CHAPTER 4 EXERCISES: SET B E4-1B The trial balance columns of the worksheet for Lamar Company at June 30, 2017, are as follows. Complete the worksheet. LAMAR COMPANY Worksheet for the Month Ended June 30, 2017 Trial Balance Account Titles Dr. Cr. Cash $1,760 Accounts Receivable 2,100 Supplies 1,320 Accounts Payable $1,080 Unearned Service Revenue 360 Owner s Capital 2,280 Service Revenue 2,100 Salaries and Wages Expense 500 Miscellaneous Expense 140 $5,820 $5,820 Other data: 1. A physical count reveals $250 of supplies on hand. 2. $120 of the unearned revenue is still unearned at month-end. 3. Accrued salaries are $250. Enter the trial balance on a worksheet and complete the worksheet. E4-2B The adjusted trial balance columns of the worksheet for Gomez Company are as follows. GOMEZ COMPANY Worksheet (partial) for the Month Ended April 30, 2017 Complete the worksheet. Adjusted Trial Income Balance Statement Balance Sheet Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Cash 11,400 Accounts Receivable 7,000 Prepaid Rent 2,000 Equipment 20,000 Accumulated Depr. Equip. 4,700 Notes Payable 5,000 Accounts Payable 4,950 Owner s Capital 25,800 Owner s Drawings 3,500 Service Revenue 14,000 Salaries and Wages Expense 9,450 Rent Expense 500 Depreciation Expense 600 Interest Expense 50 Interest Payable 50 Totals 54,500 54,500
2 4 Completing the Accounting Cycle Complete the worksheet. Prepare financial statements from worksheet. (LO 1, 4) Journalize and post closing entries and prepare a post- closing trial balance. (LO 1, 2) Prepare adjusting entries from a worksheet, and extend balances to worksheet columns. E4-3B Worksheet data for Gomez Company are presented in E4-2B. The owner did not make any additional investments in the business in April. Prepare an income statement, an owner s equity statement, and a classified balance sheet. E4-4B Worksheet data for Gomez Company are presented in E4-2B. (a) Journalize the closing entries at April 30. (b) Post the closing entries to Income Summary and Owner s Capital. Use T accounts. (c) Prepare a post-closing trial balance at April 30. E4-5B The adjustments columns of the worksheet for Rhodes Company are shown below. Adjustments Account Titles Debit Credit Accounts Receivable 1,100 Prepaid Insurance 500 Accumulated Depr. Equip. 1,250 Salaries and Wages Payable 650 Service Revenue 1,100 Salaries and Wages Expense 650 Insurance Expense 500 Depreciation Expense 1,250 3,500 3,500 (a) Prepare the adjusting entries. (b) Assuming the adjusted trial balance amount for each account is normal, indicate the financial statement column to which each balance should be extended. Derive adjusting entries from worksheet data. E4-6B Selected worksheet data for Houser Company are presented below. Adjusted Account Titles Trial Balance Trial Balance Dr. Cr. Dr. Cr. Accounts Receivable? 35,000 Prepaid Insurance 29,000 24,000 Supplies 8,000? Accumulated Depr. Equip. 24,000? Salaries and Wages Payable? 6,000 Service Revenue 80,000 95,000 Insurance Expense? Depreciation Expense 12,000 Supplies Expense 6,500 Salaries and Wages Expense? 52,000 (a) Fill in the missing amounts. (b) Prepare the adjusting entries that were made.
Exercises: Set B 3 E4-7B Pennington Company had the following adjusted trial balance. PENNINGTON COMPANY Adjusted Trial Balance for the Month Ended June 30, 2017 Adjusted Trial Balance Account Titles Debits Credits Cash $ 4,650 Accounts Receivable 5,200 Supplies 640 Accounts Payable $ 2,500 Unearned Service Revenue 200 Owner s Capital 7,280 Owner s Drawings 400 Service Revenue 5,360 Salaries and Wages Expense 1,650 Miscellaneous Expense 350 Supplies Expense 3,050 Salaries and Wages Payable 600 $15,940 $15,940 Prepare closing entries, and prepare a post-closing trial balance. (LO 1, 2) (a) Prepare closing entries at June 30, 2017. (b) Prepare a post-closing trial balance. E4-8B Wang Company ended its fiscal year on July 31, 2017. The company s adjusted trial balance as of the end of its fiscal year is as shown below. WANG COMPANY Adjusted Trial Balance July 31, 2017 Journalize and post closing entries, and prepare a post- closing trial balance. (LO 1, 2) No. Account Titles Debits Credits 101 Cash $ 7,900 112 Accounts Receivable 6,200 157 Equipment 10,600 167 Accumulated Depr. Equip. $ 4,400 201 Accounts Payable 2,800 208 Unearned Rent Revenue 1,200 301 Owner s Capital 30,700 306 Owner s Drawings 11,000 404 Service Revenue 42,400 429 Rent Revenue 6,100 711 Depreciation Expense 2,700 720 Salaries and Wages Expense 39,100 732 Utilities Expense 10,100 $87,600 $87,600 (a) Prepare the closing entries using page J15. (b) Post to Owner s Capital and No. 350 Income Summary accounts. (Use the threecolumn form.) (c) Prepare a post-closing trial balance at July 31.
4 4 Completing the Accounting Cycle Prepare financial statements. Answer questions related to the accounting cycle. (LO 3) Prepare closing entries. E4-9B The adjusted trial balance for Wang Company is presented in E4-8B. (a) Prepare an income statement and an owner s equity statement for the year. Wang did not make any capital investments during the year. (b) Prepare a classified balance sheet at July 31. E4-10B Julie Ehrlich has prepared the following list of statements about the accounting cycle. 1. Analyze business transactions is the first step in the accounting cycle. 2. Adjusting entries are a required step in the accounting cycle. 3. Correcting entries are a required step in the accounting cycle. 4. If a worksheet is prepared, all the steps of the accounting cycle are incorporated into the worksheet. 5. The accounting cycle begins with the analysis of business transactions and ends with the preparation of a post-closing trial balance. 6. All steps of the accounting cycle occur daily during the accounting period. 7. The step of post to the ledger accounts occurs after the step of journalize the transactions. 8. Closing entries must be prepared before financial statements can be prepared. Identify each statement as true of false. If false, indicate how to correct the statement. E4-11B Selected accounts for Angie s Salon are presented below. All June 30 postings are from closing entries. Salaries and Wages Expense 6/10 2,100 6/30 5,900 6/28 3,800 Supplies Expense 6/12 400 6/30 850 6/24 450 Service Revenue 6/30 10,100 6/15 4,500 6/24 5,600 Rent Expense 6/1 2,000 6/30 2,000 Owner s Capital 6/30 1,700 6/1 10,000 6/30 1,350 Bal. 9,650 Owner s Drawings 6/13 700 6/30 1,700 6/25 1,000 (a) Prepare the closing entries that were made. (b) Post the closing entries to Income Summary. Prepare correcting entries. (LO 3) Prepare correcting entries. (LO 3 ) E4-12B Troy Company discovered the following errors made in January 2017. 1. A payment of Salaries and Wages Expense of $700 was debited to Supplies and credited to Cash, both for $700. 2. A collection of $4,000 from a client on account was debited to Cash $400 and credited to Service Revenue $400. 3. The purchase of supplies on account for $860 was debited to Supplies $680 and credited to Accounts Payable $680. (a) Correct the errors by reversing the incorrect entry and preparing the correct entry. (b) Correct the errors without reversing the incorrect entry. E4-13B Ellis Company has an inexperienced accountant. During the first 2 weeks on the job, the accountant made the following errors in journalizing transactions. All entries were posted as made. 1. A payment on account of $720 to a creditor was debited to Accounts Payable $270 and credited to Cash $270. 2. The purchase of supplies for $650 cash was debited to Inventory $65 and credited to Cash $65. 3. A $500 withdrawal of cash for Ellis personal use was debited to Salaries and Wages Expense $500 and credited to Cash $500. Prepare the correcting entries.
Exercises: Set B 5 E4-14B The adjusted trial balance for Kever Miniature Golf at December 31, 2017, contains the following accounts. Debits Credits Buildings $ 77,000 Owner s Capital $ 67,000 Accounts Receivable 9,000 Accumulated Depreciation Buildings 19,000 Prepaid Insurance 2,700 Accounts Payable 7,400 Cash 10,840 Notes Payable 60,000 Equipment 37,500 Accumulated Depreciation Equipment 11,000 Land 38,000 Interest Payable 1,600 Insurance Expense 540 Service Revenues 15,580 Depreciation Expense 4,400 $181,580 Interest Expense 1,600 $181,580 Prepare a classified balance sheet. (a) Prepare a classified balance sheet; assume that $15,000 of the note payable will be paid in 2018. (b) Comment on the liquidity of the company. E4-15B The following are the major balance sheet classifications. Current assets (CA) Long-term investments (LTI) Property, plant, and equipment (PPE) Intangible assets (IA) Current liabilities (CL) Long-term liabilities (LTL) Owner s equity (OE) Classify each of the following accounts taken from Garza Company s balance sheet. Accounts payable Accounts receivable Cash Owner s capital Salaries and wages payable Trademarks Stock Investments Inventory Accumulated depreciation equipment Buildings. Land Notes payable (due in 3 years) Supplies Prepaid insurance Equipment Classify accounts on balance sheet. E4-16B The following items were taken from the financial statements of Foyle Company. (All dollars are in thousands.) Long-term debt $1,560 Accumulated depr. equipment $4,000 Prepaid insurance 620 Accounts payable 1,010 Equipment 8,100 Notes payable (due after 2018) 250 Stock investments (long-term) 185 Owner s capital 8,925 Debt investments (short-term) 2,500 Accounts receivable 1,500 Notes payable (due in 2018) 340 Inventory 880 Cash 2,300 Prepare a classified balance sheet. Prepare a classified balance sheet in good form as of December 31, 2017. E4-17B These financial statement items are for Herrera Company at year-end, July 31, 2017. Salaries and wages payable $ 1,800 Notes payable (long-term) $ 2,000 Salaries and wages expense 39,000 Cash 13,300 Utilities expense 3,600 Accounts receivable 21,200 Equipment 26,500 Accumulated depr. equip. 5,400 Accounts payable 3,600 Owner s drawings 3,600 Service revenue 58,000 Depreciation expense 16,200 Rent revenue 7,600 Owner s capital (beginning 45,000 of the year) Prepare financial statements. (LO 1, 4)
6 4 Completing the Accounting Cycle (a) Prepare an income statement and an owner s equity statement for the year. The owner did not make any new investments during the year. (b) Prepare a classified balance sheet at July 31. Use reversing entries. (LO 5) *E4-18B Kerr Company pays salaries of $25,000 every Monday for the preceding 5-day week (Monday through Friday). Assume December 31 falls on a Wednesday, so Kerr s employees have worked 3 days without being paid. (a) Assume the company does not use reversing entries. Prepare the December 31 adjusting entry and the entry on Monday, January 5, when Kerr pays the payroll. (b) Assume the company does use reversing entries. Prepare the December 31 adjusting entry, the January 1 reversing entry, and the entry on Monday, January 5, when Kerr pays the payroll. Prepare closing and reversing entries. (LO 1, 3, 5) *E4-19B On December 31, the adjusted trial balance of Sele Employment Agency shows the following selected data. Accounts Receivable $35,000 Service Revenue $100,000 Interest Expense 11,000 Interest Payable 2,500 Analysis shows that adjusting entries were made to (1) accrue $6,000 of service revenue and (2) accrue $2,500 interest expense. (a) Prepare the closing entries for the temporary accounts shown above at December 31. (b) Prepare the reversing entries on January 1. (c) Post the entries in (a) and (b) to the four accounts shown above. Rule and balance the accounts. (Use T accounts.) (d) Prepare the entries to record (1) the collection of the accrued revenue on January 10 and (2) the payment of all interest due ($3,000) on January 15. (e) Post the entries in (d) to the temporary accounts shown above.