Chapter 4, Problem 5APSA

Problem 4-5A

Preparing trial balances, closing entries, and financial statements

C3 P2 P3

The adjusted trial balance of Karise Repairs on December 31, 2017, follows.

Required

a. Prepare an income statement and a statement of owner’s equity for the year 2017, and a classified balance sheet at December 31, 2017.

There are no owner investments in 2017.

b. Enter the adjusted trial balance in the first two columns of a six-column table. Use columns three and four for closing entry information and

the last two columns for a post-closing trial balance. Insert an Income Summary account as the last item in the trial balance.

C. Enter closing entry information in the six- column table and prepare journal entries for it.

Check (1) Ending capital balance. $47.750 Net income. $30.750

(2) P-C trial balance totals. $67.350

Analysis Component

4. Assume for this part only that

a. None of the $8oo insurance expense had expired during the year. Instead, assume it is a prepayment of the next period’s insurance protection.

b. There are no earned and unpaid wages at the end of the year. (Hint: Reverse the $600 wages payable accrual.)

Describe the financial statement changes that would result from these two assumptions.