![Financial Accounting](https://www.bartleby.com/isbn_cover_images/9781305088436/9781305088436_largeCoverImage.gif)
Concept explainers
For the past several years, Steffy Lopez has operated a part-time consulting business from his home. As of July 1, 2016, Steffy decided to move to rented quarters and to operate the business, which was to be known as Diamond Consulting, on a full-time basis. Diamond Consulting entered into the following transactions during July:
Instructions
1. Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.)
2. Post the journal to a ledger of four-column accounts.
3. Prepare an unadjusted
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6).
- a. Insurance expired during July is $375.
- b. Supplies on hand on July 31 are $1,525.
- c.
Depreciation of office equipment for July is $750. - d. Accrued receptionist salary on July 31 is $175.
- e. Rent expired during July is $2,400.
- f. Unearned fees on July 31 are $2,750.
5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet.
6. Journalize and post the
7. Prepare an adjusted trial balance.
8. Prepare an income statement, a statement of owner’s equity, and a
9. Prepare and post the closing entries. (Income Summary is account #33 in the chart of accounts.) Record the closing entries on Page 4 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry.
10. Prepare a post-closing trial balance.
(1)
![Check Mark](/static/check-mark.png)
Journalize the transactions of July in a two column journal beginning on page 1.
Explanation of Solution
Journal: Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
T-Accounts: T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:
- The title of accounts.
- The debit side (Dr) and,
- The credit side (Cr).
Adjusted trial balance: The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.
Adjusting entries: An adjusting entry is prepared when the trial balance is not up-to-date, and complete, and they are usually prepared at the end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business.
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.
Statement of owners’ equity: This statement reports the beginning owner’s equity and all the changes, which led to ending owners’ equity. Additional capital, net income from income statement is added to and drawing is deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
Income statement: An income statement is one of the financial statements which shows the revenues, and expenses of the company. The income statement is prepared to ascertain the net income/loss of the company, by deducting the expenses from the revenues.
Balance sheet: A balance sheet is a financial statement consists of the assets, liabilities, and the stockholder’s equity of the company. The balance of the assets account must be equal to that of the liabilities and the stockholder’s equity account.
Closing entries: Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts. It is passed at the end of the accounting period, to transfer the final balance.
Post-Closing Trial Balance: After passing all the journal entries and the closing entries of the permanent accounts and then further posting them to each of the respective accounts, a post-closing trial balance is prepared which consists of a list of all the permanent accounts. A post-closing trial balance serves as an evidence to prove that the balance of the permanent accounts is equal.
Journal: Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
T-Accounts: T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:
- The title of accounts.
- The debit side (Dr) and,
- The credit side (Cr).
Adjusted trial balance: The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.
Adjusting entries: An adjusting entry is prepared when the trial balance is not up-to-date, and complete, and they are usually prepared at the end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business.
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.
Statement of owners’ equity: This statement reports the beginning owner’s equity and all the changes, which led to ending owners’ equity. Additional capital, net income from income statement is added to and drawing is deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
Income statement: An income statement is one of the financial statements which shows the revenues, and expenses of the company. The income statement is prepared to ascertain the net income/loss of the company, by deducting the expenses from the revenues.
Balance sheet: A balance sheet is a financial statement consists of the assets, liabilities, and the stockholder’s equity of the company. The balance of the assets account must be equal to that of the liabilities and the stockholder’s equity account.
Closing entries: Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts. It is passed at the end of the accounting period, to transfer the final balance.
Post-Closing Trial Balance: After passing all the journal entries and the closing entries of the permanent accounts and then further posting them to each of the respective accounts, a post-closing trial balance is prepared which consists of a list of all the permanent accounts. A post-closing trial balance serves as an evidence to prove that the balance of the permanent accounts is equal.
Journalize the transactions of July in a two column journal beginning on page 1.
Journal Page 1 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2016 | Cash | 11 | 13,500 | ||
July | 1 | Accounts receivable | 12 | 20,800 | |
Supplies | 14 | 3,200 | |||
Office equipment | 18 | 7,500 | |||
Common stock | 31 | 45,000 | |||
(To record the receipt of assets) | |||||
1 | Prepaid Rent | 15 | 4,800 | ||
Cash | 11 | 4,800 | |||
(To record the payment of rent) | |||||
2 | Prepaid insurance | 16 | 4,500 | ||
Cash | 11 | 4,500 | |||
(To record the payment of insurance premium) | |||||
4 | Cash | 11 | 5,500 | ||
Unearned rent | 23 | 5,500 | |||
(To record the cash received for the service yet to be provide) | |||||
5 | Office equipment | 18 | 6,500 | ||
Accounts payable | 21 | 6,500 | |||
(To record the purchase of supplies of account) | |||||
6 | Cash | 11 | 15,300 | ||
Accounts receivable | 12 | 15,300 | |||
(To record the cash received from clients) | |||||
10 | Miscellaneous expense | 59 | 400 | ||
Cash | 11 | 400 | |||
(To record the payment made for Miscellaneous expense) | |||||
12 | Accounts payable | 21 | 5,200 | ||
Office supplies | 11 | 5,200 | |||
(To record the payment made to creditors on account) | |||||
12 | Accounts receivable | 12 | 13,300 | ||
Fees earned | 41 | 13,300 | |||
(To record the revenue earned and billed) | |||||
14 | Salary Expense | 51 | 1,750 | ||
Cash | 11 | 1,750 | |||
(To record the payment made for salary) |
Table (1)
Journal Page 2 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2016 | Cash | 11 | 9,450 | ||
July | 17 | Fees earned | 41 | 9,450 | |
(To record the receipt of cash) | |||||
18 | Supplies | 14 | 600 | ||
Cash | 11 | 600 | |||
(To record the payment made for automobile expense) | |||||
20 | Accounts receivable | 12 | 6,650 | ||
Fees earned | 41 | 6,650 | |||
(To record the payment of advertising expense) | |||||
24 | Cash | 11 | 4,000 | ||
Fees earned | 41 | 4,000 | |||
(To record the cash received from client for fees earned) | |||||
26 | Cash | 11 | 12,000 | ||
Accounts receivable | 12 | 12,000 | |||
(To record the cash received from clients) | |||||
27 | Salary expense | 51 | 1,750 | ||
Cash | 11 | 1,750 | |||
(To record the payment of salary) | |||||
29 | Miscellaneous Expense | 59 | 325 | ||
Cash | 11 | 325 | |||
(To record the payment of telephone charges) | |||||
31 | Miscellaneous Expense | 59 | 675 | ||
Cash | 11 | 675 | |||
(To record the payment of electricity charges) | |||||
31 | Cash | 11 | 5,200 | ||
Fees earned | 41 | 5,200 | |||
(To record the cash received from client for fees earned) | |||||
31 | Accounts receivable | 12 | 3,000 | ||
Fees earned | 41 | 3,000 | |||
(To record the revenue earned and billed) | |||||
31 | Dividends | 33 | 12,500 | ||
Cash | 11 | 12,500 | |||
(To record the dividends made for personal use) |
Table (2)
(2), (6) and (9)
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Record the balance of each accounts in the appropriate balance column of a four-column account and post them to the ledger.
Explanation of Solution
Account: Cash Account no. 11 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 | 1 | 13,500 | 13,500 | |||
1 | 1 | 4,800 | 8,700 | ||||
2 | 1 | 4,500 | 4,200 | ||||
4 | 1 | 5,500 | 9,700 | ||||
6 | 1 | 15,300 | 25,000 | ||||
10 | 1 | 400 | 24,600 | ||||
12 | 1 | 5,200 | 19,400 | ||||
14 | 1 | 1,750 | 17,650 | ||||
17 | 2 | 9,450 | 27,100 | ||||
18 | 2 | 600 | 26,500 | ||||
24 | 2 | 4,000 | 30,500 | ||||
26 | 2 | 12,000 | 42,500 | ||||
27 | 2 | 1,750 | 40,750 | ||||
29 | 2 | 325 | 40,425 | ||||
31 | 2 | 675 | 39,750 | ||||
31 | 2 | 5,200 | 44,950 | ||||
31 | 2 | 12,500 | 32,450 |
Table (3)
Account: Accounts Receivable Account no. 12 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 | 1 | 20,800 | 20,800 | |||
6 | 1 | 15,300 | 5,500 | ||||
12 | 1 | 13,300 | 18,800 | ||||
20 | 2 | 6,650 | 25,450 | ||||
26 | 2 | 12,000 | 13,450 | ||||
31 | 2 | 3,000 | 16,450 |
Table (4)
Account: Supplies Account no. 14 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 | 1 | 3,200 | 3,200 | |||
18 | 2 | 600 | 3,800 | ||||
31 | Adjusting | 3 | 2,275 | 1,525 |
Table (5)
Account: Prepaid Rent Account no. 15 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 | 1 | 4,800 | 4,800 | |||
31 | Adjusting | 3 | 2,400 | 2,400 |
Table (6)
Account: Prepaid Insurance Account no. 16 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 2 | 1 | 4,500 | 4,500 | |||
31 | Adjusting | 3 | 375 | 4,125 |
Table (7)
Account: Office equipment Account no. 18 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 | 1 | 7,500 | 7,500 | |||
5 | 1 | 6,500 | 14,000 |
Table (8)
Account: Accumulated Depreciation-Office equipment Account no. 19 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 750 | 750 |
Table (9)
Account: Accounts Payable Account no. 21 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 5 | 1 | 6,500 | 6,500 | |||
12 | 1 | 5,200 | 1,300 |
Table (10)
Account: Salaries Payable Account no. 22 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 175 | 175 |
Table (11)
Account: Unearned Fees Account no. 23 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 4 | 1 | 5,500 | 5,500 | |||
31 | Adjusting | 3 | 2,750 | 2,750 |
Table (12)
Account: SL Capital Account no. 31 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 | 1 | 45,000 | 45,000 | |||
31 | Closing | 4 | 33,475 | 33,475 | |||
31 | Closing | 4 | 12,500 | 20,975 |
Table (13)
Account: Drawings Account no. 33 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | 2 | 12,500 | 12,500 | |||
31 | Closing | 4 | 12,500 |
Table (14)
Account: Income Summary Account no. 34 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Closing | 4 | 44,350 | 44,350 | ||
31 | Closing | 4 | 10,875 | 33,475 | |||
31 | Closing | 4 | 33,475 |
Table (15)
Account: Fees earned Account no. 41 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 12 | 1 | 13,300 | 13,300 | |||
17 | 2 | 9,450 | 22,750 | ||||
20 | 2 | 6,650 | 29,400 | ||||
24 | 2 | 4,000 | 33,400 | ||||
31 | 2 | 5,200 | 38,600 | ||||
31 | 2 | 3,000 | 41,600 | ||||
31 | Adjusting | 3 | 2,750 | 44,350 | |||
31 | Closing | 4 | 59,700 |
Table (16)
Account: Salary expense Account no. 51 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 14 | 1 | 1,750 | 1,750 | |||
27 | 2 | 1,750 | 3,500 | ||||
31 | Adjusting | 3 | 175 | 3,675 | |||
31 | Closing | 4 | 3,675 |
Table (17)
Account: Rent expense Account no. 52 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 2,400 | 2,400 | ||
31 | Closing | 4 | 2,400 |
Table (18)
Account: Supplies expense Account no. 53 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 2,275 | 2,275 | ||
31 | Closing | 4 | 2,275 |
Table (19)
Account: Depreciation expense Account no. 54 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 750 | 750 | ||
31 | Closing | 4 | 750 |
Table (20)
Account: Insurance expense Account no. 54 | ||||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | |||
Debit ($) | Credit ($) | |||||||
2016 | ||||||||
July | 31 | Adjusting | 3 | 375 | 375 | |||
31 | Closing | 4 | 375 |
Table (21)
Account: Miscellaneous expense Account no. 59 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 10 | 1 | 400 | 400 | |||
29 | 2 | 325 | 725 | ||||
31 | 2 | 675 | 1,400 | ||||
31 | Closing | 4 | 1,400 |
Table (22)
(3)
![Check Mark](/static/check-mark.png)
Prepare unadjusted trial balance of Consulting D at July, 31.
Explanation of Solution
Prepare an unadjusted trial balance of Consulting D for the month ended July, 31 as follows:
D Consulting Unadjusted Trial Balance July 31, 2016 | |||
Particulars |
Account No. | Debit $ | Credit $ |
Cash | 11 | 32,450 | |
Accounts receivable | 12 | 16,450 | |
Supplies | 14 | 3,800 | |
Prepaid insurance | 16 | 4,500 | |
Prepaid rent | 15 | 4,800 | |
Office Equipment | 18 | 14,000 | |
Accounts payable | 21 | 1,300 | |
Unearned fees | 23 | 5,500 | |
SL Capital | 31 | 45,000 | |
Dividends | 33 | 12,500 | |
Fees earned | 41 | 41,600 | |
Salary expense | 51 | 3,500 | |
Miscellaneous expense | 59 | 1,500 | |
Total | $93,400 | $93,400 |
Table (23)
The debit column and credit column of the unadjusted trial balance are agreed, both having balance of $93,400.
(5)
![Check Mark](/static/check-mark.png)
Enter the unadjusted trial balance on an end-of-period spreadsheet.
Explanation of Solution
The unadjusted trial balance on an end-of-period spreadsheet is prepared as follows:
Table (24)
Hence, the unadjusted trial balance on an end-of-period spreadsheet is prepared and completed.
(6)
![Check Mark](/static/check-mark.png)
Journalize the adjusting entries of Consulting D for July 31.
Explanation of Solution
The adjusting entries of Consulting D for July 31, 2016 are as follows:
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) | |
2016 | Insurance expense | 55 | 375 | ||
July | 31 | Prepaid insurance | 16 | 375 | |
(To record the insurance expense for July) | |||||
31 | Supplies expense | 53 | 2,275 | ||
Supplies | 14 | 2,275 | |||
(To record the supplies expense) | |||||
31 | Depreciation expense | 54 | 750 | ||
Accumulated Depreciation | 19 | 750 | |||
(To record the depreciation and the accumulated depreciation) | |||||
31 | Salaries expense | 51 | 175 | ||
Salaries payable | 22 | 175 | |||
(To record the accrued salaries payable) | |||||
31 | Rent expense | 52 | 2,400 | ||
Prepaid rent | 15 | 2,400 | |||
(To record the rent expense for July) | |||||
31 | Unearned fees | 23 | 2,750 | ||
Fees earned | 41 | 2,750 | |||
(To record the receipt of unearned fees) |
Table (25)
Working notes:
(7)
![Check Mark](/static/check-mark.png)
Prepare adjusted trial balance of Consulting D for July 31, 2016.
Explanation of Solution
An adjusted trial balance of Consulting D for July 31, 2016 is prepared as follows:
D Consulting Adjusted Trial Balance July 31, 2016 | |||
Particulars |
Account No. | Debit $ | Credit $ |
Cash | 11 | 32,450 | |
Accounts receivable | 12 | 16,450 | |
Supplies | 14 | 1,525 | |
Prepaid insurance | 16 | 4,125 | |
Prepaid rent | 15 | 2,400 | |
Office Equipment | 18 | 14,000 | |
Accumulated Depreciation-Office equipment | 19 | 750 | |
Accounts payable | 21 | 1,300 | |
Salaries payable | 22 | 175 | |
Unearned fees | 23 | 2,750 | |
Common stock | 31 | 45,000 | |
Dividends | 33 | 12,500 | |
Fees earned | 41 | 44,350 | |
Salary expense | 51 | 3,675 | |
Rent expense | 52 | 2,400 | |
Supplies Expense | 53 | 2,275 | |
Depreciation expense | 54 | 750 | |
Insurance expense | 55 | 375 | |
Miscellaneous expense | 59 | 1,400 | |
Total | $94,325 | $94,325 |
Table (26)
The debit column and credit column of the adjusted trial balance are agreed, both having balance of $94,325.
(8)
![Check Mark](/static/check-mark.png)
Prepare an income statement for the year ended July 31, 2016.
Explanation of Solution
An income statement for the year ended July 31, 2016 is as follows:
D Consulting | ||
Income Statement | ||
For the year ended July 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
Revenues: | ||
Fees Earned | 44,350 | |
Expenses: | ||
Salaries Expense | 3,675 | |
Rent Expense | 2,400 | |
Supplies Expense | 2,275 | |
Depreciation Expense- Building | 750 | |
Insurance Expense | 375 | |
Miscellaneous Expense | 1,400 | |
Total Expenses | 10,875 | |
Net Income | $33,475 |
Table (28)
Hence, the net income of D Consulting for the year ended July 31, 2016 is $33,475.
![Check Mark](/static/check-mark.png)
Prepare the statement of owner’s equity for the year ended July 31, 2016.
Explanation of Solution
The statement of owner’s equity for the year ended July 31, 2016 is as follows:
D Consulting | ||
Statement of Owner’s Equity | ||
For the Year Ended July 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
SL, Capital, July 1, 2016 | 0 | |
Add: Net income | $33,475 | |
Add: Investment made during the period | 45,000 | |
Less: Withdrawals | (12,500) | |
Increase in owner’s equity | 65,975 | |
SL,, Capital, July 31, 2016 | $65,975 |
Table (29)
Hence, owner’s equity for the year ended July 31, 2016 is 65,975.
![Check Mark](/static/check-mark.png)
Prepare the balance sheet of D Consulting at July 31, 2016.
Explanation of Solution
The balance sheet of D Consulting at July 31, 2016 is prepared as follows:
D Consulting | ||
Balance Sheet | ||
At July 31, 2016 | ||
Assets | ||
Current Assets: | $ | $ |
Cash | 32,450 | |
Accounts Receivable | 16,450 | |
Supplies | 1,525 | |
Prepaid Rent | 2,400 | |
Prepaid Insurance | 4,125 | |
Total Current Assets | 56,950 | |
Property, plant and equipment: | ||
Office Equipment | 14,000 | |
Less: Accumulated Depreciation | 750 | |
Total Plant Assets | 13,250 | |
Total Assets | $70,200 | |
Liabilities | ||
Current Liabilities: | 1,300 | |
Accounts Payable | 175 | |
Salaries Payable | 2,750 | |
Unearned Rent | 4,225 | |
Total Liabilities | ||
Owners’ Equity | ||
SL Capital | 65975 | |
Total Owners’ Equity | 65,975 | |
Total Liabilities and Owners’ Equity | $70,200 |
Table (30)
Therefore, the total assets and total liabilities plus retained earnings of Company D at July 31, 2016 are $70,200.
(9)
![Check Mark](/static/check-mark.png)
Journalize the closing entries for D Consulting.
Answer to Problem 5PA
Closing entry for revenue and expense accounts:
Date | Accounts title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
July 31, 2016 | Fees Earned | 41 | 44,350 | |
Income Summary | 34 | 44,350 | ||
(To record the closure of revenues account ) | ||||
Income Summary | 34 | 10,875 | ||
Salary Expense | 51 | 3,675 | ||
Rent Expense | 52 | 2,400 | ||
Supplies Expense | 53 | 2,275 | ||
Depreciation Expense- Office Equipment | 54 | 750 | ||
Insurance Expense | 55 | 375 | ||
Miscellaneous Expense | 59 | 1,400 | ||
(To close the expenses account. Then the balance amount are transferred to income summary account) | ||||
Income Summary | 34 | 33,475 | ||
SL Capital | 32 | 33,475 | ||
(To close balance of income summary are transferred to owners’ capital account) | ||||
SL’s Capital | 32 | 12,500 | ||
SL Drawing | 33 | 12,500 | ||
(To Close the capital and drawings account) |
Table (31)
Explanation of Solution
- Service revenue is revenue account. Since the amount of revenue is closed, and transferred to SL’s capital account. Here, Company D earned an income of $160,000. Therefore, it is debited.
- Wages Expense, Rent Expense, Insurance Expense, Utilities Expense, Laundry Supplies Expense, Depreciation Expense, SL Capital, and Miscellaneous Expense are expense accounts. Since the amount of expenses are closed to Income Summary account. Therefore, it is credited.
- Owner’s capital is a component of owner’s equity. Thus, owners ‘equity is debited since the capital is decreased on owners’ drawings.
- Owner’s drawings are a component of owner’s equity. It is credited because the balance of owners’ drawing account is transferred to owners ‘capital account
(10)
![Check Mark](/static/check-mark.png)
Prepare post–closing trial balance of D Consulting for the month ended July 31, 2016.
Explanation of Solution
Prepare a post–closing trial balance of D Consulting for the month ended July 31, 2016 as follows:
Company D Post-closing Trial Balance July, 31, 2016 | |||
Particulars | Account Number | Debit $ | Credit $ |
Cash | 11 | 32,450 | |
Accounts receivable | 12 | 16,450 | |
Supplies | 14 | 1,525 | |
Prepaid rent | 15 | 2,400 | |
Prepaid insurance | 16 | 4,125 | |
Office Equipment | 18 | 14,000 | |
Accumulated depreciation –Office Equipment | 19 | 750 | |
Accounts payable | 21 | 1,300 | |
Salaries payable | 22 | 175 | |
Unearned rent | 23 | 2,750 | |
S’s Capital | 31 | 45,000 | |
Retained earnings | 32 | 20,975 | |
Total | $70,950 | $70,950 |
Table (32)
The debit column and credit column of the post–closing trial balance are agreed, both having balance of $70,950.
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Chapter 4 Solutions
Financial Accounting
- For the past several years, Steffy Lopez has operated a part-time consulting business from his home. As of July 1, 2018, Steffy decided to move to rented quarters and to operate the business, which was to be known as Diamond Consulting, on a full-time basis. Diamond Consulting entered into the following transactions during July: Jul. 1 The following assets were received from Steffy Lopez in exchange for common stock: cash, $13,500; accounts receivable, $20,800; supplies, $3,200; and office equipment, $7,500. There were no liabilities received. 1 Paid two months’ rent on a lease rental contract, $4,800. 2 Paid the annual premiums on property and casualty insurance policies, $4,500. 4 Received cash from clients as an advance payment for services to be provided, and recorded it as unearned fees, $5,500. 5 Purchased additional office equipment on account from Office Station Co., $6,500. 6 Received cash from clients on account, $15,300. 10 Paid cash for a…arrow_forwardJohn Doe founded Premier Construction. Operations started on October 1, 2021. John’s son, a teenager, kept the books for the first two months. John decides that it is time to hire a bookkeeper with formal training. He asks you to record the activity for December and to complete the accounting cycle for the quarter ended December 31, 2021. The trial balance as of 11/30/2021 and the detail for the Accounts Receivable account balance is on page 2.The December 2021 events are on page 3. Additional Information: • Ellie Smith is the only employee. She is paid on the 1st of month for the pay period ending on the last day of the prior month and on the 16th of the month for the pay period covering the first fifteen days of the current month. Required1. Enter the balances as of 11/30/2021 in the general ledger. 2. Prepare journal entries to record each of the December transactions for Premier Construction. If an event is not a transaction, write the date and “no entry needed” on the journal…arrow_forwardOn October 1, 2016, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business: Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 2016. 4. Determine the excess of revenues over expenses for October. 5. Can you think of any reason why the amount determined in (4) might not be the net income for October?arrow_forward
- On November 1, 2016, Patty Cosgrove established an interior decorating business, Classic Designs. During the month, Patty completed the following transactions related to the business: Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Explanations may be omitted. 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Classic Designs as of November 30, 2016. 4. Determine the excess of revenues over expenses for November. 5. Can you think of any reason why the amount determined in (4) might not be the net income for November?arrow_forwardBrian Marlow recently was hired to prepare Louise Michenor Consulting’s year-end financial statements. Brain just entered his CPA certificate, and Louise Michneor was one of his first clients. Louise employs a bookkeeper, Martha Hailing, who does the daily journal entries and prepares a year-to-date trial balance at the end of the of each month. Martha gives the December 31 trial to a CPA to make adjustments and generate the financial statements. As Brian was looking through Louise Michenor’s books, he noticed two things. First, in each of the last three years, a different COA had prepared the financial statements. Second, the amount shown on the December 31 trial balance for miscellaneous expense was quite high this year compared to prior years. Brian called Martha to find out is she new why miscellaneous expense had such a high balance. Martha’s response was “ I just do what Louise tells me to do. If she wants to charge personal expenses to the company, it’s none of my business “.…arrow_forwardRoland Foster Optical Dispensary completed the following transactions during the latter part of March: Mar. 15 Purchased office supplies on account, $3,400 Mar. 28 Paid $1,800 on account. Read the requirements. Requirement 1. Journalize the transactions of Roland Foster Optical Dispensary. Include an explanation with each journal entry. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Mar. 15: Purchased office supplies on account, $3,400. Date Accounts and Explanation Debit Credit Mar. 15 Requirements 1. Journalize the transactions of Roland Foster Optical Dispensary. Include an explanation with each journal entry. 2. The following T-accounts have been opened for you: Cash (Beginning Balance of $21,000), Office Supplies, and Accounts Payable. Post the journal entries from Requirement 1 to the accounts, and compute the balance in each account. Mar. 28: Paid $1,800 on account. Date Accounts and Explanation Debit Credit Mar. 28 Print…arrow_forward
- How to record transactions in a general journal for an accounting assignment. Here is the list of transactions I need help recording for a general journal. Here is the chart of accounts for recording in the general journal.arrow_forwardFor the past several years, Samantha Hogan has operated a part-time consulting business from her home. As of July 1, 20Y9, Samantha decided to move to rented quarters and to operate the business, which was to be known as Arborvite Consulting, on a full-time basis. Arborvite Consulting entered into the following transactions during July: Jul. 1 The following assets were received from Samantha Hogan: cash, $25,700; accounts receivable, $30,200; supplies, $5,100; and office equipment, $12,100. There were no liabilities received. 1 Paid three months’ rent on a lease rental contract, $8,100. 2 Paid the premiums on property and casualty insurance policies, $6,100. 3 Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $10,800. 5 Purchased additional office equipment on account from Office Necessities Co., $6,900. 6 Received cash from clients on account, $17,300. 10 Paid cash for a newspaper advertisement,…arrow_forwardFor the past several years, Samantha Hogan has operated a part-time consulting business from her home. As of July 1, 20Y9, Samantha decided to move to rented quarters and to operate the business, which was to be known as Arborvite Consulting, on a full-time basis. Arborvite Consulting entered into the following transactions during July: Jul. 1 The following assets were received from Samantha Hogan: cash, $25,700; accounts receivable, $30,200; supplies, $5,100; and office equipment, $12,100. There were no liabilities received. 1 Paid three months’ rent on a lease rental contract, $8,100. 2 Paid the premiums on property and casualty insurance policies, $6,100. 3 Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $10,800. 5 Purchased additional office equipment on account from Office Necessities Co., $6,900. 6 Received cash from clients on account, $17,300. 10 Paid cash for a newspaper advertisement,…arrow_forward
- At the end of the current month, Gil Frank prepared a trial balance for College App Services. The credit side of the trial balance exceeds the debit side by a significant amount. Gil has decided to add the difference to the balance of the miscellaneous expense account in order to complete the preparation of the current month's financial statements by a 5 o'clock deadline. Gil will look for the difference next week when he has more time. Discuss whether Gil is behaving in a professional manner in your opinion.arrow_forwardCompound journal entries. The following transactions took place at the Cook Employment Agency during November 2019. Record the general journal entries that would be made for these transactions. Use a compound entry for each transaction. DATE Nov. in 5 18 23 TRANSACTIONS Performed services for Job Search, Inc., for $20,000; received $9,500 in cash and the client promised to pay the balance in 60 days. Purchased a graphing calculator for $450 and some supplies for $600 from Office Supply; issued Check 1008 for the total. Received Invoice 1602 for $2,500 from Automotive Technicians Repair for repairs to the firm's automobile; issued Check 1009 for half the amount and arranged to pay the other half in 30 days.arrow_forwardA group of students from City Tech’s Hospitality Management Program invested and opened, “Catering for Any Occasion,” an off-premise catering business on June 1, 2021. The trial balance for the first month of business follows. Instructions a) Enter the totals from the trial balance as beginning account balances in the general ledger, and place a check mark in the posting reference column. See the cash account in the general ledger as an example. b) Prepare the adjusting entries for the month of June (see other data below). Use J3 as the page number for your journal. c) Post the adjusting entries to the ledger accounts. d) Prepare an adjusted trial balance at June 30, 2021. Other data: 1. $1200 of supplies has been used during the month. 2. A utility bill for $600 has not been recorded and will not be paid until next month. 3. The insurance policy is for two years. 4. $3,000 of unearned service revenue has been earned at the end of the month. 5. Salaries of $3600 are accrued at June 30.…arrow_forward
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
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