CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE
1
Problems
Prob. 4–1A
1.DYNAMITE LAUNDRY
Work Sheet
For the Year Ended July 31, 2006
AdjustedIncomeBalance
Trial BalanceAdjustmentsTrial BalanceStatementSheet
Account TitleDr.Cr.Dr.Cr.Dr.Cr.Dr.Cr.Dr.Cr.
1Cash...... 2,900...... 2,900...... 2,900...... 1
2Laundry Supplies.....7,500...... (c)5,7501,750...... 1,750...... 2
3Prepaid Insurance.....4,800...... (d)2,4002,400...... 2,400...... 3
4Laundry Equipment...109,050...... 109,050...... 109,050...... 4
5Accum. Depreciation...... 41,100...... (b)6,800...... 47,900...... 47,9005
6Accounts Payable...... 6,100...... 6,100...... 6,1006
7Capital Stock...... 10,000...... 10,000...... 10,0007
8Retained Earnings...... 27,800...... 27,800...... 27,8008
9Dividends...... 2,000...... 2,000...... 2,000...... 9
10Laundry Revenue...... 165,000...... 165,000...... 165,000...... 10
11Wages Expense...... 71,400...... (a)1,200...... 72,600...... 72,600...... 11
12Rent Expense...... 36,000...... 36,000...... 36,000...... 12
13Utilities Expense...... 13,650...... 13,650...... 13,650...... 13
14Misc. Expense...... 2,700...... 2,700...... 2,700...... 14
15250,000250,00015
16Wages Payable....... (a)1,200...... 1,200...... 1,20016
17Depreciation Expense...... (b)6,800...... 6,800...... 6,800...... 17
18Laundry Supp. Expense...... (c)5,750...... 5,750...... 5,750...... 18
19Insurance Expense...... (d)2,400...... 2,400...... 2,400...... 19
2016,15016,150258,000258,000139,900165,000118,10093,00020
21Net income...... 25,100...... 25,10021
22165,000165,000118,100118,10022
1
Prob. 4–1AContinued
2.DYNAMITE LAUNDRY
Income Statement
For the Year Ended July 31, 2006
Laundry revenue...... $165,000
Operating expenses:
Wages expense...... $72,600
Rent expense...... 36,000
Utilities expense...... 13,650
Depreciation expense...... 6,800
Laundry supplies expense...... 5,750
Insurance expense...... 2,400
Miscellaneous expense...... 2,700
Total operating expenses...... 139,900
Net income...... $ 25,100
DYNAMITE LAUNDRY
Retained Earnings Statement
For the Year Ended July 31, 2006
Retained earnings, August 1, 2005...... $27,800
Net income for the year...... $25,100
Less dividends...... 2,000
Increase in retained earnings...... 23,100
Retained earnings, July 31, 2006...... $ 50,900
DYNAMITE LAUNDRY
Balance Sheet
July 31, 2006
AssetsLiabilities
Current assets: Current liabilities:
Cash...... $ 2,900 ...... Accounts payable $6,100
Laundry supplies.. 1,750 Wages payable.... 1,200
Prepaid insurance.. 2,400 ...Total liabilities $ 7,300
Total current assets $ 7,050
Property, plant, and Stockholders’ Equity
equipment: Capital stock...... $10,000
Laundry equipment $109,050 Retained earnings 50,900 60,900
Less accum. depr. 47,900 ...... 61,150 Total liabilities and
Total assets...... $ 68,200 stockholders’ equity $ 68,200
Prob. 4–1AConcluded
3.
Adjusting Entries
2006
July31Wages Expense...... 1,200
Wages Payable...... 1,200
31Depreciation Expense...... 6,800
Accumulated Depreciation...... 6,800
31Laundry Supplies Expense...... 5,750
Laundry Supplies...... 5,750
31Insurance Expense...... 2,400
Prepaid Insurance...... 2,400
4.
Closing Entries
2006
July31Laundry Revenue...... 165,000
Income Summary...... 165,000
31Income Summary...... 139,900
Wages Expense...... 72,600
Rent Expense...... 36,000
Utilities Expense...... 13,650
Miscellaneous Expense...... 2,700
Depreciation Expense...... 6,800
Laundry Supplies Expense...... 5,750
Insurance Expense...... 2,400
31Income Summary...... 25,100
Retained Earnings...... 25,100
31Retained Earnings...... 2,000
Dividends...... 2,000
Prob. 4–2A
1.Closing Entries
2006
Aug.31Service Fees Earned...... 175,000
Rent Revenue...... 1,500
Income Summary...... 176,500
31Income Summary...... 116,000
Salary Expense...... 73,000
Depreciation Expense—Equipment...... 9,500
Rent Expense...... 8,500
Supplies Expense...... 7,650
Utilities Expense...... 5,300
Depreciation Expense—Buildings...... 5,200
Taxes Expense...... 4,150
Insurance Expense...... 1,000
Miscellaneous Expense...... 1,700
31Income Summary...... 60,500
Retained Earnings...... 60,500
31Retained Earnings...... 10,000
Dividends...... 10,000
2.
THE XAVIER COMPANY
Retained Earnings Statement
For the Year Ended August 31, 2006
Retained earnings, September 1, 2005...... $ 98,500
Net income for the year...... $60,500
Less dividends...... 10,000
Increase in retained earnings...... 50,500
Retained earnings, August 31, 2006...... $149,000
3.$5,000 net loss. The $15,000 decrease is caused by the $10,000 dividends and a $5,000 net loss.
1
Prob. 4–4A
1.HERITAGE COMPANY
Work Sheet
For the Year Ended April 30, 2006
AdjustedIncomeBalance
Trial BalanceAdjustmentsTrial BalanceStatementSheet
Account TitleDr.Cr.Dr.Cr.Dr.Cr.Dr.Cr.Dr.Cr.
1Cash...... 3,200...... 3,200...... 3,200...... 1
2Accounts Receivable..10,500...... (a)2,800...... 13,300...... 13,300...... 2
3Prepaid Insurance.....1,800...... (b)4501,350...... 1,350...... 3
4Supplies...... 1,350...... (c)700650...... 650...... 4
5Land...... 50,000...... 50,000...... 50,000...... 5
6Building...... 136,500...... 136,500...... 136,500...... 6
7Acc. Depr.—Building...... 50,700...... (d)1,620...... 52,320...... 52,3207
8Equipment...... 92,700...... 92,700...... 92,700...... 8
9Acc. Depr.—Equipment...... 36,300...... (e)3,500...... 39,800...... 39,8009
10Accounts Payable...... 6,500...... 6,500...... 6,50010
11Unearned Rent...... 3,000(g)1,500...... 1,500...... 1,50011
12Capital Stock...... 50,000...... 50,000...... 50,00012
13Retained Earnings...... 162,500...... 162,500...... 162,50013
14Dividends...... 10,000...... 10,000...... 10,000...... 14
15Fees Revenue...... 191,000...... (a)2,800...... 193,800...... 193,800...... 15
16Salaries & Wages Exp..96,200...... (f)1,800...... 98,000...... 98,000...... 16
17Advertising Expense..63,200...... 63,200...... 63,200...... 17
18Utilities Expense...... 18,000...... 18,000...... 18,000...... 18
19Repairs Expense...... 12,500...... 12,500...... 12,500...... 19
20Misc. Expense...... 4,050...... 4,050...... 4,050...... 20
21500,000500,00021
22Insurance Expense...... (b)450...... 450...... 450...... 22
23Supplies Expense...... (c)700...... 700...... 700...... 23
24Depr. Exp.—Building...... (d)1,620...... 1,620...... 1,620...... 24
25Depr. Exp.—Equip...... (e)3,500...... 3,500...... 3,500...... 25
26Sal. & Wages Payable...... (f)1,800...... 1,800...... 1,80026
27Rent Revenue...... (g)1,500...... 1,500...... 1,500...... 27
2812,37012,370509,720509,720202,020195,300307,700314,42028
29Net loss...... 6,7206,720...... 29
30202,020202,020314,420314,42030
1
Prob. 4–4AContinued
2.
Accounts Receivable...... 2,800
Fees Revenue...... 2,800
Insurance Expense...... 450
Prepaid Insurance...... 450
Supplies Expense...... 700
Supplies...... 700
Depreciation Expense—Building...... 1,620
Accumulated Depreciation—Building...... 1,620
Depreciation Expense—Equipment...... 3,500
Accumulated Depreciation—Equipment...... 3,500
Salaries and Wages Expense...... 1,800
Salaries and Wages Payable...... 1,800
Unearned Rent...... 1,500
Rent Revenue...... 1,500
Prob. 4–4AContinued
3.
HERITAGE COMPANY
Adjusted Trial Balance
April 30, 2006
Cash...... 3,200
Accounts Receivable...... 13,300
Prepaid Insurance...... 1,350
Supplies...... 650
Land...... 50,000
Building...... 136,500
Accumulated Depreciation—Building...... 52,320
Equipment...... 92,700
Accumulated Depreciation—Equipment...... 39,800
Accounts Payable...... 6,500
Unearned Rent...... 1,500
Salaries and Wages Payable...... 1,800
Capital Stock...... 50,000
Retained Earnings...... 162,500
Dividends...... 10,000
Fees Revenue...... 193,800
Rent Revenue...... 1,500
Salaries and Wages Expense...... 98,000
Advertising Expense...... 63,200
Utilities Expense...... 18,000
Repairs Expense...... 12,500
Depreciation Expense—Equipment...... 3,500
Insurance Expense...... 450
Supplies Expense...... 700
Depreciation Expense—Building...... 1,620
Miscellaneous Expense...... 4,050
509,720 509,720
Prob. 4–4AContinued
4.
HERITAGE COMPANY
Income Statement
For the Year Ended April 30, 2006
Revenues:
Fees revenue...... $193,800
Rent revenue...... 1,500
Total revenues...... $195,300
Operating expenses:
Salaries and wages expense...... $ 98,000
Advertising expense...... 63,200
Utilities expense...... 18,000
Repairs expense...... 12,500
Depreciation expense—equipment...... 3,500
Depreciation expense—building...... 1,620
Supplies expense...... 700
Insurance expense...... 450
Miscellaneous expense...... 4,050
Total operating expenses...... 202,020
Net loss...... $ 6,720
5.
HERITAGE COMPANY
Retained Earnings Statement
For the Year Ended April 30, 2006
Retained earnings, May 1, 2005...... $162,500
Net loss for the year...... $ (6,720)
Less dividends...... 10,000
Decrease in retained earnings...... (16,720)
Retained earnings, April 30, 2006...... $145,780
1
Prob. 4–4AConcluded
6.
HERITAGE COMPANY
Balance Sheet
April 30, 2006
AssetsLiabilities
Current assets:...... Current liabilities:
Cash...... $3,200Accounts payable...... $6,500
Accounts receivable...... 13,300Salaries and wages
Prepaid insurance...... 1,350payable...... 1,800
Supplies...... 650Unearned rent...... 1,500
Total current assets...... $18,500Total liabilities...... $9,800
Property, plant, and equipment:
Land...... $50,000Stockholders’ Equity
Building...... $136,500Capital stock...... $ 50,000
Less accum. depreciation...... 52,32084,180Retained earnings...... 145,780195,780
Equipment...... $92,700
Less accum. depreciation....39,80052,900
Total property, plant, and
equipment...... 187,080Total liabilities and
Total assets...... $205,580stockholders’ equity.....$205,580
7.$195,300 ÷ $205,580 = 95%
1
Prob. 4–5A
1., 3., and 6.
Cash11
Post.Balance
DateItemRef.Dr.Cr.Dr.Cr.
2006
Dec.31Balance...... ...... 2,825......
Supplies13
2006
Dec.31Balance...... ...... 5,820......
31Adjusting...... 26...... 4,5701,250......
Prepaid Insurance14
2006
Dec.31Balance...... ...... 2,500......
31Adjusting...... 26...... 1,0001,500......
Equipment16
2006
Dec.31Balance...... ...... 44,200......
Accumulated Depreciation—Equipment17
2006
Dec.31Balance...... ...... 12,050
31Adjusting...... 26...... 5,080...... 17,130
Trucks18
2006
Dec.31Balance...... ...... 45,000......
Accumulated Depreciation—Trucks19
2006
Dec.31Balance...... ...... 27,100
31Adjusting...... 26...... 3,500...... 30,600
Prob. 4–5AContinued
Accounts Payable21
Post.Balance
DateItemRef.Dr.Cr.Dr.Cr.
2006
Dec.31Balance...... ...... 2,015
Wages Payable22
2006
Dec.31Adjusting...... 26...... 900...... 900
Capital Stock31
2006
Dec.31Balance...... ...... 12,000
Retained Earnings32
2006
Dec.1Balance...... ...... 20,885
31Closing...... 27...... 16,245...... 37,130
31Closing...... 275,000...... 32,130
Dividends33
2006
Dec.31Balance...... ...... 5,000......
31Closing...... 27...... 5,000——
Income Summary34
2006
Dec.31Closing...... 27...... 75,950...... 75,950
31Closing...... 2759,705...... 16,245
31Closing...... 2716,245...... ——
Service Revenue41
2006
Dec.31Balance...... ...... 75,950
31Closing...... 2775,950...... ——
Prob. 4–5AContinued
Wages Expense51
Post.Balance
DateItemRef.Dr.Cr.Dr.Cr.
2006
Dec.31Balance...... ...... 28,010......
31Adjusting...... 26900...... 28,910......
31Closing...... 27...... 28,910——
Supplies Expense52
2006
Dec.31Adjusting...... 264,570...... 4,570......
31Closing...... 27...... 4,570——
Rent Expense53
2006
Dec.31Balance...... ...... 8,100......
31Closing...... 27...... 8,100——
Depreciation Expense—Equipment54
2006
Dec.31Adjusting...... 265,080...... 5,080......
31Closing...... 27...... 5,080——
Truck Expense55
2006
Dec.31Balance...... ...... 6,350......
31Closing...... 27...... 6,350——
Depreciation Expense—Trucks56
2006
Dec.31Adjusting...... 263,500...... 3,500......
31Closing...... 27...... 3,500——
Insurance Expense57
2006
Dec.31Adjusting...... 261,000...... 1,000......
31Closing...... 27...... 1,000——
Miscellaneous Expense59
2006
Dec.31Balance...... ...... 2,195......
31Closing...... 27...... 2,195——
1
Prob. 4–5AContinued
2.Pablo REPAIRS
Work Sheet
For the Year Ended December 31, 2006
AdjustedIncomeBalance
Trial BalanceAdjustmentsTrial BalanceStatementSheet
Account TitleDr.Cr.Dr.Cr.Dr.Cr.Dr.Cr.Dr.Cr.
1Cash...... 2,825...... 2,825...... 2,825...... 1
2Supplies...... 5,820...... (a)4,5701,250...... 1,250...... 2
3Prepaid Insurance.....2,500...... (b)1,0001,500...... 1,500...... 3
4Equipment...... 44,200...... 44,200...... 44,200...... 4
5Acc. Depr.—Equipment...... 12,050...... (c)5,080...... 17,130...... 17,1305
6Trucks...... 45,000...... 45,000...... 45,000...... 6
7Acc. Depr.—Trucks...... 27,100...... (d)3,500...... 30,600...... 30,6007
8Accounts Payable...... 2,015...... 2,015...... 2,0158
9Capital Stock...... 12,000...... 12,000...... 12,0009
10Retained Earnings...... 20,885...... 20,885...... 20,88510
11Dividends...... 5,000...... 5,000...... 5,000...... 11
12Service Revenue...... 75,950...... 75,950...... 75,950...... 12
13Wages Expense...... 28,010...... (e)900...... 28,910...... 28,910...... 13
14Rent Expense...... 8,100...... 8,100...... 8,100...... 14
15Truck Expense...... 6,350...... 6,350...... 6,350...... 15
16Misc. Expense...... 2,195...... 2,195...... 2,195...... 16
17150,000150,00017
18Supplies Expense...... (a)4,570...... 4,570...... 4,570...... 18
19Insurance Expense...... (b)1,000...... 1,000...... 1,000...... 19
20Depr. Exp.—Equip...... (c)5,080...... 5,080...... 5,080...... 20
21Depr. Exp.—Trucks...... (d)3,500...... 3,500...... 3,500...... 21
22Wages Payable...... (e)900...... 900...... 90022
2315,05015,050159,480159,48059,70575,95099,77583,53023
24Net income...... 16,245...... 16,24524
2575,95075,95099,77599,77525
1
Prob. 4–5AContinued
3.JOURNALPage 26
Post.
DateRef.DebitCredit
Adjusting Entries
2006
Dec.31Supplies Expense...... 524,570
Supplies...... 134,570
31Insurance Expense...... 571,000
Prepaid Insurance...... 141,000
31Depreciation Expense—Equipment...... 545,080
Accumulated Depreciation—Equip....175,080
31Depreciation Expense—Trucks...... 563,500
Accumulated Depreciation—Trucks..193,500
31Wages Expense...... 51900
Wages Payable...... 22900
Prob. 4–5AContinued
4.
PABLO REPAIRS
Adjusted Trial Balance
December 31, 2006
Cash...... 2,825
Supplies...... 1,250
Prepaid Insurance...... 1,500
Equipment...... 44,200
Accumulated Depreciation—Equipment...... 17,130
Trucks...... 45,000
Accumulated Depreciation—Trucks...... 30,600
Accounts Payable...... 2,015
Wages Payable...... 900
Capital Stock...... 12,000
Retained Earnings...... 20,885
Dividends...... 5,000
Service Revenue...... 75,950
Wages Expense...... 28,910
Supplies Expense...... 4,570
Rent Expense...... 8,100
Depreciation Expense—Equipment...... 5,080
Truck Expense...... 6,350
Depreciation Expense—Trucks...... 3,500
Insurance Expense...... 1,000
Miscellaneous Expense...... 2,195
159,480 159,480
Prob. 4–5AContinued
5.
PABLO REPAIRS
Income Statement
For the Year Ended December 31, 2006
Service revenue...... $ 75,950
Operating expenses:
Wages expense...... $ 28,910
Rent expense...... 8,100
Truck expense...... 6,350
Depreciation expense—equipment...... 5,080
Supplies expense...... 4,570
Depreciation expense—trucks...... 3,500
Insurance expense...... 1,000
Miscellaneous expense...... 2,195
Total operating expenses...... 59,705
Net income...... $ 16,245
PABLO REPAIRS
Retained Earnings Statement
For the Year Ended December 31, 2006
Retained earnings, January 1, 2006...... $ 20,885
Net income for the year...... $16,245
Less dividends...... 5,000
Increase in retained earnings...... 11,245
Retained earnings, December 31, 2006...... $ 32,130
1
Prob. 4–5AContinued
PABLO REPAIRS
Balance Sheet
December 31, 2006
AssetsLiabilities
Current assets:Current liabilities:
Cash...... $2,825Accounts payable...... $2,015
Supplies...... 1,250Wages payable...... 900
Prepaid insurance...... 1,500Total liabilities...... $2,915
Total current assets...... $5,575
Property, plant, and equipment:
Equipment...... $44,200Stockholders’ Equity
Less accumulated depr...... 17,130$27,070Capital stock...... $12,000
Trucks...... $45,000Retained earnings...... 32,13044,130
Less accumulated depr...... 30,60014,400
Total property, plant, and
equipment...... 41,470Total liabilities and
Total assets...... $47,045stockholders’ equity...... $47,045
1
Prob. 4–5AConcluded
6.JOURNALPage 27
Post.
DateRef.DebitCredit
Closing Entries
2006
Dec.31Service Revenue...... 4175,950
Income Summary...... 3475,950
31Income Summary...... 3459,705
Wages Expense...... 5128,910
Supplies Expense...... 524,570
Rent Expense...... 538,100
Depreciation Expense—Equipment...545,080
Truck Expense...... 556,350
Depreciation Expense—Trucks...... 563,500
Insurance Expense...... 571,000
Miscellaneous Expense...... 592,195
31Income Summary...... 3416,245
Retained Earnings...... 3216,245
31Retained Earnings...... 325,000
Dividends...... 335,000
7.
PABLO REPAIRS
Post-Closing Trial Balance
December 31, 2006
Cash...... 2,825
Supplies...... 1,250
Prepaid Insurance...... 1,500
Equipment...... 44,200
Accumulated Depreciation—Equipment...... 17,130
Trucks...... 45,000
Accumulated Depreciation—Trucks...... 30,600
Accounts Payable...... 2,015
Wages Payable...... 900
Capital Stock...... 12,000
Retained Earnings...... 32,130
94,775 94,775
1
1