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Q1CP

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 243

Short Answer

This problem continues the Canyon Canoe Company situation from Chapter 3.

Requirements

1. Complete the worksheet at December 31, 2018 (optional). Use the unadjusted trial balance from Chapter 2 and the adjusting entries from Chapter 3.

2. Prepare an income statement for the two months ended December 31, 2018. Use the worksheet prepared in Requirement 1 or the adjusted trial balance from Chapter 3.

3. Prepare a statement of retained earnings for the two months ended December 31, 2018.

4. Prepare a classified balance sheet (report form) at December 31, 2018. Assume the note payable is long-term.

5. Journalize and post the closing entries at December 31, 2018. Open T-accounts for Income Summary and Retained earnings. Determine the ending balance for each account. Denote each closing amount as Clos. and each account balance as Balance.

6. Prepare a post-closing trial balance at December 31, 2018.

Post Closing Trial Balance Total: $153,890

See the step by step solution

Step by Step Solution

Step 1: Worksheet

Galaxy Theater Production Company
Worksheet
December 31, 2018
Account NamesUnadjusted Trial BalanceAdjustmentsAdjusted Trial Balance
DebitCreditDebitCreditDebitCredit

Cash

$ 12,125

$ 12,125

Accounts Receivables

5,750

$ 1,850

7,600

Office Supplies

1.250

$ 1,085

165

Prepaid Rent

3.000

1,000

2,000

Land

85.000

85,000

Building

35,000

35,000

Accumulated Depreciation – Building

500

$ 500

Canoes

12.000

12,000

Accumulated Depreciation – Canoes

350

350

Accounts Payable

3.050

3,050

Utilities Payable

295

295

Telephone Payable

325

325

Unearned Revenue

750

400

350

Notes Payable

7.200

7,200

Wilson, Capital

136.000

136,000

Wilson, withdrawals

450

450

Canoe Rental Revenue

12.400

1,850

14,250

Rent Expense

1.200

1,000

2,200

Wages Expense

3.300

3,300

Utilities Expense

445

445

Telephone Expense

500

500

Service Revenue

400

400

Salary Expense

1,250

1,250

Outstanding Salary

1,250

1,250

Depreciation Expense – Building

500

500

Depreciation Expense – Canoes

350

350

Interest Expense

50

50

Accrued Interest

50

50

Supplies Expense

1,085

1,085

Total

$ 160,020

$ 160,020

$ 6,485

$ 6,485

$164,020

$ 164,020

Step 2: Income statement

Income Statement
Canyon Canoe Company
Amount

Particular

Canoe Rental Revenue

$ 14,250

Service Revenue

400

Total Revenue

14,650

Rent Expense

$ 2,200

Wages Expense

3,300

Utilities Expense

445

Telephone Expense

500

Salary Expense

1,250

Depreciation Expense – Building

500

Depreciation Expense – Canoes

350

Interest Expense

50

Supplies Expense

1,085

Total Expenses

9,680

Net Income

$ 4,970

Step 3: Statement of retained earnings

Retained Earnings Statement

Particular

Amount

Beginning Balance

0

Add: Net Income

$ 4,970

Less: Withdrawals

450

Ending Balance

$ 4,520

Step 4: Balance sheet

Balance Sheet
December 31, 2018

Assets

Amount

Current Assets

Cash

$ 12,125

Accounts Receivables

7,600

Office Supplies

165

Prepaid Rent

2,000

Total Current Assets

$ 21,890

Non-current Assets

Land

85,000

Building

$ 35,000

Accumulated Depreciation – Building

500

34,500

Canoes

12,000

Accumulated Depreciation – Canoes

350

11,650

Total Non-Current Assets

$ 1,31,150

Total Assets

$ 153,040

Liabilities and Shareholder’s equity

Current Liability

Accounts Payable

3.050

Utilities Payable

295

Telephone Payable

325

Unearned Revenue

350

Outstanding Salary

1,250

Accrued Interest

50

Total Current Liability

$ 5,720

Non-Current Liability

Notes Payable

7,200

Total Non-Current Liability

7,200

Total Liability

12,920

Shareholders’ Equity

Wilson, Capital

$ 136,000

Add: Retained Earnings

4,520

Total Shareholders’ Equity

$ 140,520

Total Liabilities and Shareholders’ Equity

$ 153,040

Step 5: Closing entries and posting them into ledger

Date

Particular

Debit

Credit

2018

Dec 31

Total Revenue

$ 14,650

Income Summary

$ 14,650

Being revenue account closed

Dec 31

Income Summary

9,680

Rent Expense

2,200

Wages Expense

3,300

Utilities Expense

445

Telephone Expense

500

Salary Expense

1,250

Depreciation Expense – Building

500

Depreciation Expense – Canoes

350

W

Interest Expense

50

Supplies Expense

1,085

Being all expenses closed to the income summary

Dec 31

Income Summary

4,970

Retained Earnings

4,970

Being net income closed to retained earnings

Income Summary

Clos. 2

$ 9,680

$ 14,650

Clos. 1

Clos. 3

4,970

0

Retained Earnings

0

Adj. Bal.

Clos. 4

450

$ 4,970

Clos. 3

4,520

Step 6: Post closing trial balance

CANYON CANOE COMPANY
Post Closing Trial Balance
December 31, 2018

Account Title

Debit ($)

Credit ($)

Cash

$ 12,125

Accounts Receivables

7,600

Office Supplies

165

Prepaid Rent

2,000

Land

85,000

Building

35,000

Accumulated Depreciation – Building

$ 500

Canoes

12,000

Accumulated Depreciation – Canoes

350

Accounts Payable

3,050

Utilities Payable

295

Telephone Payable

325

Unearned Revenue

350

Notes Payable

7,200

Wilson, Capital

136,000

Outstanding Salary

1,250

Accrued Interest

50

Retained earnings

4,520

Total

$153,890

$153,890

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