Solution to Problem 31 Adjusting entries. Solution to Problem 32 Closing entries.

Transcription

1 Solution to Problem 31 Adjusting entries. 1. Utilities expense 27,000 Accounts payable 27, Rent revenue 4,000 Unearned revenue 4, Supplies 2,000 Supplies expense 2, Interest receivable 700 Interest revenue Prepaid insurance 1,600 Insurance expense 1, Supplies expense 1,550 Supplies 1, Depreciation expense 2,500 Accumulated depreciation 2, Accounts receivable 1,000 Service revenue 1, Subscriptions collected in advance 800,000 Subscription revenue 800,000 Solution to Problem 32 Closing entries. Retained earnings 200 Dividends distributed 200 Sales revenue 7,900 Retained earnings 7,900 Retained earnings 7,060 Cost of goods sold expense 4,300 Selling expense 1,800 Administrative expense 600 Income tax expense

2 Solution to Problem 33 Two complete accounting cycles Jan 1 Truck 30,000 Cash 30,000 Feb 1 Accounts Payable 7,000 Cash 7,000 Apr 1 Cash 12,000 Notes Payable 12,000 Aug 1 Cash 16,000 Common Stock 16,000 Nov 1 Rent Expense 4,800 Cash 4,800 Dec 31 Cash 50,000 Service Revenue 50,000 Dec 31 Accounts Receivable 60,000 Service Revenue 60,000 Dec 31 Cash 55,000 Accounts Receivable 55,000 Dec 31 Wages Expenses 69,000 Cash 69,000 Dec 31 Prepaid Rent 3,733 Rent Expense 3,733 Dec 31 Utilities Expense 15,000 Accounts Payable 15,000 Dec 31 Depreciation Expense 4,000 Accumulated depreciation 4,000 (30,000! 2,000) 7 = 4,000 per year Dec 31 Interest Expense 450 Interest Payable ,000 *.06 * 9/12 = 450 Dec 31 Service Revenue 110,000 Retained Earnings 110,000 Dec 31 Retained Earnings 15,000 Utilities Expense 15,000 Dec 31 Retained Earnings 1,067 Rent Expense 1,067 Dec 31 Retained Earnings 69,000 Wages Expense 69,000 Dec 31 Retained Earnings 450 Interest Expense 450 Dec 31 Retained Earnings 4,000 Depreciation Expense 4,

3 TB after closing TB after transact TB after adjust TB after closing Cash 42,000 64,200 64,200 64,200 AR 16,000 21,000 21,000 21,000 Ppd Rent 0 0 3,733 3,733 Land 49,000 49,000 49,000 49,000 Truck 0 30,000 30,000 30,000 AccumDeprec 0 0 4,000 4,000 AP 12,000 5,000 20,000 20,000 Interest Pay Notes Pay 0 12,000 12,000 12,000 Common Stock 32,000 48,000 48,000 48,000 Retained Earnings 63,000 63,000 63,000 83,483 Dividends Service Rev 0 110, ,000 0 Utilities Expense ,000 0 Rent Expense 0 4,800 1,067 0 Wages Expense 0 69,000 69,000 Interest Expense Depreciation Exp 0 0 4, , , , , , , , ,

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5 Balance sheet Current Assets Cash 64,200 Accounts Receivable 21,000 Prepaid Rent 3,733 Total 88,933 Property plant equipment Land 49,000 Truck 26,000 Total 75,000 Total assets 163,933 Accounts payable 20,000 Interest payable 450 Note payable 12,000 Total liabilities 32,450 Common Stock 48,000 Retained earnings 83,483 Total SHE 131,483 Total liabilities & SHE 183,150 Income statement Service Revenue 110,000 Total 110,000 Utilities Expense 15,000 Rent Expense 1,067 Wages Expense 69,000 Depreciation Expense 4,000 Interest Expense 450 Total 89,517 Net income 20,483 Statement of cash flows Operating activities 24,200 Investing activities (30,000) Financing activities 28,000 Net change in cash 22,200 + Beginning cash 42,000 Ending cash 64,200 Statement of changes in stockholders equity Beginning common stock 32,000 Issue new capital 16,000 Ending common stock 48,

6 Beginning retained earnings 63,000 Net income 20,483 Dividends paid (0) Ending retained earnings 83,

7 2015 Jan 1 Rent Expense 3,733 Prepaid Rent 3,733 Jan 1 Accounts Payable 15,000 Utilities Expense 15,000 Jan 1 Interest Payable 450 Interest Expense 450 Jan 1 Accounts Payable 11,000 Cash 11,000 Feb 1 Utilities Expense 18,000 Cash 18,000 Apr 1 Note Payable 12,000 Interest Expense 720 Cash 12,720 Aug 1 Cash 16,000 Common Stock 16,000 Aug 1 Rent Expense 4,800 Cash 4,800 Dec 31 Cash 70,000 Service Revenue 70,000 Dec 31 Accounts Receivable 50,000 Service Revenue 50,000 Dec 31 Cash 55,000 Accounts Receivable 55,000 Dec 31 Wages Expenses 69,000 Cash 69,000 Dec 31 Prepaid Rent 2,400 Rent Expense 2,400 Dec 31 Utilities Expense 17,000 Accounts Payable 17,000 Dec 31 Depreciation Expense 4,000 Accumulated depreciation 4,000 (30,000! 2,000) 7 = 4,000 per year Dec 31 Service Revenue 110,000 Retained Earnings 110,000 Dec 31 Retained Earnings 15,000 Utilities Expense 15,000 Dec 31 Retained Earnings 1,067 Rent Expense 1,067 Dec 31 Retained Earnings 69,000 Wages Expense 69,000 Dec 31 Retained Earnings 450 Interest Expense

8 Dec 31 Retained Earnings 4,000 Depreciation Expense 4,000 Missing: post to accounts, present trial balances, prepare financial statements 261

9 Solution to Problem 34 Reversing. Examine the following adjusting entries, and determine which should get reversed at the start of the next accounting period. Dec 31 Wages expense 9,000 Reverse Wages payable 9,000 Dec 31 Prepaid rent 25,000 Reverse Rent expense 25,000 Dec 31 Rent revenue 41,000 Reverse Unearned rent revenue 41,000 Dec 31 Insurance expense 19,000 Don t reverse Prepaid insurance 19,000 Dec 31 Interest receivable 6,000 Reverse Interest revenue 6,000 Dec 31 Utilities expense 17,000 Reverse Accounts payable 17,000 Dec 31 Depreciation expense 23,000 Don t reverse Accumulated depreciation 23,000 Dec 31 Cost of goods sold expense 154,000 Don t reverse Inventory 154,000 Dec 31 Supplies expense 13,000 Don t reverse Supplies 13,000 Dec 31 Supplies 16,000 Reverse Supplies expense 16,

10 Solution to Problem 35 Reversing. Prepare a sequence of journal entries with supporting T-accounts for the following sequences. (1) On September 1, the XYZ Company pays $6,000 for a six month insurance policy. The company initially records the insurance policy as a debit to prepaid insurance. Make the appropriate journal entries on: * September 1 for the transaction * December 31 for the adjustment * February 28 for the completion of the insurance period. Sep 1, Yr1 Prepaid insurance 6,000 Cash 6,000 Dec 31, Yr1 Insurance expense 4,000 Prepaid insurance 4,000 Feb 28, Yr2 Insurance expense 2,000 Prepaid insurance 2,000 (2) On September 1, the XYZ company pays $6,000 for a six month insurance policy. The company initially records the insurance policy as a debit to insurance expense. Make the appropriate journal entries on: * September 1 for the transaction * December 31 for the adjustment * January 1 for the reversal Sep 1, Yr1 Insurance expense 6,000 Cash 6,000 Dec 31, Yr1 Prepaid insurance 2,000 Insurance expense 2,000 Jan 1, Yr2 Insurance expense 2,000 Prepaid insurance 2,