Accounting 1AChapter 41

E4-13

Preparing a worksheet & using to calculate net income.

The trial balance of Telegraphic Link at November 30, follows:

Req. 1

Telegraphic Link
Worksheet
Month Ended November 30, 2012
ACCOUNT TITLE / TRIAL BALANCE / ADJUSTMENTS / ADJUSTED TRIAL BALANCE / INCOME STATEMENT / BALANCE SHEET
DEBIT / CREDIT / DEBIT / CREDIT / DEBIT / CREDIT / DEBIT / CREDIT / DEBIT / CREDIT
Cash / $4,000 / $4,000 / $4,000
Accounts receivable / 3,200 / (a) $600 / 3,800 / 3,800
Prepaid rent / 1,900 / (d) $500 / 1,400 / 1,400
Supplies / 3,000 / (e) 100 / 2,900 / 2,900
Equipment / 34,800 / 34,800 / 34,800
Accumulated depreciation / $1,600 / (b) 300 / $1,900 / $1,900
Accounts payable / 5,400 / 5,400 / 5,400
Salary payable / (c) 800 / 800 / 800
Thomas, capital / 35,700 / 35,700 / 35,700
Thomas, drawing / 2,100 / 2,100 / 2,100
Service revenue / 8,600 / (a) 600 / 9,200 / $9,200
Depreciation expense / (b) 300 / 300 / $300
Salary expense / 1,700 / (c) 800 / 2,500 / 2,500
Rent expense / (d) 500 / 500 / 500
Utilities expense / 600 / 600 / 600
Supplies expense / (e) 100 / 100 / 100
$51,300 / $51,300 / $2,300 / $ 2,300 / $53,000 / $53,000 / $4,000 / $9,200 / $49,000 / $43,800
Net income / $5,200 / $ 5,200
$9,200 / $9,200 / $49,000 / $49,000

Req. 2Thenet incomefor November was $5,200.

E 4-14

Req.1

Telegraphic Link
Balance Sheet
November 30, 2012
ASSETS / LIABILITIES
Cash / $ 4,000 / Accounts payable / $ 5,400
Supplies / 3,800 / Salary payable / 800
Prepaid rent / 1,400 / Total liabilities / 6,200
Supplies / 2,900 / OWNER’S EQUITY
Equipment $ 34,800 / Thomas, capital / 38,800
Accumulated. depreciation (1,900) / 32,900
Total assets / $ 45,000 / Total liabilities and
owner’s equity / $ 45,000

Accounting 1A – 228551

Accounting 1AChapter 41

E 4-15

Req.1

Journal
DATE / ACCOUNTS AND EXPLANATIONS / POST.
REF. / DEBIT / CREDIT
Adjusting Entries
Nov / 30 / Account receivable / 600
Service revenue / 600
30 / Depreciation expense / 300
Accumulated depreciation / 300
30 / Salary expense / 800
Salary payable
/ 800
30 / Rent expense / 500
Prepaid rent / 500
30 / Supplies expense / 100
Supplies / 100

Reqs. 1 and 2

Accounts receivable / Prepaid rent
Bal / 3,200 / Bal / 1,900 / (d) / 500
(a) / 600 / Bal / 1,400
Bal / 3,800
Supplies / Accumulated depreciation
Bal / 3,000 / (e) / 100 / Bal / 1,600
Bal / 2,900 / (b) / 300
Bal / 1,900
Salary payable / Thomas, capital
Bal / 0 / Clo / 2,100 / Bal / 20,000
(c) / 800 / Clo / 5,200
Bal / 800 / Bal / 23,100
Thomas, drawing / Income summary
Bal / 2,100 / Clo / 2,100 / Clo / 4,000 / Clo / 9,200
Bal / 0 / Clo / 5,200 / Bal / 5,200
Bal / 0
Service revenue / Depreciation expense
Clo / 9,200 / Bal / 8,600 / Bal / 0
(a) / 600 / (b) / 300 / Clo / 300
Bal / 0 / Bal / 0
Salary expense / Rent expense
Bal / 1,700 / Clo / 2,500 / Bal / 0 / Clo / 500
(c ) / 800 / (d) / 500
Bal / 0 / Bal / 0
Utilities expense / Supplies expense
Bal / 600 / Clo / 600 / Bal
(e) / 0
100 / Clo / 100
Bal / 0
Bal / 0

:

Req. 1

Journal
DATE / ACCOUNTS AND EXPLANATIONS / POST.
REF. / DEBIT / CREDIT
Closing Entries
Jan / 31 / Service revenue / 16,800
Income summary / 16,800
31 / Income summary / 6,200
Salary expense / 3,600
Rent expense / 1,400
Depreciation expense / 400
Supplies expense / 200
Utilities expense / 600
31 / Income summary / 10,600
Silver, capital / 10,600
31 / Silver, capital / 800
Silver, drawing / 800

Req. 2

Silver had net income of $10,600. We know this because service revenue exceeded total expenses.

E 4-19

Req. 1

Guitars by Peter
Statement of Owner’s Equity
Year Ended December 31, 2012
Peter, capital, January 1, 2012 / $152,000
Net income / 120,000
272,000
Drawing / (31,000)
Peter, capital, December 31, 2012 / $241,000

E4-21

Req. 1

Journal
DATE / ACCOUNTS AND EXPLANATIONS / POST.
REF. / DEBIT / CREDIT
Closing Entries
Dec / 31 / Service revenue / 110,000
Income summary / 110,000
31 / Income summary / 35,500
Salary expense / 26,100
Supplies expense / 2,400
Depreciation expense—furniture / 800
Depreciation expense—building / 6,200
31 / Income summary / 74,500
Klein, capital / 74,500
31 / Klein, capital / 57,000
Klein, drawing / 57,000

Req. 2

Klein, capital
Clo / 57,000 / Beg Bal / 47,000
Clo / 74,500
End Bal / 64,500

E 4-22

Req. 1

Telegraphic Link
Post-closing Trial Balance
November 30, 2012
ACCOUNT / DEBIT / CREDIT
Cash / $ 4,000
Accounts receivable / 3,800
Prepaid rent / 1,400
Supplies / 2,900
Equipment / 34,800
Accumulated depreciation / $ 1,900
Accounts payable / 5,400
Salary payable / 800
Thomas, capital / 38,800
Total / $ 46,900 / $ 46,900

E 4-23

Req. 1

Beginning capital + Net Income – Drawing = Ending Capital

$36,500 + $12,300 – $1,100 = $47,700

Brian O’Brion Dance Studio Company
Balance Sheet
August 31, 2012
ASSETS
Current assets:
Cash / $ 15,800
Supplies / 2,000
Prepaid rent / 900
Total current assets / 18,700
Plant asset:
Equipment / $ 49,000
Accumulated depreciation / (5,500) / 43,500
Total assets / $ 62,200
LIABILITIES
Current liabilities:
Accounts payable / $ 4,500
Salary payable / 500
Unearned service revenue / 5,100
Total current liabilities / 10,100
Long-term liabilities:
Long-term note payable
/ 4,400
Total liabilities
/ 14,500
OWNER’S EQUITY
O’Brion, capital / 47,700
Total liabilities and owner’s equity / $ 62,200

Req. 2

2012 / 2011
Current Ratio / = / Total current assets
Total current liabilities / = / $18,700
$10,100 / = / 1.85 / 1.49

Since the current ratio was 1.49 one year ago, during the current year, Brian O’Brion Dance Studio’s ability to pay its current liabilities has improved.

Debt Ratio / = / Total liabilities
Total assets / = / $14,500
$62,200 / = / 0.23 / 0.29

Since the debt ratio was 0.29 one year ago, during the current year, Brian O’Brion Dance Studio’s ability to pay its debt has improved.

P4-26A

Wolf Anvils: Trial Balance

P4-26A

Req. 1

Journal
DATE / ACCOUNTS AND EXPLANATIONS / POST.
REF. / DEBIT / CREDIT
Oct / 31 /
Adjusting Entries
a. / Unearned service revenue / 4,200
Service revenue / 4,200
b. / Rent expense / 200
Prepaid rent / 200
c. / Supplies expense / 1,000
Supplies / 1,000
d. / Depreciation expense / 300
Accumulated depreciation / 300
e. /
Salary expense
/ 200
Salary payable / 200

(continued) P 4-26A

Req. 2

Wolfe Anvils
Worksheet
Month Ended October 31, 2012
ACCOUNT TITLE / TRIAL BALANCE / ADJUSTMENTS / ADJUSTED TRIAL BALANCE
DEBIT / CREDIT / DEBIT / CREDIT / DEBIT / CREDIT
Cash / $4,300 / $4,300
Accounts receivable / 15,000 / 15,000
Prepaid rent / 2,700 / (b) $200 / 2,500
Supplies / 1,600 / (c) 1,000 / 600
Equipment / 31,200 / 31,200
Accumulated depreciation / $3,000 / (d) 300 / $3,300
Accounts payable / 6,900 / 6,900
Salary payable / (e) 200 / 200
Unearned service revenue / 5,400 / (a) $4,200 / 1,200
Wolfe, capital / 26,600 / 26,600
Wolfe, drawing / 3,500 / 3,500
Service revenue / 18,900 / (a) 4,200 / 23,100
Salary expense / 2,500 / (e) 200 / 2,700
Rent expense / (b) 200 / 200
Depreciation expense / (d) 300 / 300
Supplies expense / ______ / ______ / (c) 1,000 / ______ / 1,000 / ______
Total / $60,800 / $60,800 / $5,900 / $5,900 / $61,300 / $61,300

(continued) P 4-26A

Req. 3

Wolfe Anvils
Income Statement
Month Ended October 31, 2012
Revenue:
Service revenue / $ 23,100
Expenses:
Salary expense / $ 2,700
Supplies expense / 1,000
Depreciation expense / 300
Rent expense / 200
Total expenses / 4,200
Net income / $ 18,900
Wolfe Anvils
Statement of Owner’s Equity
Month Ended October 31, 2012
Wolfe, capital, October 1, 2012 / $ 26,600
Net income / 18,900
45,500
Drawing / (3,500)
Wolfe, capital, October 31, 2012 / $ 42,000

(continued) P 4-26A

Req. 3

Wolfe Anvils
Balance Sheet
October 31, 2012
ASSETS
Current assets:
Cash / $ 4,300
Accounts receivable / 15,000
Prepaid rent / 2,500
Supplies / 600
Total current assets / 22,400
Plant assets:
Equipment / $ 31,200
Accumulated depreciation / (3,300) / 27,900
Total assets / $ 50,300
LIABILITIES
Current liabilities:
Accounts payable / $ 6,900
Salary payable / 200
Unearned service revenue / 1,200
Total current liabilities / 8,300
OWNER’S EQUITY
Wolfe, capital / 42,000
Total liabilities and owner’s equity / $ 50,300

(continued) P 4-26A

Req. 4

Journal
DATE / ACCOUNTS AND EXPLANATIONS / POST.
REF. / DEBIT / CREDIT
Closing Entries
Oct / 31 / Service revenue / 23,100
Income summary / 23,100
31 / Income summary / 4,200
Salary expense / 2,700
Rent expense / 200
Depreciation expense / 300
Supplies expense / 1,000
31 / Income summary / 18,900
Wolfe, capital / 18,900
31 / Wolfe, capital / 3,500
Wolfe, drawing / 3,500

Req. 4

Prepaid rent
Oct 31 / 2,700 / Adj b) / 200
Bal / 2,500
Supplies
Oct.31 / 1,600 / Adj c) / 1,000
Bal / 600
Accumulated depreciation
Oct 31 / 3,000
Adj d) / 300
Bal / 3,300
Salary payable
Oct 31 / 0
Adj e) / 200
Bal / 200
Unearned service revenue
Adj a) / 4,200 / Oct 31 / 5,400
Bal / 1,200
Wolfe, capital / Wolfe, drawing
Clo / 3,500 / Oct.31 / 26,600 / Oct 31 / 3,500 / Clo / 3,500
Clo / 18,900 / Bal / 0
Bal / 42,000
Service revenue / Salary expense
Clo / 23,100 / Oct. 31 / 18,900 / Oct 31 / 2,500 / Clo / 2,700
Adj (a) / 4,200 / Adj (e) / 200
Bal / 0 / Bal. / 0
Rent expense / Income summary
Oct 31 / 0 / Clo / 200 / Clo / 4,200 / Clo / 23,100
Adj (b) / 200 / Clo / 18,900 / Bal / 18,900
Bal / 0 / Bal / 0
Depreciation expense / Supplies expense
Oct31 / 0 / Clo / 300 / Oct31 / 0 / Clo / 1,000
Adj (d) / 300 / Adj (c) / 1,000
Bal / 0 / Bal / 0

(continued) P 4-26A

Req. 5

Wolfe Anvils
Post-closing Trial Balance
October 31, 2012
ACCOUNT / DEBIT / CREDIT
Cash / $ 4,300
Accounts receivable / 15,000
Prepaid rent / 2,500
Supplies / 600
Equipment / 31,200
Accumulated depreciation / $ 3,300
Accounts payable / 6,900
Salary payable / 200
Unearned service revenue / 1,200
Wolfe, capital / 42,000
Total / $ 53,600 / $ 53,600

Req. 6

Wolfe’s current ratio at October 31, 2012 is 2.70.

Wolfe’s debt ratio at October 31, 2012 is 0.17.

Accounting 1A – 228551