Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Chapter 4, Problem 4PA

Ledger accounts, adjusting entries, financial statements, and closing entries; optional spreadsheet

The unadjusted trial balance of Lakota Freight Co. at March 31, 20Y4, the end of the year, follows:

Chapter 4, Problem 4PA, Ledger accounts, adjusting entries, financial statements, and closing entries; optional spreadsheet

The data needed to determine year-end adjustments are as follows:

  1. (a) Supplies on hand at March 31 are $7,500.
  2. (b) Insurance premiums expired during year are $1,800.
  3. (c) Depreciation of equipment during year is $8,350.
  4. (d) Depreciation of trucks during year is $6,200.
  5. (e) Wages accrued but not paid at March 31 are $600.

Instructions

  1. 1. For each account listed in the trial balance, enter the balance in the appropriate Balance column of a four-column account and place a check mark (✓) in the Posting Reference column.
  2. 2. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (3) as needed.
  3. 3. Journalize and post the adjusting entries, inserting balances in the accounts affected. Record the adjusting entries on Page 26 of the journal. The following additional accounts from Lakota Freight Co.’s chart of accounts should be used: Wages Payable, 22; Supplies Expense, 52; Depreciation Expense—Equipment, 55; Depreciation Expense—Trucks, 56; Insurance Expense, 57.
  4. 4. Prepare an adjusted trial balance.
  5. 5. Prepare an income statement, a statement of stockholders’ equity, and a balance sheet. During the year ended March 31, 20Y4, additional common stock of $6,000 was issued.
  6. 6. Journalize and post the closing entries. Record the closing entries on Page 27 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry.
  7. 7. Prepare a post-closing trial balance.

1, 3 and 6.

Expert Solution
Check Mark
To determine

Prepare the T-accounts.

Explanation of Solution

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

The components of the T-account are as follows:

a) The title of the account

b) The left or debit side

c) The right or credit side

Prepare the T-accounts:

Account:         Cash                                                              Account no. 11
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    12,000 
Account:   Supplies                                                            Account no. 13
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    30,000 
 31Adjusting26 22,5007,500 
Account:    Prepaid Insurance                                                  Account no. 14
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    3,600 
 31Adjusting26 1,8001,800 
Account:    Equipment                                                             Account no. 16
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    110,000 
Account:  Accumulated Depreciation-Office equipment        Account no. 17
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓     25,000
 31Adjusting26 8,350 33,350
Account:    Trucks                                                                    Account no. 18
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    60,000 
Account:  Accumulated Depreciation- Truck                      Account no. 19
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓     15,000
 31Adjusting26 6,200 21,200
Account:     Accounts Payable                                                      Account no. 21
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓     4,000
Account:     Wages Payable                                                        Account no. 22
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Adjusting26 600 600
Account:          Common Stock                                                         Account no. 31
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance
  • ✓ 1
 26,000 26,000
Account:         Retained Earnings                                                       Account no. 32
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓     70,000
 31Closing27 51,150 121,150
 31Closing2715,000  106,150
Account:          Dividends                                                         Account no. 33
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance
  • ✓ 1
  15,000 
 31Closing27 15,000  
Account:         Income Summary                                                       Account no. 34
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Closing27 160,000 160,000
 31Closing27108,850  51,150
 31Closing2751,150   
Account:          Service revenue                                                         Account no. 41
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓     160,000
 31Closing27160,000   
Account:  Wages expense                                                           Account no. 51
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    45,000 
 31Adjusting26600 45,600 
 31Closing27 45,600  
Account:     Supplies Expense                                                        Account no. 52
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Adjusting2622,500 22,500 
 31Closing27 22,500  
Account:   Rent expense                                                               Account no. 53
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    10,600 
 31Closing27 10,600  
Account:   Truck Expense                                                          Account no. 54
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    9,000 
 31Closing27 9,000  
Account:   Depreciation Expense- Equipment                                Account no. 55
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Adjusting268,350 8,350 
 31Closing27 8,350  
Account:   Depreciation Expense- Equipment                                Account no. 55
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Adjusting268,350 8,350 
 31Closing27 8,350  
Account:   Depreciation Expense- Trucks                                         Account no. 56
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Adjusting266,200 6,200 
 31Closing27 6,200  
Account:   Insurance expense                                                     Account no. 57
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Adjusting261,800 1,800 
 31Closing27 1,800  
Account:   Miscellaneous expense                                                   Account no. 59
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
20Y4      
March31Balance ✓    4,800 
 31Closing27 4,800  

2.

Expert Solution
Check Mark
To determine

Enter the unadjusted trial balance on an end of period spreadsheet and complete the spread sheet.

Explanation of Solution

Spreadsheet: A spreadsheet is a worksheet. It is used while preparing a financial statement. It is a type of form having multiple columns and it is used in the adjustment process. The use of a worksheet is optional for any organization. A worksheet can neither be considered as a journal nor a part of the general ledger.

Prepare the end of period spreadsheet and enter the unadjusted trial balance:

Financial And Managerial Accounting, Chapter 4, Problem 4PA

Table (1)

3.

Expert Solution
Check Mark
To determine

Prepare the adjusting entries and post it into the T-accounts.

Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).

Prepare the adjusting entries:

DateAccount title and explanation

Post.

Ref.

Debit ($)Credit ($)
20Y4Adjusting Entries   
March 31Supplies Expense5222,500 
  Supplies13 22,500
  (To record the supplies expense used)   
      
20Y4Insurance Expense571,800 
March 31Prepaid Insurance14 1,800
  (To record the insurance expense)   
      
20Y4Depreciation Expense-Equipment558,350 
March 31Accumulated Depreciation-Equipment17 8,350
  (To record the depreciation expense for equipment)   
      
20Y4Depreciation Expense-Trucks566,200 
March 31Accumulated Depreciation-Trucks19 6,200
  (To record the depreciation expense for trucks)   
      
20Y4Wages Expense51600 
March 31Wages Payable22 600
  (To record the wages expense)   

Table (2)

4.

Expert Solution
Check Mark
To determine

Prepare an adjusted trial balance as of March 31, 20Y4.

Explanation of Solution

Adjusted trial balance:

Adjusted trial balance is a summary of all the ledger accounts, and it contains the balances of all the accounts after the adjustment entries are journalized, and posted.

Prepare an adjusted trial balance as of March 31, 20Y4:

Company LF
Adjusted Trial Balance
As of March 31, 20Y4
Account titlesAccount No.Debit balancesCredit balances
Cash11$12,000  
Supplies13$7,500  
Prepaid Insurance14$1,800  
Equipment16$110,000  
Accumulated Depreciation-Equipment17 $33,350
Trucks18$60,000  
Accumulated Depreciation-Trucks19 $21,200
Accounts Payable21 $4,000
Wages Payable22 $600
Common Stock31 $26,000
Retained Earnings32 $70,000
Dividends33$15,000  
Service Revenue41 $160,000
Wages Expense51$45,600  
Supplies Expense52$22,500  
Rent Expense53$10,600  
Truck Expense54$9,000  
Depreciation Expense-Equipment55$8,350  
Depreciation Expense-Trucks56$6,200  
Insurance Expense57$1,800  
Miscellaneous Expense59$4,800  
Totals $315,150$315,150

Table (3)

5.

Expert Solution
Check Mark
To determine

Prepare an income statement, a statement of stockholders, equity and a balance sheet for the year ended March 31, 20Y4.

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 for the year ended March 31, 20Y4:

Company LF
Income Statement
For the Year Ended March 31, 20Y4
ParticularsAmount ($)Amount ($)
Service revenue $160,000
Expenses:  
Wages expense$45,600 
Supplies expense$22,500 
Rent expense$10,600 
Truck expense$9,000 
Depreciation expense-equipment$8,350 
Depreciation expense-trucks$6,200 
Insurance expense$1,800 
Miscellaneous expense$4,800 
Total expenses ($108,850)
Net income $51,150

Table (4)

Statement of stockholders’ equity: The statement which reports the changes in stock, paid-in capital, retained earnings, and treasury stock, during the year is referred to as statement of stockholders’ equity.

Prepare a statement of stockholders’ equity for the year ended March 31, 20Y4:

Company LF
Statement of Stockholders’ Equity
For the Year Ended March 31, 20Y4
ParticularsCommon stockRetained earningsTotal
Beginning balances, April 1, 20Y3$ 20,000$ 70,000$ 90,000
Issued common stock$ 6,000$ 0$ 6,000
Net income$ 0$ 51,150$ 51,150
Dividends$ 0($ 15,000)($ 15,000)
Ending balances, March 31, 20Y4$ 26,000$ 106,150$ 132,150

Table (5)

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Prepare the balance sheet as of March 31, 20Y4:

Company LF
Balance Sheet
As of March 31, 20Y4
ParticularsAmount ($)Amount ($)Amount ($)
Assets   
Current assets:   
Cash $12,000  
Supplies $7,500  
Prepaid insurance $1,800  
Total current assets  $21,300
Property, plant, and equipment:   
Equipment$110,000   
Accumulated depreciation-equipment($33,350)  
Book value-equipment $76,650  
Trucks$60,000   
Accumulated depreciation-trucks($21,200)  
Book value-trucks $38,800  
Total property, plant, and equipment  $115,450
Total assets  $136,750
Liabilities   
Current liabilities:   
Accounts payable $4,000  
Wages payable $600  
Total liabilities  $4,600
Stockholders’ Equity   
Common stock $26,000  
Retained earnings $106,150  
Total stockholders’ equity  $132,150
Total liabilities and stockholders’ equity  $136,750

Table (6)

6.

Expert Solution
Check Mark
To determine

Prepare the closing entries.

Explanation of Solution

Closing entries: The journal entries prepared to close the temporary accounts to Retained Earnings account are referred to as closing entries. The revenue, expense, and dividends accounts are referred to as temporary accounts because the information and figures in these accounts is held temporarily and consequently transferred to permanent account at the end of accounting year.

Closing entry for revenue, expense accounts and dividend account:

DateAccount title and explanationPost refDebit ($)Credit ($)
20Y4Service Revenue41160,000 
March 31Wages Expense51 45,600
 Supplies Expense52 22,500
 Rent Expense53 10,600
 Truck Expense54 9,000
 Depreciation Expense-Equipment55 8,350
 Depreciation Expense-Trucks56 6,200
 Insurance Expense57 1,800
 Miscellaneous Expense59 4,800
 Retained Earnings32 51,150
 (To close the revenue account and expense account to retained earnings account)   
     
20Y4Retained Earnings3215,000 
March 31Dividends33 15,000
 (To close the dividends accounts to retained earnings account)   

Table (7)

7.

Expert Solution
Check Mark
To determine

Prepare a post-closing trial balance as of March 31, 20Y4.

Explanation of Solution

Post-closing trial balance:

The post-closing trial balance is a summary of all ledger accounts, and it shows the debit and the credit balances after the closing entries are journalized and posted.  The post-closing trial balance contains only permanent (balance sheet) accounts, and the debit and the credit balances of permanent accounts should agree.

Prepare a post-closing trial balance as of March 31, 20Y4:

Company LF
Post-Closing Trial Balance
As of March 31, 20Y4
Account titleAccount No.Debit balanceCredit balance
Cash11$12,000 
Supplies13$7,500 
Prepaid Insurance14$1,800 
Equipment16$110,000 
Accumulated Depreciation-Equipment17 $33,350
Trucks18$60,000 
Accumulated Depreciation-Trucks19 $21,200
Accounts Payable21 $4,000
Wages Payable22 $600
Common Stock31 $26,000
Retained Earnings32 $106,150
Total $191,300$191,300

Table (8)

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Chapter 4 Solutions

Financial And Managerial Accounting

Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Prob. 2BECh. 4 - Classified balance sheet The following accounts...Ch. 4 - Closing entries After the accounts have been...Ch. 4 - Accounting cycle From the following list of steps...Ch. 4 - Working capital and current ratio Current assets...Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Classifying accounts Balances for each of the...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Income statement The following account balances...Ch. 4 - Income statement; net loss The following revenue...Ch. 4 - Income statement FedEx Corporation (FDX) had the...Ch. 4 - Statement of stockholders equity Climate Control...Ch. 4 - Statement of stockholders equity; net loss...Ch. 4 - Classifying assets Identify each of the following...Ch. 4 - Balance sheet classification At the balance sheet...Ch. 4 - Balance sheet Dynamic Weight Loss Co. offers...Ch. 4 - Balance sheet The following balance sheet was...Ch. 4 - Identifying accounts to be closed From the list...Ch. 4 - Closing entries with net income Automation...Ch. 4 - Closing entries with net loss Summit Services Co....Ch. 4 - Identifying permanent accounts Which of the...Ch. 4 - Post-closing trial balance An accountant prepared...Ch. 4 - Steps in the accounting cycle Rearrange the...Ch. 4 - Completing an end-of-period spreadsheet List (a)...Ch. 4 - Appendix 1 Adjustment data on an end-of-period...Ch. 4 - Prob. 22ECh. 4 - Appendix 1 Financial statements from an...Ch. 4 - Appendix 1 Adjusting entries from an end-of-period...Ch. 4 - Prob. 25ECh. 4 - Reversing entry The following adjusting entry for...Ch. 4 - Adjusting and reversing entries On the basis of...Ch. 4 - Adjusting and reversing entries On the basis of...Ch. 4 - Entries posted to wages expense account Portions...Ch. 4 - Entries posted to wages expense account Portions...Ch. 4 - Financial statements and closing entries Beacons...Ch. 4 - Financial statements and closing entries Foxy...Ch. 4 - T accounts, adjusting entries, financial...Ch. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Complete accounting cycle For the past several...Ch. 4 - Financial statements and closing entries Last...Ch. 4 - Financial statements and closing entries The...Ch. 4 - T accounts, adjusting entries, financial...Ch. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Complete accounting cycle For the past several...Ch. 4 - The unadjusted trial balance of PS Music as of...Ch. 4 - Kelly Pitney began her consulting business, Kelly...Ch. 4 - Analyze and compare Amazon.com to Best Buy...Ch. 4 - Analyze and compare Zynga, Electronic Arts, and...Ch. 4 - Analyze and compare Foot Locker and The Finish...Ch. 4 - Analyze Under Armour The following year-end data...Ch. 4 - Prob. 5MADCh. 4 - Analyze and compare Alphabet (Google) and...Ch. 4 - Prob. 1TIFCh. 4 - Your friend, Daniel Nat, recently began work as...Ch. 4 - Prob. 4TIFCh. 4 - Prob. 5TIF
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