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Q32PSA

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Horngren'S Financial And Managerial Accounting
Found in: Page 233

Short Answer

The unadjusted trial balance of Walton Anvils at December 31, 2018, and the data for the adjustments follow: WALTON ANVILS Unadjusted Trial Balance December 31, 2018 Account Title Prepaid Rent Cash Debit Credit Accounts Receivable Office Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Dividends Retained Earnings Service Revenue Salaries Expense Rent Expense Depreciation Expense—Equipment Supplies Expense Balance $ 13,480 $ 62,100 $ 62,100 7,100 $ 1,000 23,000 6,000 4,600 24,000 4,500 19,500 2,500 14,500 2,320 1,700 Total Adjustment data: a. Unearned Revenue still unearned at December 31, $1,800. b. Prepaid Rent still in force at December 31, $2,100. c. Office Supplies used, $1,500. d. Depreciation, $390. e. Accrued Salaries Expense at December 31, $200. Requirements 1. Open the T-accounts using the balances in the unadjusted trial balance. 2. Complete the worksheet for the year ended December 31, 2018 (optional). 3. Prepare the adjusting entries, and post to the accounts. 4. Prepare an adjusted trial balance. 5. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form. 6. Prepare the closing entries, and post to the accounts. 7. Prepare a post-closing trial balance. 8. Calculate the current ratio for the company

(1) T accounts is mentioned in Step 1.

(2) Worksheet is mentioned in Step 2.

(3) Closing entries are mentioned in Step 3.

(4) Under adjusted trial balance, total debits and credits equals $62,690.

(5) Net income is $18,890, ending balance of retained earnings equals $18,790 and total assets and total liabilities & stockholders’ equity equals $51,890.

(6) Closing entries are recorded and posted in Step 6.

(7) Under post-closing trial balance, total debits and credits equals $53,280.

(8) Current ratio equals 3.23 times.

See the step by step solution

Step by Step Solution

Step-by-Step-Solution  Step 1: T accounts

T accounts are as follows:

Cash

Un. Adj. Bal.

$13,480

Accounts Receivable

Un. Adj. Bal.

$14,500

Prepaid Rent

Un. Adj. Bal.

$2,320

Office Supplies

Un. Adj. Bal.

$1,700

Equipment

Un. Adj. Bal.

$23,000

Accumulated Depreciation—Equipment

$1,000

Un. Adj. Bal.

Accounts Payable

$7,100

Un. Adj. Bal.

Unearned Revenue

$6,000

Un. Adj. Bal.

Common Stock

$24,000

Un. Adj. Bal.

Retained Earnings

$4,500

Un. Adj. Bal.

Dividends

Un. Adj. Bal.

$4,600

Service Revenue

$19,500

Un. Adj. Bal.

Un. Adj. Bal.

$2,500

Step 2: Worksheet

(2) Worksheet is shown as follows:

WALTON ANVILS
Worksheet
December 31, 2018
Unadjusted Trial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance Sheet

Account Names

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Cash

$13,480

$13,480

$13,480

Accounts Receivable

14,500

14,500

14,500

Prepaid Rent

2,320

220

(b)

2,100

2,100

Office

Supplies

1,700

1,500

(c)

200

200

Equipment

23,000

23,000

23,000

Accumulated Depreciation—Equipment

$1,000

390

(d)

1,390

1,390

Accounts Payable

7,100

7,100

7,100

Salaries Payable

200

(e)

200

200

Unearned Revenue

6,000

(a)

4,200

1,800

1,800

Common Stock

24,000

24,000

24,000

Retained Earnings

4,500

4,500

4,500

Dividends

4,600

4,600

4,600

Service Revenue

19,500

4,200

(a)

23,700

23,700

Salaries Expense

2,500

(e)

200

2,700

2,700

Rent Expense

(b)

220

220

220

Depreciation Expense—Equipment

(d)

390

390

390

Supplies Expense

(c)

1,500

1,500

1,500

Total

$62,100

$62,100

$6,510

$6,510

$62,690

$62,690

$4,810

$23,700

$57,880

$38,990

Net Income

18,890

18,890

Total

$23,700

$23,700

$57,880

$57,880

Step 3: Adjusting Entries Recording and Posting

(3) Adjusting entries are as follows:

Date

Accounts and Explanation

Debit

Credit

(a)

Dec. 31

Unearned Revenue

$4,200

Service Revenue

$4,200

To record earned revenue

(b)

Dec. 31

Rent Expense

$220

Prepaid Rent

$220

To record rent expense expired

(c)

Dec. 31

Supplies Expense

$1,500

Office Supplies

$1,500

To record supplies expense

(d)

Dec. 31

Depreciation Expense- Equipment

$390

Accumulated Depreciation-Equipment

$390

To record depreciation expense

(e)

Dec. 31

Salaries Expense

$200

Salaries Payable

$200

To record accrued salaries expense

Unearned Revenue

Dec. 31

$4,200

$6,000

Un. Adj. Bal.

$1,800

Bal.

Service Revenue

$19,500

Un. Adj. Bal.

$4,200

Dec. 31

$23,700

Bal.

Prepaid Rent

Un. Adj. Bal.

$2,320

$220

Dec. 31

Bal.

$2,100

Rent Expense

Dec. 31

$220

Bal.

$220

Office Supplies

Un. Adj. Bal.

$1,700

$1,500

Dec.31

Bal.

$200

Supplies Expense

Un. Adj. Bal.

$1,500

Bal.

$1,500

Accumulated Depreciation—Equipment

$1,000

Un. Adj. Bal.

$390

Dec. 31

$1,390

Bal.

Depreciation Expense

Dec. 31

$390

Bal.

$390

Salaries Expense

Un. Adj. Bal.

$2,500

Dec. 31

$200

Bal.

$2,700

Salaries Payable

$200

Dec. 31

$200

Bal.

Step 4: Adjusting Trial Balance

(4) Adjusted trial balance is shown as follows:

WALTON ANVILS
Adjusted Trial Balance
December 31, 2018

Account Names

Debit

Credit

Cash

$13,480

Accounts Receivable

14,500

Prepaid Rent

2,100

Office Supplies

200

Equipment

23,000

Accumulated Depreciation—Equipment

$1,390

Accounts Payable

7,100

Salaries Payable

200

Unearned Revenue

1,800

Common Stock

24,000

Retained Earnings

4,500

Dividends

4,600

Service Revenue

23,700

Salaries Expense

2,700

Rent Expense

220

Depreciation Expense—Equipment

390

Supplies Expense

1,500

Total

$62,690

$62,690

Step 5: Income statement, Statement of retained earnings, and the classified balance sheet

(5) Income statement is shown as follows:

WALTON ANVILS
Income Statement
Year Ended December 31, 2018

Revenues

Service Revenue

$23,700

Expenses

Salaries Expense

$2,700

Rent Expense

220

Depreciation Expense—Equipment

390

Supplies Expense

1,500

Total Expenses

4,810

Net Income

$18,890

Statement of retained earnings is shown as follows:

WALTON ANVILS

Statement of Retained Earnings

Year Ended December 31, 2018

Retained Earnings, Beginning Balance

$4,500

Net Income for the year

18,890

23,390

Dividends

(4,600)

Retained Earnings, Ending Balance

$18,790

Balance Sheet is shown as follows:

WALTON ANVILS
Balance Sheet
December 31, 2018
Assets

Current Assets:

Cash

$13,480

Accounts Receivable

14,500

Prepaid Rent

2,100

Office Supplies

200

Total Current Assets

$30,280

Property, Plant, and Equipment:

Equipment

$23,000

Less: Accumulated Depreciation- Equipment

(1,390)

21,610

Total Property, Plant, and Equipment:

21,610

Total Assets

$51,890

Liabilities

Current Liabilities:

Accounts Payable

7,100

Salaries Payable

200

Unearned revenue

1,800

Total Current Liabilities:

$9,100

Total Liabilities

$9,100

Stockholders’ Equity

Common Stock

24,000

Retained Earnings

18,790

Total Stockholders’ Equity

42,790

Total Liabilities and Stockholders’ Equity

$51,890

Step 6: Closing entries and posting

(6) Closing entries are as follows:

Date

Accounts and Explanation

Debit

Credit

Dec. 31

Service Revenue

$23,700

Income Summary

$23,700

To close revenue.

Dec. 31

Income Summary

$4,810

Salaries Expense

$2,700

Rent Expense

$220

Depreciation Expense—Equipment

$390

Supplies Expense

$1,500

To close expenses.

Dec. 31

Income Summary

$18,890

Retained Earnings

$18,890

To close Income Summary

Dec. 31

Retained Earnings

$4,600

Dividends

$4,600

To close Dividends

Retained Earnings

Clos.4

$4,600

$4,500

Un. Adj. Bal.

$18,890

Clos.3

$18,790

Bal.

Income Summary

Clos.2

$4,810

$23,700

Clos.1

$18,890

Bal.

Clos.3

$18,890

$0

Bal.

Dividends

Un. Adj. Bal.

$4,600

$4,600

Clos. 4

Bal.

$0

Service Revenue

Clos.1

$23,700

$19,500

Un. Adj. Bal.

$4,200

Dec. 31

$0

Bal.

Rent Expense

Dec. 31

$220

$220

Clos.2

Bal.

$0

Supplies Expense

Un. Adj. Bal.

$1,500

$1,500

Clos.2

Bal.

$0

Depreciation Expense

Dec. 31

$390

$390

Clos.2

Bal.

$0

Salaries Expense

Un. Adj. Bal.

$2,500

$2,700

Clos.2

Dec. 31

$200

Bal.

$0

Step 7: Post-closing Trial Balance

(7) Post-closing trial balance is shown as follows:

WALTON ANVILS
Post-Closing Trial Balance
December 31, 2018

Account Names

Debit

Credit

Cash

$13,480

Accounts Receivable

14,500

Prepaid Rent

2,100

Office Supplies

200

Equipment

23,000

Accumulated Depreciation—Equipment

$1,390

Accounts Payable

7,100

Salaries Payable

200

Unearned Revenue

1,800

Common Stock

24,000

Retained Earnings

18,790

Total

$53,280

$53,280

Step 8: Calculation of Current Ratio

(8) Current ratio is calculated as follows:

Most popular questions for Business-studies Textbooks

Murphy Delivery Service completed the following transactions during December 2018: Dec. 1 Murphy Delivery Service began operations by receiving $13,000 cash and a truck with a fair value of $9,000 from Russ Murphy. The business issued Murphy shares of common stock in exchange for this contribution. 1 Paid $600 cash for a six-month insurance policy. The policy begins December 1. 4 Paid $750 cash for office supplies. 12 Performed delivery services for a customer and received $2,200 cash. 15 Completed a large delivery job, billed the customer, $3,300, and received a promise to collect the $3,300 within one week. 18 Paid employee salary, $800. 20 Received $7,000 cash for performing delivery services. 22 Collected $2,200 in advance for delivery service to be performed later. 25 Collected $3,300 cash from customer on account. 27 Purchased fuel for the truck, paying $150 on account. (Credit Accounts Payable) 28 Performed delivery services on account, $1,400. 29 Paid office rent, $1,400, for the month of December. 30 Paid $150 on account. 31 Cash dividends of $2,500 were paid to stockholders. Requirements

1. Record each transaction in the journal using the following chart of accounts. Explanations are not required. Cash Retained Earnings Accounts Receivable Dividends Office Supplies Income Summary Prepaid Insurance Service Revenue Truck Salaries Expense Accumulated Depreciation—Truck Depreciation Expense—Truck Accounts Payable Insurance Expense Salaries Payable Fuel Expense Unearned Revenue Rent Expense Common Stock Supplies Expense

2. Post the transactions in the T-accounts.

3. Prepare an unadjusted trial balance as of December 31, 2018.

4. Prepare a worksheet as of December 31, 2018 (optional).

5. Journalize the adjusting entries using the following adjustment data and also by reviewing the journal entries prepared in Requirement 1. Post adjusting entries to the T-accounts. CHAPTER 4 Completing the Accounting Cycle 245 Adjustment data: a. Accrued Salaries Expense, $800. b. Depreciation was recorded on the truck using the straight-line method. Assume a useful life of five years and a salvage value of $3,000. c. Prepaid Insurance for the month has expired. d. Office Supplies on hand, $450. e. Unearned Revenue earned during the month, $700. f. Accrued Service Revenue, $450.

6. Prepare an adjusted trial balance as of December 31, 2018.

7. Prepare Murphy Delivery Service’s income statement and statement of retained earnings for the month ended December 31, 2018, and the classified balance sheet on that date. On the income statement, list expenses in decreasing order by amount—that is, the largest expense first, the smallest expense last.

8. Journalize the closing entries, and post to the T-accounts.

9. Prepare a post-closing trial balance as of December 31, 2018.

On December 1, Bob Waldo began an auto repair shop, Waldo’s Quality Automotive. The following transactions occurred during December: Dec. 1 Waldo contributed $70,000 cash to the business in exchange for shares of common stock. 1 Purchased $12,000 of equipment paying cash. 1 Paid $1,750 for a five-month insurance policy starting on December 1. 9 Paid $20,000 cash to purchase land to be used in operations. 10 Purchased office supplies on account, $2,800. 19 Borrowed $15,000 from the bank for business use. Waldo signed a note payable to the bank in the name of the corporation. The note is due in five years. 22 Paid $1,300 for advertising expenses. 26 Paid $900 on account. 28 The business received a bill for utilities to be paid in January, $280. 31 Revenues earned during the month included $16,000 cash and $3,600 on account. 31 Paid employees’ salaries $3,800 and building rent $1,200. Record as a compound entry. 31 The business received $1,440 for auto screening services to be performed next month. 31 Paid cash dividends of $5,500 to stockholders. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Equipment; Accumulated Depreciation—Equipment; Accounts Payable; Utilities Payable; Interest Payable; Unearned Revenue; Notes Payable; Common Stock; Retained Earnings; Dividends; Income Summary; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense—Equipment. Adjustment data: a. Office Supplies used during the month, $1,800. b. Depreciation for the month, $200. c. One month insurance has expired. d. Accrued Interest Expense, $75. Requirements 1. Prepare the journal entries, and post to the T-accounts. 2. Prepare an unadjusted trial balance. 3. Complete the worksheet for the month ended December 31, 2018 (optional). 4. Prepare the adjusting entries, and post to the T-accounts. 5. Prepare an adjusted trial balance.6. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form. 7. Prepare the closing entries, and post to the T-accounts. 8. Prepare a post-closing trial balance.

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