Financial Statements and Closing Entries Last Chance Company offers legal consulting advice to prison inmates. Last Chance Company prepared the end-of-period spreadsheet that follows at June 30, 20Y1, the end of the fiscal year: Last Chance Company End-of-Period Spreadsheet For the Year Ended June 30, 20Y1 Unadjusted Adjusted Trial Balance Adjustments Trial Balance Account Title Dr. Cr. Dr. Cr. Dr. Cr. Cash 5,100 5,100 Accounts Receivable 22,750 (a) 3,750 26,500 Prepaid Insurance 3,600 (b) 1,300 2,300 Supplies 2,025 (c) 1,500 525 Land 80,000 80,000 Building 340,000 340,000 Accum. Depr.—Building 190,000 (d) 3,000 193,000 Equipment 140,000 140,000 Accum. Depr.—Equipment 54,450 (e) 4,550 59,000 Accounts Payable 9,750 9,750 Salaries and Wages Payable (f) 1,900 1,900 Unearned Rent 4,500 (g) 3,000 1,500 Tami Garrigan, Capital 361,300 361,300 Tami Garrigan, Drawing 20,000 20,000 Fees Earned 280,000 (a) 3,750 283,750 Rent Revenue (g) 3,000 3,000 Salaries and Wages Expense 145,100 (f) 1,900 147,000 Advertising Expense 86,800 86,800 Utilities Expense 30,000 30,000 Travel Expense 18,750 18,750 Depr. Exp.—Equipment (e) 4,550 4,550 Depr. Exp.—Building (d) 3,000 3,000 Supplies Expense (c) 1,500 1,500 Insurance Expense (b) 1,300 1,300 Misc. Expense 5,875 5,875 900,000 900,000 19,000 19,000 913,200 913,200 Required: 1. Prepare an income statement for the year ended June 30. Last Chance Company Income Statement For the Year Ended June 30, 20Y1 Revenues: $fill in the blank 13217dfb500cf8d_2 fill in the blank 13217dfb500cf8d_4 Total revenues $fill in the blank 13217dfb500cf8d_5 Expenses: $fill in the blank 13217dfb500cf8d_7 fill in the blank 13217dfb500cf8d_9 fill in the blank 13217dfb500cf8d_11 fill in the blank 13217dfb500cf8d_13 fill in the blank 13217dfb500cf8d_15 fill in the blank 13217dfb500cf8d_17 fill in the blank 13217dfb500cf8d_19 fill in the blank 13217dfb500cf8d_21 fill in the blank 13217dfb500cf8d_23 Total expenses fill in the blank 13217dfb500cf8d_24 $fill in the blank 13217dfb500cf8d_26 2. Prepare a statement of owner's equity for the year ended June 30. No additional investments were made during the year. Last Chance Company Statement of Owner's Equity For the Year Ended June 30, 20Y1 $fill in the blank 71a3ea07307a005_2 $fill in the blank 71a3ea07307a005_4 fill in the blank 71a3ea07307a005_6 fill in the blank 71a3ea07307a005_8 $fill in the blank 71a3ea07307a005_10 3. Prepare a balance sheet as of June 30. Last Chance Company Balance Sheet June 30, 20Y1 Assets Current assets: $fill in the blank 6ff0e0faa01c07b_2 fill in the blank 6ff0e0faa01c07b_4 fill in the blank 6ff0e0faa01c07b_6 fill in the blank 6ff0e0faa01c07b_8 Total current assets $fill in the blank 6ff0e0faa01c07b_9 Property, plant, and equipment: $fill in the blank 6ff0e0faa01c07b_11 $fill in the blank 6ff0e0faa01c07b_13 fill in the blank 6ff0e0faa01c07b_15 fill in the blank 6ff0e0faa01c07b_16 $fill in the blank 6ff0e0faa01c07b_18 fill in the blank 6ff0e0faa01c07b_20 fill in the blank 6ff0e0faa01c07b_21 Total property, plant, and equipment fill in the blank 6ff0e0faa01c07b_22 Total assets $fill in the blank 6ff0e0faa01c07b_23 Liabilities Current liabilities: $fill in the blank 6ff0e0faa01c07b_25 fill in the blank 6ff0e0faa01c07b_27 fill in the blank 6ff0e0faa01c07b_29 Total liabilities $fill in the blank 6ff0e0faa01c07b_30 Owner's Equity fill in the blank 6ff0e0faa01c07b_32 Total liabilities and owner's equity $fill in the blank 6ff0e0faa01c07b_33
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Financial Statements and Closing Entries
Last Chance Company offers legal consulting advice to prison inmates. Last Chance Company prepared the end-of-period spreadsheet that follows at June 30, 20Y1, the end of the fiscal year:
| Last Chance Company | ||||||||
| End-of-Period Spreadsheet | ||||||||
| For the Year Ended June 30, 20Y1 | ||||||||
| Unadjusted | Adjusted | |||||||
| Adjustments | Trial Balance | |||||||
| Account Title | Dr. | Cr. | Dr. | Cr. | Dr. | Cr. | ||
| Cash | 5,100 | 5,100 | ||||||
| 22,750 | (a) | 3,750 | 26,500 | |||||
| Prepaid Insurance | 3,600 | (b) | 1,300 | 2,300 | ||||
| Supplies | 2,025 | (c) | 1,500 | 525 | ||||
| Land | 80,000 | 80,000 | ||||||
| Building | 340,000 | 340,000 | ||||||
| Accum. Depr.—Building | 190,000 | (d) | 3,000 | 193,000 | ||||
| Equipment | 140,000 | 140,000 | ||||||
| Accum. Depr.—Equipment | 54,450 | (e) | 4,550 | 59,000 | ||||
| Accounts Payable | 9,750 | 9,750 | ||||||
| Salaries and Wages Payable | (f) | 1,900 | 1,900 | |||||
| Unearned Rent | 4,500 | (g) | 3,000 | 1,500 | ||||
| Tami Garrigan, Capital | 361,300 | 361,300 | ||||||
| Tami Garrigan, Drawing | 20,000 | 20,000 | ||||||
| Fees Earned | 280,000 | (a) | 3,750 | 283,750 | ||||
| Rent Revenue | (g) | 3,000 | 3,000 | |||||
| Salaries and Wages Expense | 145,100 | (f) | 1,900 | 147,000 | ||||
| Advertising Expense | 86,800 | 86,800 | ||||||
| Utilities Expense | 30,000 | 30,000 | ||||||
| Travel Expense | 18,750 | 18,750 | ||||||
| Depr. Exp.—Equipment | (e) | 4,550 | 4,550 | |||||
| Depr. Exp.—Building | (d) | 3,000 | 3,000 | |||||
| Supplies Expense | (c) | 1,500 | 1,500 | |||||
| Insurance Expense | (b) | 1,300 | 1,300 | |||||
| Misc. Expense | 5,875 | 5,875 | ||||||
| 900,000 | 900,000 | 19,000 | 19,000 | 913,200 | 913,200 |
Required:
1. Prepare an income statement for the year ended June 30.
| Last Chance Company | ||
| Income Statement | ||
| For the Year Ended June 30, 20Y1 | ||
| Revenues: | ||
| $fill in the blank 13217dfb500cf8d_2 | ||
| fill in the blank 13217dfb500cf8d_4 | ||
| Total revenues | $fill in the blank 13217dfb500cf8d_5 | |
| Expenses: | ||
| $fill in the blank 13217dfb500cf8d_7 | ||
| fill in the blank 13217dfb500cf8d_9 | ||
| fill in the blank 13217dfb500cf8d_11 | ||
| fill in the blank 13217dfb500cf8d_13 | ||
| fill in the blank 13217dfb500cf8d_15 | ||
| fill in the blank 13217dfb500cf8d_17 | ||
| fill in the blank 13217dfb500cf8d_19 | ||
| fill in the blank 13217dfb500cf8d_21 | ||
| fill in the blank 13217dfb500cf8d_23 | ||
| Total expenses | fill in the blank 13217dfb500cf8d_24 | |
| $fill in the blank 13217dfb500cf8d_26 |
2. Prepare a statement of owner's equity for the year ended June 30. No additional investments were made during the year.
| Last Chance Company | ||
| Statement of Owner's Equity | ||
| For the Year Ended June 30, 20Y1 | ||
| $fill in the blank 71a3ea07307a005_2 | ||
| $fill in the blank 71a3ea07307a005_4 | ||
| fill in the blank 71a3ea07307a005_6 | ||
| fill in the blank 71a3ea07307a005_8 | ||
| $fill in the blank 71a3ea07307a005_10 |
3. Prepare a
| Last Chance Company | |||
| Balance Sheet | |||
| June 30, 20Y1 | |||
| Assets | |||
| Current assets: | |||
| $fill in the blank 6ff0e0faa01c07b_2 | |||
| fill in the blank 6ff0e0faa01c07b_4 | |||
| fill in the blank 6ff0e0faa01c07b_6 | |||
| fill in the blank 6ff0e0faa01c07b_8 | |||
| Total current assets | $fill in the blank 6ff0e0faa01c07b_9 | ||
| Property, plant, and equipment: | |||
| $fill in the blank 6ff0e0faa01c07b_11 | |||
| $fill in the blank 6ff0e0faa01c07b_13 | |||
| fill in the blank 6ff0e0faa01c07b_15 | fill in the blank 6ff0e0faa01c07b_16 | ||
| $fill in the blank 6ff0e0faa01c07b_18 | |||
| fill in the blank 6ff0e0faa01c07b_20 | fill in the blank 6ff0e0faa01c07b_21 | ||
| Total property, plant, and equipment | fill in the blank 6ff0e0faa01c07b_22 | ||
| Total assets | $fill in the blank 6ff0e0faa01c07b_23 | ||
| Liabilities | |||
| Current liabilities: | |||
| $fill in the blank 6ff0e0faa01c07b_25 | |||
| fill in the blank 6ff0e0faa01c07b_27 | |||
| fill in the blank 6ff0e0faa01c07b_29 | |||
| Total liabilities | $fill in the blank 6ff0e0faa01c07b_30 | ||
| Owner's Equity | |||
| fill in the blank 6ff0e0faa01c07b_32 | |||
| Total liabilities and owner's equity | $fill in the blank 6ff0e0faa01c07b_33 |
Financial statement is prepared from the trial balance which include :-
- Profit and loss and other comprehensive income statement where all revenue and expenses will be shown and net profit or loss is calculated.
- Statement of financial position where all the assets , liabilities and equities has been shown.
Trial balance means a statement which include all the debit or credit balances of accounts from ledgers and should match as so to pass the test of equality of debit and credit.
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On the basis of the end of period speeds, journalize the closing entries.
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