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Q31PSA

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Horngren'S Financial And Managerial Accounting
Found in: Page 232

Short Answer

The unadjusted trial balance of Farish Investment Advisers at December 31, 2018, follows: Adjustment data at December 31, 2018: a. Unearned Revenue earned during the year, $800. b. Office Supplies on hand, $4,500. c. Depreciation for the year, $4,500. d. Accrued Salaries Expense, $5,000. e. Accrued Service Revenue, $6,500. Requirements 1. Prepare a worksheet for Farish Investment Advisers at December 31, 2018. 2. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in account format. 3. Prepare closing entries. Account Title Office Supplies Cash Debit Credit Accounts Receivable Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Notes Payable (long-term) Dividends Service Revenue Insurance Expense Salaries Expense Supplies Expense Interest Expense Rent Expense Balance $ 30,000 $ 198,000 $ 198,000 5,500 $ 9,000 13,000 27,000 21,000 93,000 Retained Earnings 29,500 29,000 2,500 40,000 5,500 5,000 51,000 7,000 28,000 Depreciation Expense—Equipment Total FARISH INVESTMENT ADVISERS Unadjusted Trial Balance December 31, 2018

(1) Worksheet is mentioned in Step 1.

(2) Net income is $35,300, ending balance of retained earnings equals $35,800 and total assets and total liabilities & stockholders’ equity equals $106,500.

(3) Closing entries are mentioned in Step 3.

See the step by step solution

Step by Step Solution

Step-by-Step-SolutionStep 1: Worksheet

(1) Worksheet is shown as follows:

FARISH INVESTMENT ADVISERS
Worksheet
December 31, 2018

Unadjusted Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet

Account Names

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Cash

$30,000

$30,000

$30,000

Accounts Receivable

51,000

(e)

$6,500

57,500

57,500

Office

Supplies

7,000

$2,500

(b)

4,500

4,500

Equipment

28,000

28,000

28,000

Accumulated Depreciation—Equipment

$9,000

4,500

(c)

13,500

13,500

Accounts Payable

13,000

13,000

13,000

Salaries Payable

5,000

(d)

5,000

5,000

Unearned Revenue

5,500

(a)

800

4,700

4,700

Notes Payable

21,000

21,000

21,000

Common Stock

27,000

27,000

27,000

Retained Earnings

29,500

29,500

29,500

Dividends

29,000

29,000

29,000

Service Revenue

93,000

7,300

(e,a)

100,300

100,300

Insurance Expense

2,500

2,500

2,500

Salaries Expense

40,000

(d)

5,000

45,000

45,000

Supplies Expense

(b)

2,500

2,500

2,500

Interest Expense

5,500

5,500

5,500

Rent Expense

5,000

5,000

5,000

Depreciation Expense—Equipment

(c)

4,500

4,500

4,500

Total

$198,000

$198,000

$19,300

$19,300

$214,000

$214,000

$65,000

$100,300

$149,000

$113,700

Net Income

35,300

35,300

Total

$100,300

$100,300

$149,000

$149,000

Step 2: Income statement, Statement of retained earnings, and Classified balance sheet

Income statement is shown as follows:

FARISH INVESTMENT ADVISERS
Income Statement
Year Ended December 31, 2018

Revenues

Service Revenue

$100,300

Expenses

Insurance Expense

$2,500

Salaries Expense

45,000

Supplies Expense

2,500

Interest Expense

5,500

Rent Expense

5,000

Depreciation Expense—Equipment

4,500

Total Expenses

65,000

Net Income

$35,300

Statement of retained earnings is shown as follows:

FARISH INVESTMENT ADVISERS
Statement of Retained Earnings
Year Ended December 31, 2018

Retained Earnings, Beginning Balance

$29,500

Net Income for the year

35,300

64,800

Dividends

(29,000)

Retained Earnings, November 30, 2018

$35,800

Balance Sheet is shown as follows:

FARISH INVESTMENT ADVISERS
Balance Sheet
December 31, 2018
Assets

Current Assets:

Cash

$30,000

Accounts Receivable

57,500

Office Supplies

4,500

Total Current Assets

$92,000

Property, Plant, and Equipment:

Equipment

$28,000

Less: Accumulated Depreciation- Equipment

(13,500)

14,500

Total Property, Plant, and Equipment:

14,500

Total Assets

$106,500

Liabilities

Current Liabilities:

Accounts Payable

13,000

Salaries Payable

5,000

Unearned revenue

4,700

Total Current Liabilities:

$22,700

Long-term Liabilities

Notes Payable

21,000

Total Liabilities

43,700

Stockholders’ Equity

Common Stock

27,000

Retained Earnings

35,800

Total Stockholders’ Equity

62,800

Total Liabilities and Stockholders’ Equity

$106,500

Step 3: Closing entries

(3) Closing entries are as follows:

Date

Accounts and Explanation

Debit

Credit

Dec. 31

Service Revenue

$100,300

Income Summary

$100,300

To close revenue.

Dec. 31

Income Summary

$65,000

Insurance Expense

$2,500

Salaries Expense

$45,000

Supplies Expense

$2,500

Interest Expense

$5,500

Rent Expense

$5,000

Depreciation Expense—Equipment

$4,500

To close expenses.

Dec. 31

Income Summary

$35,300

Retained Earnings

$35,300

To close Income Summary

Dec. 31

Retained Earnings

$29,500

Dividends

$29,500

To close Dividends

Most popular questions for Business-studies Textbooks

Kathy Wintz formed a lawn service business as a summer job. To start the corporationon May 1, 2018, she deposited $1,000 in a new bank account in the name of the business. The $1,000 consisted of a $600 loan from Bank One to her company, Wintz Lawn Service, and $400 of her own money. The company issued $400 of common stock to Wintz. Wintz rented lawn equipment, purchased supplies, and hired other students to mow and trim customers’ lawns.

At the end of each month, Wintz mailed bills to the customers. On August 31, she was ready to dissolve the corporation and return to college. Because she was so busy, she kept few records other than the checkbook and a list of receivables from customers.

At August 31, the business’s checkbook shows a balance of $2,000, and customers still owe $750. During the summer, the business collected $5,500 from customers. The business checkbook lists payments for supplies totaling $400, and it still has gasoline, weed trimmer cord, and other supplies that cost a total of $50.

The business paid employees $1,800 and still owes them $300 for the final week of the summer. Wintz rented some equipment from Ludwig’s Machine Shop. On May 1, the business signed a six-month rental agreement on mowers and paid $600 for the full rental period in advance. Ludwig’s will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Wintz has kept the mowers in excellent condition. In fact, the business had to pay $300 to repair a mower.To transport employees and equipment to jobs, Wintz used a trailer that the business bought for $300. The business estimates that the summer’s work used up one-third of the trailer’s service potential. The business checkbook lists a payment of $500 for cash dividends paid during the summer. The business paid the loan back during August. (For simplicity, ignore any interest expense associated with the loan.)

Requirements

1. As a team, prepare the income statement and the statement of retained earnings of Wintz Lawn Service for the four months May 1 through August 31, 2018.

2. Prepare the classified balance sheet (report form) of Wintz Lawn Service at August 31, 2018.

3. Was Wintz’s summer work successful? Give your team’s reason for your answer.

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