Group Work – Chapters 1-4

1.Prepare an adjusting journal entry for XYZ Co. for each of the following transactions. Assume the date is December 31, 2007, and XYZ Co. is adjusting account balances in order to prepare and distribute yearly Financial Statements.

  1. XYZ Co. borrowed $40,000 on a 8-mth note at 9% on October 1, 2007. Interest and Principal are due at June 1, 2008. Today is December 31, 2007. Prepare an adjusting entry regarding this borrowing.

Interest Expense900

Interest Payable900

  1. The Supplies asset account had a December 1, 2007 beginning balance of $1,200. During the month of December, Supplies costing $6,200 were purchased. A count of the Supplies on hand at December 31, 2007 indicates $2,900 of Supplies remain in the storeroom. Prepare an adjusting entry for supplies at December 31, 2007.

Supplies Expense4,500

Supplies (A)4,500

  1. XYZ Co. purchased Equipment last year for $25,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $3,000. XYZ Co. uses straight line depreciation. Prepare an adjusting entry for equipment at December 31, 2007.

Depreciation Expense2,200

Accumulated Depreciation2,200

  1. On November 1, 2007, XYZ Co. paid $2,400 to the building landlord for 3 months rent in advance. The Prepaid Rent account increased on that date. Prepare the adjusting entry at December 31,2007assuming no adjustments have been made since November 1, 2007.

Rent Expense1,600

Prepaid Rent1,600

  1. During December XYZ Co. received $7,000 cash from a customer for special ordered goods to be delivered at a later date. At the time of the cash receipt, Unearned Revenue was increased. At December 31, 2007, $5,000 worth of goods for the special order has been delivered to the customer. Prepare an adjusting entry regarding this delivery.

Unearned Revenue5,000

Service Revenue5,000

  1. ABC Co. started the year with a beginning balance for total Assets of $305,000 and total Liabilities of $180,000. During the year, total Revenues were $205,000; total Expenses were $218,000; and Dividends of $25,000 were paid at year end. Assume no additional Contributed Capital was received in the year, what would the Ending Balance of Owners’ Equity for the year?

$87,000

5.For each of the following accounts, indicate its Normal Balance [DR or CR], the Financial Statement on which it would be found [BS, IS, Stmt of RE], and indicate whether the account is considered a Temporary or Permanent account [T or P]. Temporary accounts are closed to Retained Earnings at Year-end. Permanent accounts are not closed out – their balances carry forward to the new year.

Normal BalanceFinancial Statement Temporary or Permanent

Accounts Receivable ___DR_____BS______P__

Cost of Goods Sold ___DR__ ___IS______T__

Common Stock ___CR_____BS______P__

Note Payable ___CR_____BS______P__

Interest Expense ___DR_____IS______T__

Dividends ___DR__ Stmt Of RE____T__

Building ___DR_____BS______P__

Retained Earnings ___CR__ Stmt Of RE and BS____P__

Interest Revenue ___CR_____IS______T__

Inventory ___DR_____BS______P__

Unearned Revenue ___CR_____BS______P__

Accumulated Depreciation ___CR_____BS______P__

Prepaid Insurance ___DR_____BS______P__

Goodwill ___DR_____BS______P__

Sales Revenue ___CR_____IS______T__

Utilities Expense ___DR_____IS______T__

6.XYZ had the following accounts balances on itsAdjusted Trial Balance at December 31, 2007. All accounts have their usual debit or credit balance, and the accounts on this list are not in a particular order.

Accounts Payable / $15,100 / Interest Expense / $4,100
Accounts Receivable / $18,200 / Interest Revenue / $3,600
Accumulated Depreciation / $12,600 / Inventory / $45,800
Cash / $15,500 / Notes Payable (due in 2 years) / $35,000
Common Stock / $40,000 / Operating Revenues / $154,200
Operating Expenses / $104,200 / Prepaid Rent / $1,600
Unearned Revenue / $2,600 / Equipment / $82,000
Retained Earnings / $32,500 / Dividends / $14,000
Tax Expense / $10,200

What is the total of Current Assets? $81,100

What is Total Assets? $150,500

What is the total of Current Liabilities? $17,700

What is Total Liabilities? $52,700

What is Operating Income? $50,000

What is Pretax Income? $49,500

What is Net Income? $39,300

What should be the endingbalanceof Retained Earnings on the Balance Sheet at December 31, 2007? [Remember, the balance of the Retained Earnings account on the Adjusted Trial Balance is before closing out temporary accounts.]

$57,800

Prepare the closing entry for XYZ at December 31, 2007 given the account balances as shown above.

Operating Revenue154,200

Interest Revenue 3,600

Operating Expenses104,200

Interest Expense 4,100

Tax Expense 10,200

Retained Earnings 39,300

Retained Earnings 14,000

Dividends 14,000