
Concept explainers
1.
Record the
1.

Answer to Problem 4.7AP
Record the adjusting entries:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
(a) | 3,000 | |||
3,000 | ||||
(To record the accumulated depreciation) | ||||
(b) | Insurance expense (+E, -SE) | 450 | ||
Prepaid insurance (-A) | 450 | |||
(To record insurance expense) | ||||
(c) | Wages expense (+E, -SE) | 2,100 | ||
Wages payable (+L) | 2,100 | |||
(To record wages payable) | ||||
(d) | Supplies expense (+E, -SE) | 500 | ||
Supplies (-A) | 500 | |||
(To record supplies expenses) | ||||
(e) | Income tax expense (+E,-SE) | 3,150 | ||
Income tax payable (+L) | 3,150 | |||
(To record accrued income tax expense) |
Table (1)
Explanation of Solution
Adjusting entries:
Adjusting entries are the
(a)
- Depreciation expense is an expense account which is a component of stockholders’ equity. There is an increase in expense account which decreases the stockholders’ equity. Hence, debit depreciation expense with $3,000.
- Accumulated depreciation is a contra-asset. There is a decrease in the asset. Hence, credit accumulated depreciation with $3,000.
(b)
- Insurance expense is an expense account which is a component of
stockholders equity. There is an increase in the expense which decreases the stock holders’ equity. Hence, debit insurance expense with $450. - Prepaid insurance is an asset. There is a decrease in the asset. Hence, credit asset with $450.
(c)
- Wages expense is an expense account which is a component of stockholders equity. There is an increase in the expense which decreases the stock holders’ equity. Hence, debit wages expense with $2,100.
- Wages payable is a liability. There is an increase in the liability. Hence, credit wages payable with $2,100.
(d)
- Supplies expense is an expense account which is a component of stockholders equity. There is an increase in the expense which decreases the stock holders’ equity. Hence, debit supplies expense with $500.
- Supplies are asset. There is a decrease in the asset. Hence, credit asset with $500.
(e)
- Income tax expense is an expense account which is a component of stock holders’ equity. There is an increase in the expense account which decreases the stockholders’ equity. Hence, debit interest expense with $3,150.
- Income tax payable is a liability. There is an increase in the liability. Hence, credit, interest payable with $3,150.
2.
Prepare an income statement and a classified
2.

Explanation of Solution
Income statement:
The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Prepare an income statement:
Incorporation S | ||
Income Statement | ||
For the current year ended December 31 | ||
Particulars | Amount ($) | Amount ($) |
Operating Revenue: | ||
Service revenue | 48,000 | |
Less: Operating Expenses: | ||
Supplies expense | 500 | |
Insurance expense | 450 | |
Depreciation expense | 3,000 | |
Wages expense | 2,100 | |
Remaining expenses | 32,900 | |
Total expenses | 38,950 | |
Operating Income | 9,050 | |
Less: Income tax expense | 3,150 | |
Net Income | $5,900 | |
Earnings per share | $1.97 |
Table (2)
The net income for the Incorporation S is $5,900.
Classified balance sheet:
This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.
Prepare a classified balance sheet:
Incorporation S | |||
Balance Sheet | |||
At December 31 of the Current Year | |||
Assets | Amount ($) | Liabilities and Stockholders’ Equity | Amount ($) |
Current Assets: | Current Liabilities: | ||
Cash | 19,600 | Accounts payable | 2,500 |
7,000 | Wages payable | 2,100 | |
Supplies | 800 | Income taxes payable | 3,150 |
Prepaid insurance | 450 | ||
Total current assets | 27,850 | Total current liabilities | 7,750 |
Equipment | 27,000 | Note payable, long term | 5,000 |
Accumulated depreciation | (15,000) | Total liabilities | 12,750 |
Other assets | 5,100 | Stockholders' Equity | |
Common stock | 300 | ||
Additional paid-in capital | 15,700 | ||
16,200 | |||
Total stockholders' equity | 32,200 | ||
Total assets | $44,950 | Total liabilities and stockholders' equity | $44,950 |
Table (3)
Working notes:
Calculation of retained earnings:
The balance sheet agreed with $44,950 by assets and liabilities.
3.
Record the closing entry at December 31 of the current year.
3.

Explanation of Solution
Closing entries:
Closing entries are those journal entries, which are passed to transfer the final balances of temporary accounts, (all revenues account, all expenses account and dividend) to the retained earnings account. Closing entries produce a zero balance in each temporary account.
Prepare closing entries at December 31 of the current year:
Date | Account Title and Explanation | Debit ($) | Credit ($) |
Sales revenue(-R) | 48,000 | ||
Retained earnings(+SE) | 5,900 | ||
Supplies expense(-E) | 500 | ||
Insurance expense(-E) | 450 | ||
Depreciation expense(-E) | 3,000 | ||
Wages expense (-E) | 2,100 | ||
Remaining expense (-E) | 32,900 | ||
Income tax expense(-E) | 3,150 | ||
(To record the closing entries) |
Table (4)
For closing of temporary accounts, the balances of revenues, expenses, and dividend accounts will be transferred to retained earnings in order to bring zero balance for expenses and revenues accounts.
Want to see more full solutions like this?
Chapter 4 Solutions
Financial Accounting
- A trial balance will balance even if A. a journal entry to record the purchase of equipment for cash of $52100 is not posted. B. a $13100 cash dividend is debited to dividends for $13100 and credited to cash for $1310. C. a $510 collection on accounts receivable is credited to accounts receivable for $510 without a corresponding debit. D. a purchase of supplies for $595 on account is debited to supplies for $595 and credited to accounts payable for $559.arrow_forwardEquipment costing $15200 is purchased by paying $3800 cash and signing a note payable for the remainder. The journal entry to record this transaction should include a credit to Notes Payable. credit to Notes Receivable. credit to Equipment. debit to Cash.arrow_forwardAt December 1, 2025, a company's Accounts Receivable balance was $20160. During December, the company had credit sales of $54000 and collected accounts receivable of $43200. At December 31, 2025, the Accounts Receivable balance is A. $30960 debit. B. $30960 credit. C. $74160 debit. D. $20160 debit.arrow_forward
- Whispering Winds Corp.'s trial balance at the end of its first month of operations reported the following accounts and amounts with normal balances: Cash $14720 Prepaid insurance 460 Accounts receivable 2300 Accounts payable 1840 Notes payable 2760 Common stock 4600 Dividends 460 Revenues 20240 Expenses 11500 Total credits on Whispering Winds Corp's trial balance are A. $28980. B. $30360. C. $29900. D. $29440arrow_forwardSwifty Corporation's trial balance reported the following normal balances at the end of its first year: Cash $14440 Prepaid insurance 530 Accounts receivable 2660 Accounts payable 2130 Notes payable 3190 Common stock 4100 Dividends 530 Revenues 22040 Expenses 13300 What amount did Swifty Corporation's trial balance show as total credits? A. $31460 B. $32520 C. $30930 D. $31990arrow_forwardMonty Inc., a major retailer of high-end office furniture, operates several stores and is a publicly traded company. The company is currently preparing its statement of cash flows. The comparative statement of financial position and income statement for Monty as at May 31, 2020, are as The following is additional information about transactions during the year ended May 31, 2020 for Monty Inc., which follows IFRS. Plant assets costing $69,000 were purchased by paying $47,000 in cash and issuing 5,000 common shares. In order to supplement its cash, Monty issued 4,000 additional common shares. Cash dividends of $35,000 were declered and paid at the end of the fiscal year. create direct method cash flow statement, show your workarrow_forward
- Following is additional information about transactiona during the year ended May 31, 2020 for Monty Inc., which follows IFRS. Plant assets costing $69,000 were purchased by paying $47,000 in cash and issuing 5,000 common shares. In order to supplement iRs cash, Monty Issued 4,000 additional common shares. Cash dividends of $35,000 were declared and paid at the end of the fiscal year. PRepare a direct Method Cash FLow using the format.arrow_forwardmake a trail balancearrow_forwardOn July 31, 2025, the general ledger of Cullumber Legal Services Inc. showed the following balances: Cash $4,960, Accounts Receivable $1,860, Supplies $620, Equipment $6,200, Accounts Payable $5,080, Common Stock $4,340, and Retained Earnings $4,220. During August, the following transactions occurred. Aug. 3 5 Collected $1,490 of accounts receivable due from customers. Received $1,610 cash for issuing common stock to new investors. 6 Paid $3,350 cash on accounts payable. 7 Performed legal services of $8,060, of which $3,720 was collected in cash and the remainder was due on account. 2 2 2 2 2 12 Purchased additional equipment for $1,490, paying $500 in cash and the balance on account. 14 Paid salaries $4,340, rent $1,120, and advertising expenses $340 for the month of August. 18 20 24 26 27 Collected the balance for the services performed on August 7. Paid cash dividend of $620 to stockholders. Billed a client $1,240 for legal services performed. Received $2,480 from Laurentian Bank;…arrow_forward
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
