1.
Journal the
1.
Explanation of Solution
Adjusting entries are those entries which are recorded at the end of the year to update the income statement accounts (revenue and expenses) and
Journal the adjusting entries for Incorporation T.
Transaction for adjustment (a):
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
December | 31 | Supplies Expense (+E, –SE) | 600 | |||
Supplies (–A) | 600 | |||||
(Record part of supplies used) |
Table (1)
Working Notes:
Calculation of supplies expense.
Transaction for adjustment (b):
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
December | 31 | Insurance Expense (+E, –SE) | 800 | |||
Prepaid Insurance (–A) | 800 | |||||
(Record part of prepaid insurance expired) |
Table (2)
Transaction for adjustment (c):
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
December | 31 | 3,700 | ||||
3,700 | ||||||
(Record depreciation expense) |
Table (3)
Transaction for adjustment (d):
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
December | 31 | Wages Expense (+E, –SE) | 640 | |||
Wages Payable (+L) | 640 | |||||
(Record accrued expense) |
Table (4)
Transaction for adjustment (e):
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
December | 31 | Income Tax Expense (+E, –SE) | 5,540 | |||
Income Tax Payable (+L) | 5,540 | |||||
(Record accrued expense) |
Table (5)
2.
Prepare an income statement and a classified balance sheet for the current year for Incorporation T.
2.
Explanation of Solution
Prepare an income statement for the current year ended December 31 for Incorporation T.
Incorporation T | ||
Income Statement | ||
For the Current Year Ended December 31 | ||
Particulars | Amount ($) | Amount ($) |
Operating Revenue: | ||
Service revenue | $61,360 | |
Operating Expenses: | ||
Supplies expense | 600 | |
Insurance expense | 800 | |
Depreciation expense | 3,700 | |
Wages expense | 16,840 | |
Remaining expenses | 17,160 | |
Total expenses | 39,100 | |
Operating Income | 22,260 | |
Income tax expense | 5,540 | |
Net Income | $16,720 | |
Earnings per share | $3.34 |
Table (6)
Working Notes:
Calculate earnings per share.
Prepare a classified balance sheet for the current year for Incorporation T.
Incorporation T | |||
Balance Sheet | |||
At December 31 of the Current Year | |||
Assets | Amount ($) | Liabilities and Stockholders’ Equity | Amount ($) |
Current Assets: | Current Liabilities: | ||
Cash | $42,000 | Accounts payable | 3,000 |
11,600 | Wages payable | 640 | |
Supplies | 300 | Income taxes payable | 5,540 |
Total current assets | 53,900 | Total current liabilities | 9,180 |
Service trucks | 19,000 | Note payable, long term | 17,000 |
Accumulated depreciation | (12,900) | Total liabilities | 26,180 |
Other assets | 8,300 | Stockholders' Equity | |
Common stock | 400 | ||
Additional paid-in capital | 19,000 | ||
22,720 | |||
Total stockholders' equity | 42,120 | ||
Total assets | $68,300 | Total liabilities and stockholders' equity | $68,300 |
Table (7)
Working Notes:
Calculate retained earnings.
3.
Prepare the closing entry for Incorporation T for the current year, by using the adjusted balances.
3.
Explanation of Solution
Prepare the closing entry for Incorporation T for the current year, by using the adjusted balances.
Date | Account Title and Explanation | Post. Ref. | Debit ($) | Credit ($) | ||
Service Revenue (–R) | 61,360 | |||||
Supplies Expense (–E) | 600 | |||||
Depreciation Expense (–E) | 3,700 | |||||
Insurance Expense (–E) | 800 | |||||
Wages Expense (–E) | 16,840 | |||||
Remaining Expenses (–E) | 17,160 | |||||
Income Tax Expense (–E) | 1,155 | |||||
Retained earnings (+SE) | 16,720 | |||||
(Record closing of revenues and expenses) |
Table (8)
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