Chapter 4—Completing the Accounting Cycle
6. The following data were taken from the Balance Sheet columns of the work sheet for September 30, 2005 for Clayton Company:
Accumulated Depreciation-Trucks $25,000 Prepaid Rent 4,000 Supplies 500 Unearned Fees 4,300 Trucks 29,000 Cash 2,000 Clayton, Capital ?
Prepare a classified balance sheet.
ANS:
Clayton Company Balance Sheet September 30, 2005
Assets Liabilities
Current assets: Cash $ 2,000 Current liabilities: Supplies 500 Unearned fees $ 4,300 Prepaid rent 4,000 Total current assets $ 6,500 Owner's Equity Property, plant, and Clayton, capital 6,200 equipment: Trucks $29,000 Total liabilities and
owner's equity $10,500
Less accum. ======= depreciation 25,000 Total prop- erty, plant and equipment Total assets 4,000 $10,500 =======
DIF: 3 OBJ: 03
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Chapter 4—Completing the Accounting Cycle
7. Indicate whether each of the following would be reported in the section of financial statements identified as (a) current asset, (b) property, plant, and equipment, (c) current liability, (d) revenue, or (e) expense:
(1) Automobile ___
(2) Accumulated depreciation ____ (3) Rent expense ____ (4) Fees earned ____ (5) Salaries payable ____ (6) Prepaid rent ____ (7) Store supplies ____
(8) Advertising expense ____ (9) Unearned rent ____
ANS:
(1) property, plant, and equipment (2) property, plant, and equipment (3) expense (4) revenue
(5) current liability (6) current asset (7) current asset (8) expense
(9) current liability
DIF: 2 OBJ: 03
8. The balances in the ledger of Landscape Services as of December 31, 2005 before adjustments, are as follows: Cash $ 4,500 Tim Welch, Capital $33,050 Supplies 4,150 Tim Welch, Drawing 2,900 Prepaid Insurance 8,700 Service Revenue 52,500 Equipment 42,000 Salary Expense 26,600 Accumulated Rent Expense 5,000 Depreciation 10,200 Miscellaneous Expense 1,900
Adjustment data are as follows: supplies on hand, December 31, $1,000; insurance expired for December, $900; depreciation on equipment for December, $1,500; salaries accrued, December 31, $1,000.
(a) Prepare a ten-column work sheet for Landscape Services for December, 2005. (b) On the basis of the work sheet in (a), present the following in good order: (1)
income statement, (2) statement of owner's equity (no additional investments were made during the month), and (3) balance sheet.
(c) On the basis of the work sheet in (a), journalize the closing entries as of
December 31, 2005.
ANS:
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Chapter 4—Completing the Accounting Cycle
(a)
Landscape Services
Work Sheet
For the Month Ended December 31, 2005
Trial Balance Adjustments Account Title Dr. Cr. Dr. Cr. Cash 4,500 ..... ..... ..... Supplies 4,150 ..... ..... (a) 3,150 Prepaid Insurance 8,700 ..... ..... (b) 900 Equipment 42,000 ..... ..... ..... Accumulated Depreciation ..... 10,200 ..... (c) 1,500 Tim Welch, Capital ..... 33,050 ..... ..... ) ) ) ) ) ) ) ) ) ) ) Tim Welch, Drawing Service Revenue Salary Expense Rent Expense Miscellaneous Expense Supplies Expense Insurance Expense Depreciation Expense Salaries Payable Net Income ( Adjusted (Trial Balance ( Dr. Cr. ( ( 4,500 ..... ( 1,000 ..... ( 7,800 ..... (42,000 ..... ( ..... 11,700 ( ..... 33,050 ( 2,900 ..... ( ..... 52,500 (27,600 ..... ( 5,000 ..... ( 1,900 ..... ( 3,150 ..... ( 900 ..... ( 1,500 ..... ( ..... 1,000 (98,250 98,250 (====== ====== ( (
(b) (1)
2,900 ..... ..... 52,500 26,600 ..... 5,000 ..... 1,900 ..... 95,750 95,750 ..... ..... ..... ..... ..... ..... ..... ..... Income Statement Dr. Cr. ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... 52,500 27,600 ..... 5,000 ..... 1,900 ..... 3,150 ..... 900 ..... 1,500 ..... ..... ..... 40,050 52,500 12,450 ...... 52,500 52,500 ====== ====== ..... ..... ..... ..... (d) 1,000 ..... ..... ..... ..... ..... (a) 3,150 ..... (b) 900 ..... (c) 1,500 ..... ..... d) 1,000 6,550 6,550 Balance Sheet Dr. Cr. 4,500 ..... 1,000 ..... 7,800 ..... 42,000 ..... ..... 11,700 ..... 33,050 2,900 ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... 1,000 58,200 45,750 ...... 12,450 58,200 58,200 ====== ====== ) ) ) ) ) ) ) ) ) ) ) )
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Chapter 4—Completing the Accounting Cycle
Landscape Services Income Statement
For the Month Ended December 31, 2005
Service revenue Operating expenses: Salary expense Rent expense Supplies expense Depreciation expense Insurance expense Miscellaneous expense Total operating expenses Net income
(2)
$27,600 5,000 3,150 1,500 900 1,900
$52,500
40,050 $12,450 =======
Landscape Services Statement of Owner's Equity
For the Month Ended December 31, 2005
Tim Welch, capital, December 1, 2005 Net income for the month Less withdrawals
Increase in owner's equity
Tim Welch, capital, December 31, 2005 (3)
$12,450 2,900
$33,050
9,550 $42,600 =======
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Chapter 4—Completing the Accounting Cycle
Landscape Services Balance Sheet December 31, 2005 Liabilities $ 4,500 Current liabilities: 1,000 Salaries payable 7,800
$13,300 Owner's Equity Tim Welch, capital Assets Current assets: Cash Supplies
Prepaid insurance Total current assets
$ 1,000
42,600 Property, plant, and equipment: Equipment... $42,000 Less accumulated depreciation 11,700 Total property, plant, and equipment Total assets
(c)
Closing Entries Jan. 31 Service Revenue Income Summary
31 Income Summary Salary Expense Rent Expense
Miscellaneous Expense Supplies Expense Insurance Expense Depreciation Expense
31 Income Summary Tim Welch, Capital
31 Tim Welch, Capital Tim Welch, Drawing
DIF: 5 OBJ: 03, 04
30,300 $43,600 ======
=
Total liabilities
and owner's equity
52,500
40,050
12,450
2,900
$43,600 ======
=
52,500
27,600 5,000 1,900 3,150 900 1,500
12,450
2,900
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