 00
Sarah Palmer, Drawing
17
16
12 0 0 0 00
18
17 18
The Style Shop Postclosing Trial Balance December 31, 2010 ACCOUNT NAME
DEBIT
Cash
81 6 0 0 00
Accounts Receivable
18 0 0 0 00
Supplies
7 2 0 0 00
Prepaid Insurance Machinery
16 8 0 0 00 168 0 0 0 00
Accumulated Depreciation—Machinery
2 4 0 0 00
Accounts Payable
27 0 0 0 00
Sarah Palmer, Capital Totals
Analyze:
164
CREDIT
262 2 0 0 00 291 6 0 0 00
291 6 0 0 00
The net income would be $134,640.
■ Chapter 6
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CRITICAL THINKING PROBLEM 6.2 1. Reed made the following errors preparing the closing entries: a. Accumulated Depreciation and Accounts Payable are permanent accounts that continue from accounting period to accounting period and, consequently, are not closed. b. The Drawing account is not an expense account to be closed to Income Summary but is a reduction of equity and is closed directly to the Capital account.
Wilson Reed closed accounts based on what kind of balance they had (debit/credit) rather than looking at the type of account (permanent/temporary) they were. Only temporary, or nominal, accounts are closed.
2. GENERAL JOURNAL DATE 1
2010
2
Dec.
DESCRIPTION
PAGE __________ POST. REF.
DEBIT
CREDIT 1
31 James Walker, Capital
3
Accumulated Depreciation
4
Accounts Payable
20 7 5 0 00
2
4 2 5 0 00
3
16 5 0 0 00
4
To correct errors made in closing entries
5
5
6
6
3. The proof of this entry is: Fees Income
49,000
Expenses: Salaries Expense
39,000
Supplies Expense
2,500
Depreciation Expense
1,200
42,700
Net Income
6,300
Withdrawals
(3,500)
Increase in Capital
2,800
Capital, Beginning
25,000
Capital, Ending
27,800
Corrected balance per Reed’s entries
48,550
Less debit from correcting entry
(20,750)
Corrected ending Capital balance
27,800
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CRITICAL THINKING PROBLEM 6.2 (continued) Note: It is not necessary to make an entry to correct the closing of the Drawing account to the Income Summary account. Closing the Drawing account to the Income Summary account, which in turn was closed to the Capital account, results in reducing the Capital account by the amount of the withdrawals. So, while incorrect, Reed’s entry with regard to Drawing achieves the correct end result.
The balance of the Capital account after closing entries have been posted must agree with the ending Capital balance as shown. Posting the entry closing the Income Summary account increases the Capital account by the amount of the net income (or decreases it by the amount of a net loss), while posting the entry closing the Drawing account decreases the Capital account. These postings reflect the same changes to Capital that are shown on the statement of owner’s equity and on the balance sheet, and therefore, the ending Capital amount must be the same for both.
Note that the errors Reed made in preparing the closing entries would not be revealed by the postclosing trial balance. Since each entry Reed made had equal debits and credits, the postclosing trial balance would be in balance. The errors would not become evident until the next year when postings were made to the Accumulated Depreciation and Accounts Payable accounts or when the ledger account balances were compared to the balance sheet amounts.
Business Connections Managerial Focus: 1. No. A thorough analysis of the components of the income statement would reveal how costs directly impact net income. The balance sheet helps determine the amount of the firm’s assets and its liquidity, liabilities, and equity. 2. Current assets compared with current liabilities. 3. Timely preparation of financial statements support future planning, prompt payment of debts, developing effective credit policies. 4. The income statement might help determine the adequacy of profit, how to improve revenue and hold down expenses, how to reduce expenses without decreasing revenue, and how to even out the business operating cycle. Balance sheet data might influence decisions concerning growth of equity, the return on investment, adequacy of the firm’s assets, whether collections on accounts receivable should be accelerated, and whether more capital is needed.
Ethical Dilemma: You should wait to verify the invoice is an actual invoice. At the end of the year, Miscellaneous Expense will be closed and the $1,000 expense will be in the previous year and not given the verification it so badly needs.
166
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Streetwise: 1. Answers will vary, but permanent accounts may include Cash and Cash Equivalents, Short-Term Investments, Receivables, etc. Temporary accounts include Sales, Selling and Store Operating Expenses, Interest and Investment Income. 2. Dr. Inc. Summ., $20,110 million; Cr. Selling, General and Administrative, $18,348 million; credit Depreciation and Amortization, $1,762 million.
Financial Statement Analysis: 1. Dr. Inc. Summ., $7,440,000,000; Dr. Gain on Insurance Recoveries, $168,000,000; Cr. Labor and Fringe, $2,922,000,000; Cr. Materials, Supplies, and Other $1,889,000; Cr. Conrail Fees, Rents, and Services, $75,000,000; Cr. Inland Trans., $242,000,000; Cr. Depreciation, $856,000,000; Cr. Fuel, $1,112,000,000; Cr. Equipment & Other Rents, $512,000,000 2. Dr. Intermodal, $1,412,000,000; Dr. Rail, $8,154,000,000; Cr. Inc. Summ., $9,566,000,000 Analyze Online: Answers will vary depending on the year.
Extending the Thought: Answers will vary. Students may suggest that skipping the preparation of the worksheet will increase the chance for errors in the accounting records.
Business Communication: Students’ reports will vary. Students should demonstrate an understanding of the types of accounts that should be closed at the end of an accounting period.
Team Work: 1) Analyze transactions, 2) journalize the data about transactions, 3) post the data about transactions, 4) prepare a worksheet, 5) prepare financial statements, 6) record adjusting entries, 7) record closing entries, 8) prepare a postclosing trial balance, and 9) interpret the financial information.
Internet Connection: 1. Requirements Experience: At least 2 years full-time experience or the part-time or freelance equivalent. 2. Examination: Candidates must pass a 4-part national examination, including 2 parts given at any Prometric Test Center (there are over 300 nationwide). 3. Code of Ethics: Applicants must sign a Code of Ethics.
Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
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Chapter 6 Practice Test Answer Key Part A True-False 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
168
■ Chapter 6
F F T F T F T F F T
Part B Matching 1. 2. 3. 4. 5.
d e c b a
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MINI-PRACTICE SET
1
Service Business Accounting Cycle
3 PAGE __________
GENERAL JOURNAL DATE 1
2011
2
Jan.
3
DESCRIPTION
POST. REF.
DEBIT
CREDIT 1
2 Supplies
121
Cash
101
3 0 0 0 00
2
3 0 0 0 00
Bought supplies for cash, Check 1015
4
4
5 6 7
5
2 Prepaid Insurance Cash
134
4 8 0 0 00
101
6
4 8 0 0 00
Purchased one year of insurance, Check 1016
8
11 12
9
7 Cash
101
15 0 0 0 00
10
Accounts Receivable
111
1 8 0 0 00
11
Fees Income
401
16 8 0 0 00
Performed services for cash and on account
13
16
14
12 Cash
101
Accounts Receivable
1 5 0 0 00
111
15
1 5 0 0 00
Received cash on account
17
20
18
12 Advertising Expense Cash
526
2 1 5 0 00
101
19
2 1 5 0 00
Paid for advertising on radio, Check 1017
21
24
22
13 Cash
101
Accounts Receivable
2 2 5 0 00
111
23
2 2 5 0 00
Received cash on account
25
28 29
24 25
26 27
20 21
22 23
16 17
18 19
12 13
14 15
7 8
9 10
3
26
14 Cash
101
Supplies
121
2 7 5 00
27
2 7 5 00
Returned damaged supplies for cash refund
28 29
30
30
31
31
32
32
33
33
34
34
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Mini-Practice Set 1 ■
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MINI-PRACTICE SET 1 (continued) 4 PAGE __________
GENERAL JOURNAL DATE 1
2011
2
Jan.
3 4
POST. REF.
DESCRIPTION
DEBIT
CREDIT 1
15 Cash
101
18 2 5 0 00
2
Accounts Receivable
111
2 3 7 5 00
3
Fees Income
401
20 6 2 5 00
Performed services for cash and on account
5
5
6 7 8
6
20 Supplies
121
Accounts Payable
1 8 0 0 00
202
7
1 8 0 0 00
Bought supplies on account
9
12 13
10
20 Cash
101
9 0 5 0 00
11
Accounts Receivable
111
5 8 5 0 00
12
Fees Income
401
14 9 0 0 00
Performed services for cash and on account
14
17
15
20 Cash
101
Accounts Receivable
1 7 5 0 00
111
16
1 7 5 0 00
Received cash on account
18
21
17 18
19 20
13 14
15 16
8 9
10 11
4
19
21 Maintenance Expense
529
Cash
4 2 5 0 00
101
20
4 2 5 0 00
21
22
Paid cash for equipment maintenance,
22
23
Check 1018
23
24 25 26
24
22 Advertising Expense
526
Cash
2 7 5 0 00
101
25
2 7 5 0 00
Paid cash for newspaper ads, Check 1019
27
27
28 29 30
28
23 Telephone Expense
532
Cash
4 1 0 00
101
29
4 1 0 00
Paid monthly telephone bill, Check 1020
31
34 35
30 31
32 33
26
32
26 Cash
101
Accounts Receivable Received cash on account
111
4 5 7 0 00
33
4 5 7 0 00
34 35
36
36
37
37
38
38
39
39
170
■ Mini-Practice Set 1
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MINI-PRACTICE SET 1 (continued) 5 PAGE __________
GENERAL JOURNAL DATE 1
2011
2
Jan.
3
DESCRIPTION
POST. REF.
DEBIT
CREDIT 1
27 Accounts Payable
202
Cash
101
2 0 0 0 00
2
2 0 0 0 00
Made payment to creditor, Check 1021
4
4
5
5
6
28 Utilities Expense
514
7
Cash
101
1 0 5 0 00
6
1 0 5 0 00
Paid monthly utility bill, Check 1022
8
11 12
9
29 Cash
101
14 0 5 0 00
10
Accounts Receivable
111
2 2 5 0 00
11
Fees Income
401
16 3 0 0 00
Performed services for cash and on account
13
14
15
31 Salaries Expense
511
16
Cash
101
15 5 0 0 00
15
15 5 0 0 00
Paid monthly salaries, Checks 1023–1027
17
16 17
18
20
12 13
14
19
7 8
9 10
3
18
31 Carolyn Wells, Drawing Cash
302
6 0 0 0 00
101
19
6 0 0 0 00
20
21
Owner withdrew cash for personal use,
21
22
Check 1028
22
23 24 25
23
31 Maintenance Expense Cash
529
1 0 5 0 00
101
24
1 0 5 0 00
25
26
Paid for monthly maintenance services,
26
27
Check 1029
27
28 29
28
31 Equipment
141
10 5 0 0 00
29
30
Cash
101
5 5 0 0 00
30
31
Accounts Payable
202
5 0 0 0 00
31
32
Bought equipment for cash and on account,
32
33
Check 1030
33
34 35 36 37 38
34
31 Cash
101
2 8 5 0 00
35
Accounts Receivable
111
1 4 5 0 00
36
Fees Income
401
4 3 0 0 00
Performed services for cash and on account
38
39
Copyright © 2009 The McGraw-Hill Companies. All rights reserved.
37
39
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MINI-PRACTICE SET 1 (continued) 6 PAGE __________
GENERAL JOURNAL DATE
POST. REF.
DESCRIPTION
DEBIT
CREDIT
Adjusting Entries
1 2
2011
3
Jan.
4
1 2
31 Supplies Expense
517
Supplies
3 5 2 5 00
121
3
3 5 2 5 00
5 6 7
5
31 Insurance Expense
535
Prepaid Insurance
4 0 0 00
134
6
4 0 0 00
8 9 10
13
31 Rent Expense
520
Prepaid Rent
4 0 0 0 00
137
9
4 0 0 0 00
31 Depreciation Expense—Equipment
523
Accumulated Depreciation—Equipment
1 8 3 00
142
12
1 8 3 00
Closing Entries
15
16
16
31 Fees Income
401
Income Summary
72 9 2 5 00
309
17
72 9 2 5 00
19 20
13 14
15
18
10 11
14
17
7 8
11 12
4
18 19
31 Income Summary
309
35 2 6 8 00
20
21
Salaries Expense
511
15 5 0 0 00
21
22
Utilities Expense
514
1 0 5 0 00
22
23
Supplies Expense
517
3 5 2 5 00
23
24
Rent Expense
520
4 0 0 0 00
24
25
Depreciation Expense—Equipment
523
1 8 3 00
25
26
Advertising Expense
526
4 9 0 0 00
26
27
Maintenance Expense
529
5 3 0 0 00
27
28
Telephone Expense
532
4 1 0 00
28
29
Insurance Expense
535
4 0 0 00
29
30 31 32
30
31 Income Summary Carolyn Wells, Capital
309
37 6 5 7 00
301
31
37 6 5 7 00
33 34 35
32 33
31 Carolyn Wells, Capital Carolyn Wells, Drawing
301 302
6 0 0 0 00
34
6 0 0 0 00
35
36
36
37
37
38
38
39
39
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MINI-PRACTICE SET 1 (continued) GENERAL LEDGER Cash ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
101 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
1 Balance
✔
2
J3
3 0 0 0 00
108 3 5 0 00
2
J3
4 8 0 0 00
103 5 5 0 00
7
J3
15 0 0 0 00
118 5 5 0 00
12
J3
1 5 0 0 00
120 0 5 0 00
12
J3
13
J3
2 2 5 0 00
120 1 5 0 00
14
J3
2 7 5 00
120 4 2 5 00
15
J4
18 2 5 0 00
138 6 7 5 00
20
J4
9 0 5 0 00
147 7 2 5 00
20
J4
1 7 5 0 00
149 4 7 5 00
21
J4
4 2 5 0 00
145 2 2 5 00
22
J4
2 7 5 0 00
142 4 7 5 00
23
J4
4 1 0 00
142 0 6 5 00
26
J4
27
J5
2 0 0 0 00
144 6 3 5 00
28
J5
1 0 5 0 00
143 5 8 5 00
29
J5
31
J5
15 5 0 0 00
142 1 3 5 00
31
J5
6 0 0 0 00
136 1 3 5 00
31
J5
1 0 5 0 00
135 0 8 5 00
31
J5
5 5 0 0 00
129 5 8 5 00
31
J5
111 3 5 0 00
2 1 5 0 00
4 5 7 0 00
146 6 3 5 00
14 0 5 0 00
157 6 3 5 00
2 8 5 0 00
132 4 3 5 00
Accounts Receivable ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
117 9 0 0 00
CREDIT
111 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
1 Balance
✔
7
J3
12
J3
1 5 0 0 00
5 3 0 0 00
13
J3
2 2 5 0 00
3 0 5 0 00
15
J4
2 3 7 5 00
5 4 2 5 00
20
J4
5 8 5 0 00
11 2 7 5 00
20
J4
1 7 5 0 00
9 5 2 5 00
26
J4
4 5 7 0 00
4 9 5 5 00
29
J5
2 2 5 0 00
7 2 0 5 00
31
J5
1 4 5 0 00
8 6 5 5 00
5 0 0 0 00 1 8 0 0 00
Copyright © 2009 The McGraw-Hill Companies. All rights reserved.
6 8 0 0 00
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MINI-PRACTICE SET 1 (continued) GENERAL LEDGER Supplies ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
121 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
1 Balance
✔
2
J3
14
J3
20
J4
31 Adjusting
J6
1 0 0 0 00 3 0 0 0 00
4 0 0 0 00 2 7 5 00
1 8 0 0 00
5 5 2 5 00 3 5 2 5 00
Prepaid Insurance ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
3 7 2 5 00
CREDIT
2 0 0 0 00
134 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
2
J3
31 Adjusting
4 8 0 0 00
J6
4 8 0 0 00 4 0 0 00
Prepaid Rent ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
4 4 0 0 00
137 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
1 Balance
✔
31 Adjusting
J6
4 0 0 0 00 4 0 0 0 00
Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
141 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
1 Balance 31
✔ J5
11 0 0 0 00 10 5 0 0 00
21 5 0 0 00
Accumulated Depreciation—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
142 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
174
1 Balance
✔
31 Adjusting
J6
■ Mini-Practice Set 1
1 8 3 00 1 8 3 00
3 6 6 00
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MINI-PRACTICE SET 1 (continued) GENERAL LEDGER Accounts Payable ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
202 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
1 Balance
✔
20
J4
27
J5
31
J5
3 5 0 0 00 1 8 0 0 00 2 0 0 0 00
3 3 0 0 00 5 0 0 0 00
Carolyn Wells, Capital ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
5 3 0 0 00
DEBIT
CREDIT
8 3 0 0 00
301 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
1 Balance
✔
31 Closing
J6
31 Closing
J6
128 6 6 7 00 37 6 5 7 00 6 0 0 0 00
160 3 2 4 00
Carolyn Wells, Drawing ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
166 3 2 4 00
DEBIT
CREDIT
302 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
31
J5
31 Closing
J6
6 0 0 0 00
6 0 0 0 00 6 0 0 0 00
Income Summary ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
309 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
31 Closing
J6
72 9 2 5 00
31 Closing
J6
35 2 6 8 00
37 6 5 7 00
31 Closing
J6
37 6 5 7 00
– 0 – 00
Copyright © 2009 The McGraw-Hill Companies. All rights reserved.
72 9 2 5 00
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MINI-PRACTICE SET 1 (continued) GENERAL LEDGER Fees Income ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
401 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
7
J3
16 8 0 0 00
16 8 0 0 00
15
J4
20 6 2 5 00
37 4 2 5 00
20
J4
14 9 0 0 00
52 3 2 5 00
29
J5
16 3 0 0 00
68 6 2 5 00
31
J5
4 3 0 0 00
72 9 2 5 00
31 Closing
J6
72 9 2 5 00
– 0 – 00
Salaries Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
511 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
31
J5
31 Closing
J6
15 5 0 0 00
15 5 0 0 00 15 5 0 0 00
Utilities Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
514 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
28
J5
31 Closing
J6
1 0 5 0 00
1 0 5 0 00 1 0 5 0 00
Supplies Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
517 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
31 Adjusting
J6
31 Closing
J6
3 5 2 5 00
3 5 2 5 00 3 5 2 5 00
Rent Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
520 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
176
31 Adjusting
J6
31 Closing
J6
■ Mini-Practice Set 1
4 0 0 0 00
4 0 0 0 00 4 0 0 0 00
– 0 – 00
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MINI-PRACTICE SET 1 (continued) GENERAL LEDGER Depreciation Expense—Equipment ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
523 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
31 Adjusting
J6
31 Closing
J6
1 8 3 00
1 8 3 00 1 8 3 00
Advertising Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
526 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
12
J3
2 1 5 0 00
2 1 5 0 00
22
J4
2 7 5 0 00
4 9 0 0 00
31 Closing
J6
4 9 0 0 00
Maintenance Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
529 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
21
J4
4 2 5 0 00
4 2 5 0 00
31
J5
1 0 5 0 00
5 3 0 0 00
31 Closing
J6
5 3 0 0 00
Telephone Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
532 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
23
J4
31 Closing
J6
4 1 0 00
4 1 0 00 4 1 0 00
Insurance Expense ACCOUNT ________________________________________________________________ DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
– 0 – 00
535 ACCOUNT NO. ______________ BALANCE DEBIT
CREDIT
2011 Jan.
31 Adjusting
J6
31 Closing
J6
4 0 0 00
Copyright © 2009 The McGraw-Hill Companies. All rights reserved.
4 0 0 00 4 0 0 00
– 0 – 00
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MINI-PRACTICE SET 1 (continued) Wells’ Consulting Services Worksheet Month Ended January 31, 2011 ACCOUNT NAME
TRIAL BALANCE DEBIT CREDIT
ADJUSTMENTS DEBIT CREDIT
1
Cash
132 4 3 5 00
2
Accounts Receivable
8 6 5 5 00
3
Supplies
5 5 2 5 00
(a) 3 5 2 5 00
4
Prepaid Rent
4 0 0 0 00
(b) 4 0 0 0 00
5
Prepaid Insurance
4 8 0 0 00
(c)
4 0 0 00
6
Equipment
7
Accumulated Depreciation—Equipment
(d)
1 8 3 00
8
Accounts Payable
9
Carolyn Wells, Capital
21 5 0 0 00 1 8 3 00 8 3 0 0 00 128 6 6 7 00
10
Carolyn Wells, Drawing
6 0 0 0 00
11
Income Summary
12
Fees Income
13
Salaries Expense
15 5 0 0 00
14
Utilities Expense
1 0 5 0 00
15
Supplies Expense
(a) 3 5 2 5 00
16
Rent Expense
(b) 4 0 0 0 00
17
Depreciation Expense—Equipment
(d)
1 8 3 00
18
Insurance Expense
(c)
4 0 0 00
19
Advertising Expense
20
Telephone Expense
21
Maintenance Expense
22
Totals
23
Net Income
72 9 2 5 00
4 9 0 0 00 4 1 0 00 5 3 0 0 00 210 0 7 5 00
210 0 7 5 00
8 1 0 8 00
8 1 0 8 00
24 25 26 27 28 29 30 31 32 33 34 35 36 37
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MINI-PRACTICE SET 1 (continued)
ADJUSTED TRIAL BALANCE DEBIT CREDIT
INCOME STATEMENT DEBIT CREDIT
BALANCE SHEET DEBIT CREDIT
132 4 3 5 00
132 4 3 5 00
1
8 6 5 5 00
8 6 5 5 00
2
2 0 0 0 00
2 0 0 0 00
3
– 0 – 00
– 0 – 00
4
4 4 0 0 00
4 4 0 0 00
5
21 5 0 0 00
21 5 0 0 00
6
3 6 6 00
3 6 6 00
7
8 3 0 0 00
8 3 0 0 00
8
128 6 6 7 00
128 6 6 7 00
9
6 0 0 0 00
6 0 0 0 00
10 11
72 9 2 5 00
72 9 2 5 00
12
15 5 0 0 00
15 5 0 0 00
13
1 0 5 0 00
1 0 5 0 00
14
3 5 2 5 00
3 5 2 5 00
15
4 0 0 0 00
4 0 0 0 00
16
1 8 3 00
1 8 3 00
17
4 0 0 00
4 0 0 00
18
4 9 0 0 00
4 9 0 0 00
19
4 1 0 00
4 1 0 00
20
5 3 0 0 00
5 3 0 0 00
21
210 2 5 8 00
210 2 5 8 00
35 2 6 8 00
72 9 2 5 00
174 9 9 0 00
37 6 5 7 00 72 9 2 5 00
72 9 2 5 00
174 9 9 0 00
137 3 3 3 00
22
37 6 5 7 00
23
174 9 9 0 00
24 25 26 27 28 29 30 31 32 33 34 35 36 37
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MINI-PRACTICE SET 1 (continued) Wells’ Consulting Services Income Statement Month Ended January 31, 2011 Revenue Fees Income
72 9 2 5 00
Expenses Salaries Expense
15 5 0 0 00
Utilities Expense
1 0 5 0 00
Supplies Expense
3 5 2 5 00
Rent Expense
4 0 0 0 00
Depreciation Expense—Equipment
1 8 3 00
Insurance Expense
4 0 0 00
Advertising Expense
4 9 0 0 00
Telephone Expense
4 1 0 00
Maintenance Expense
5 3 0 0 00
Total Expenses
35 2 6 8 00
Net Income
37 6 5 7 00
Wells’ Consulting Services Statement of Owner’s Equity Month Ended January 31, 2011 Carolyn Wells, Capital, January 1, 2011 Net Income for January Less Withdrawals for January Increase in Capital for January Carolyn Wells, Capital, January 31, 2011
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128 6 6 7 00 37 6 5 7 00 6 0 0 0 00 31 6 5 7 00 160 3 2 4 00
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MINI-PRACTICE SET 1 (continued) Wells’ Consulting Services Balance Sheet January 31, 2011 Assets Cash
132 4 3 5 00
Accounts Receivable
8 6 5 5 00
Supplies
2 0 0 0 00
Prepaid Insurance
4 4 0 0 00
Equipment
21 5 0 0 00
Less Accumulated Depreciation—Equipment
3 6 6 00
Total Assets
21 1 3 4 00 168 6 2 4 00
Liabilities and Owner’s Equity Liabilities Accounts Payable
8 3 0 0 00
Owner’s Equity Carolyn Wells, Capital
160 3 2 4 00
Total Liabilities and Owner’s Equity
168 6 2 4 00
Wells’ Consulting Services Postclosing Trial Balance January 31, 2011 ACCOUNT NAME
Cash
DEBIT
132 4 3 5 00
Accounts Receivable
8 6 5 5 00
Supplies
2 0 0 0 00
Prepaid Insurance
4 4 0 0 00
Equipment
21 5 0 0 00
Accumulated Depreciation—Equipment
3 6 6 00
Accounts Payable
8 3 0 0 00
Carolyn Wells, Capital Totals
Copyright © 2009 The McGraw-Hill Companies. All rights reserved.
CREDIT
160 3 2 4 00 168 9 9 0 00
168 9 9 0 00
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MINI-PRACTICE SET 1 (continued) Analyze:
a.
Total assets increased by $36,457 ($168,624 – $132,167). Total liabilities increased by $4,800 ($8,300 – $3,500). Owner’s capital increased by $31,657 ($160,324 – 128,667).
b.
The balance of Cash increased by $21,085 ($132,435 – $111,350). The balance of Accounts Receivable increased by $3,655 ($8,655 – $5,000).
c.
Yes. The firm’s financial position improved through the increases in capital of $31,657 ($160,324 – $128,667).
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