For the past several years, Jeff Horton has operated a part-time consulting business from his home

For the past several years, Jeff Horton has operated a part-time consulting business from his home. As of April 1, 2014, Jeff decided to move to rented quarters and to operate the business, which was to be known as Rosebud Consulting, on a full-time basis. Rosebud Consulting entered into the following transactions during April:

Apr. 1. The following assets were received from Jeff Horton: cash, $20,000; accounts
receivable, $14,700; supplies, $3,300; and office equipment, $12,000. There were
no liabilities received.
 1. Paid three months’ rent on a lease rental contract, $6,000.
 2. Paid the premiums on property and casualty insurance policies, $4,200.
 4. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $9,400.
 5. Purchased additional office equipment on account from Smith Office Supply Co., $8,000.
 6. Received cash from clients on account, $11,700.
10. Paid cash for a newspaper advertisement, $350.
12. Paid Smith Office Supply Co. for part of the debt incurred on April 5, $6,400.
12. Recorded services provided on account for the period April 1–12, $21,900.
14. Paid receptionist for two weeks’ salary, $1,650.

Record the following transactions on Page 2 of the journal.

17. Recorded cash from cash clients for fees earned during the period April 1–16, $6,600.
18. Paid cash for supplies, $725.
20. Recorded services provided on account for the period April 13–20, $16,800.
24. Recorded cash from cash clients for fees earned for the period April 17–24,
$4,450.
26. Received cash from clients on account, $26,500.
27. Paid receptionist for two weeks’ salary, $1,650.
29. Paid telephone bill for April, $540.
30. Paid electricity bill for April, $760.
30. Recorded cash from cash clients for fees earned for the period April 25–30,
$5,160.
30. Recorded services provided on account for the remainder of April, $2,590.
30. Jeff withdrew $18,000 for personal use.

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.)

11 Cash 31 Jeff Horton, Capital
12 Accounts Receivable 32 Jeff Horton, Drawing
14 Supplies 41 Fees Earned
15 Prepaid Rent 51 Salary Expense
16 Prepaid Insurance 52 Supplies Expense
18 Office Equipment 53 Rent Expense
19 Accumulated Depreciation 54 Depreciation Expense
21 Accounts Payable 55 Insurance Expense
22 Salaries Payable 59 Miscellaneous Expense
23 Unearned Fees



2. Post the journal to a ledger of four-column accounts.

3. Prepare an unadjusted trial balance.

4. At the end of April, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6).
a. Insurance expired during April is $350.
b. Supplies on hand on April 30 are $1,225.
c. Depreciation of office equipment for April is $400.
d. Accrued receptionist salary on April 30 is $275.
e. Rent expired during April is $2,000.
f. Unearned fees on April 30 are $2,350.

5. (Optional.) Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet) and complete the spreadsheet.

6. Journalize and post the adjusting entries. Record the adjusting entries on Page 3 of the journal.

7. Prepare an adjusted trial balance.

8. Prepare an income statement, a statement of owner’s equity, and a balance sheet.

9. Prepare and post the closing entries. Record the closing entries on Page 4 of the journal. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry.

10. Prepare a post-closing trial balance.


Answer:














1. and 2.
JOURNAL Page 1
Date
Post.
Ref. Debit Credit
2014
Apr. 1 Cash 11 20,000
Accounts Receivable 12 14,700
Supplies 14 3,300
Office Equipment 18 12,000
Jeff Horton, Capital 31 50,000
1 Prepaid Rent 15 6,000
Cash 11 6,000
2 Prepaid Insurance 16 4,200
Cash 11 4,200
4 Cash 11 9,400
Unearned Fees 23 9,400
5 Office Equipment 18 8,000
Accounts Payable 21 8,000
6 Cash 11 11,700
Accounts Receivable 12 11,700
10 Miscellaneous Expense 59 350
Cash 11 350
12 Accounts Payable 21 6,400
Cash 11 6,400
12 Accounts Receivable 12 21,900
Fees Earned 41 21,900
14 Salary Expense 51 1,650
Cash 11 1,650
JOURNAL Page 2
Date
Post.
Ref. Debit Credit
2014
Apr. 17 Cash 11 6,600
Fees Earned 41 6,600
18 Supplies 14 725
Cash 11 725
20 Accounts Receivable 12 16,800
Fees Earned 41 16,800
24 Cash 11 4,450
Fees Earned 41 4,450
26 Cash 11 26,500
Accounts Receivable 12 26,500
27 Salary Expense 51 1,650
Cash 11 1,650
29 Miscellaneous Expense 59 540
Cash 11 540
30 Miscellaneous Expense 59 760
Cash 11 760
30 Cash 11 5,160
Fees Earned 41 5,160
30 Accounts Receivable 12 2,590
Fees Earned 41 2,590
30 Jeff Horton, Drawing 32 18,000
Cash 11 18,000
2., 6., and 9.
Account: Cash Account No. 11
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 1 1 20,000 20,000
1 1 6,000 14,000
2 1 4,200 9,800
4 1 9,400 19,200
6 1 11,700 30,900
10 1 350 30,550
12 1 6,400 24,150
14 1 1,650 22,500
17 2 6,600 29,100
18 2 725 28,375
24 2 4,450 32,825
26 2 26,500 59,325
27 2 1,650 57,675
29 2 540 57,135
30 2 760 56,375
30 2 5,160 61,535
30 2 18,000 43,535
Account: Accounts Receivable Account No. 12
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 1 1 14,700 14,700
6 1 11,700 3,000
12 1 21,900 24,900
20 2 16,800 41,700
26 2 26,500 15,200
30 2 2,590 17,790
Account: Supplies Account No. 14
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 1 1 3,300 3,300
18 2 725 4,025
30 Adjusting 3 2,800 1,225
Account: Prepaid Rent Account No. 15
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 1 1 6,000 6,000
30 Adjusting 3 2,000 4,000
Account: Prepaid Insurance Account No. 16
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 2 1 4,200 4,200
30 Adjusting 3 350 3,850
Account: Office Equipment Account No. 18
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 1 1 12,000 12,000
5 1 8,000 20,000
Account: Accumulated Depreciation Account No. 19
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 30 Adjusting 3 400 400
Account: Accounts Payable Account No. 21
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 5 1 8,000 8,000
12 1 6,400 1,600
Account: Salaries Payable Account No. 22
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 30 Adjusting 3 275 275
Account: Unearned Fees Account No. 23
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 4 1 9,400 9,400
30 Adjusting 3 7,050 2,350
Account: Jeff Horton, Capital Account No. 31
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 1 1 50,000 50,000
30 Closing 4 53,775 103,775
30 Closing 4 18,000 85,775
Account: Jeff Horton, Drawing Account No. 32
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 30 2 18,000 18,000
30 Closing 4 18,000 — —
Account: Income Summary Account No. 33
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 30 Closing 4 64,550 64,550
30 Closing 4 10,775 53,775
30 Closing 4 53,775 — —
Account: Fees Earned Account No. 41
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 12 1 21,900 21,900
17 2 6,600 28,500
20 2 16,800 45,300
24 2 4,450 49,750
30 2 5,160 54,910
30 2 2,590 57,500
30 Adjusting 3 7,050 64,550
30 Closing 4 64,550 — —
Account: Salary Expense Account No. 51
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 14 1 1,650 1,650
27 2 1,650 3,300
30 Adjusting 3 275 3,575
30 Closing 4 3,575 — —
Account: Supplies Expense Account No. 52
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 30 Adjusting 3 2,800 2,800
30 Closing 4 2,800 — —
Account: Rent Expense Account No. 53
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 30 Adjusting 3 2,000 2,000
30 Closing 4 2,000 — —
Account: Depreciation Expense Account No. 54
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 30 Adjusting 3 400 400
30 Closing 4 400 — —
Account: Insurance Expense Account No. 55
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 30 Adjusting 3 350 350
30 Closing 4 350 — —
Account: Miscellaneous Expense Account No. 59
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Apr. 10 1 350 350
29 2 540 890
30 2 760 1,650
30 Closing 4 1,650 — —
ROSEBUD CONSULTING
Unadjusted Trial Balance
April 30, 2014
Debit
Balances
Credit
Balances
Cash 43,535
Accounts Receivable 17,790
Supplies 4,025
Prepaid Rent 6,000
Prepaid Insurance 4,200
Office Equipment 20,000
Accumulated Depreciation 0
Accounts Payable 1,600
Salaries Payable 0
Unearned Fees 9,400
Jeff Horton, Capital 50,000
Jeff Horton, Drawing 18,000
Fees Earned 57,500
Salary Expense 3,300
Supplies Expense 0
Rent Expense 0
Depreciation Expense 0
Insurance Expense 0
Miscellaneous Expense 1,650
118,500 118,500
5. Optional (Appendix)
ROSEBUD CONSULTING
End-of-Period Spreadsheet (Work Sheet)
For the Month Ended April 30, 2014
Account Title
Unadjusted
Trial Balance Adjustments
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 43,535 43,535 43,535
Accounts Receivable 17,790 17,790 17,790
Supplies 4,025 (b) 2,800 1,225 1,225
Prepaid Rent 6,000 (e) 2,000 4,000 4,000
Prepaid Insurance 4,200 (a) 350 3,850 3,850
Office Equipment 20,000 20,000 20,000
Accum. Depreciation (c) 400 400 400
Accounts Payable 1,600 1,600 1,600
Salaries Payable (d) 275 275 275
Unearned Fees 9,400 (f) 7,050 2,350 2,350
Jeff Horton, Capital 50,000 50,000 50,000
Jeff Horton, Drawing 18,000 18,000 18,000
Fees Earned 57,500 (f) 7,050 64,550 64,550
Salary Expense 3,300 (d) 275 3,575 3,575
Supplies Expense (b) 2,800 2,800 2,800
Rent Expense (e) 2,000 2,000 2,000
Depreciation Expense (c) 400 400 400
Insurance Expense (a) 350 350 350
Miscellaneous Expense 1,650 1,650 1,650
118,500 118,500 12,875 12,875 119,175 119,175 10,775 64,550 108,400 54,625
Net income 53,775 53,775
64,550 64,550 108,400 108,400
6. JOURNAL Page 3
Date
Post.
Ref. Debit Credit
2014 Adjusting Entries
Apr. 30 Insurance Expense 55 350
Prepaid Insurance 16 350
Insurance expired.
30 Supplies Expense 52 2,800
Supplies 14 2,800
Supplies used ($4,025 – $1,225).
30 Depreciation Expense 54 400
Accumulated Depreciation 19 400
Equipment depreciation.
30 Salary Expense 51 275
Salaries Payable 22 275
Accrued salaries.
30 Rent Expense 53 2,000
Prepaid Rent 15 2,000
Rent expired.
30 Unearned Fees 23 7,050
Fees Earned 41 7,050
Unearned fees earned
($9,400 – $2,350).
7.
 ROSEBUD CONSULTING
Adjusted Trial Balance
April 30, 2014
Debit
Balances
Credit
Balances
Cash 43,535
Accounts Receivable 17,790
Supplies 1,225
Prepaid Rent 4,000
Prepaid Insurance 3,850
Office Equipment 20,000
Accumulated Depreciation 400
Accounts Payable 1,600
Salaries Payable 275
Unearned Fees 2,350
Jeff Horton, Capital 50,000
Jeff Horton, Drawing 18,000
Fees Earned 64,550
Salary Expense 3,575
Supplies Expense 2,800
Rent Expense 2,000
Depreciation Expense 400
Insurance Expense 350
Miscellaneous Expense 1,650
119,175 119,175

8. ROSEBUD CONSULTING
Income Statement
For the Month Ended April 30, 2014
Fees earned $64,550
Expenses:
Salary expense $3,575
Supplies expense 2,800
Rent expense 2,000
Depreciation expense 400
Insurance expense 350
Miscellaneous expense 1,650
Total expenses 10,775
Net income $53,775

ROSEBUD CONSULTING
Statement of Owner’s Equity
For the Month Ended April 30, 2014
Jeff Horton, capital, April 1, 2014 $ 0
Investment during month $ 50,000
Net income 53,775
$103,775
Less withdrawals 18,000
Increase in owner’s equity 85,775
Jeff Horton, capital, April 30, 2014 $85,775
ROSEBUD CONSULTING
Balance Sheet
April 30, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $43,535 Accounts payable $1,600
Accounts receivable 17,790 Salaries payable 275
Supplies 1,225 Unearned fees 2,350
Prepaid rent 4,000 Total liabilities $ 4,225
Prepaid insurance 3,850
Total current assets $70,400
Property, plant, and equipment:
Office equipment $20,000 Owner’s Equity
Less accum. depreciation 400 Jeff Horton, capital 85,775
Total property, plant, and
equipment 19,600 Total liabilities and owner’s
Total assets $90,000 equity $90,000
9. JOURNAL Page 4
Date
Post.
Ref. Debit Credit
2014 Closing Entries
Apr. 30 Fees Earned 41 64,550
Income Summary 33 64,550
30 Income Summary 33 10,775
Salary Expense 51 3,575
Supplies Expense 52 2,800
Rent Expense 53 2,000
Depreciation Expense 54 400
Insurance Expense 55 350
Miscellaneous Expense 59 1,650
30 Income Summary 33 53,775
Jeff Horton, Capital 31 53,775
30 Jeff Horton, Capital 31 103,775
Jeff Horton, Drawing 32 103,775
ROSEBUD CONSULTING
Post-Closing Trial Balance
April 30, 2014
Debit
Balances
Credit
Balances
Cash 43,535
Accounts Receivable 17,790
Supplies 1,225
Prepaid Rent 4,000
Prepaid Insurance 3,850
Office Equipment 20,000
Accumulated Depreciation 400
Accounts Payable 1,600
Salaries Payable 275
Unearned Fees 2,350
Jeff Horton, Capital 85,775
90,400 90,400

The unadjusted trial balance of Recessive Interiors at January 31, 2014, the end of the current year, is shown below

The unadjusted trial balance of Recessive Interiors at January 31, 2014, the end of the current year, is shown below.


Recessive Interiors
Unadjusted Trial Balance
January 31, 2014
Debit
Balances
Credit
Balances
11 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,100
13 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
14 Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500
16 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,000
17 Accumulated Depreciation—Equipment . . . . . . . . . . . . . . . . . . . . . . . . 12,000
18 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
19 Accumulated Depreciation—Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,100
21 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
31 Jeanne McQuay, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,400
32 Jeanne McQuay, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
41 Service Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,000
51 Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,000
52 Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,600
53 Truck Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,350
59 Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,450
325,000 325,000


The data needed to determine year-end adjustments are as follows:
a. Supplies on hand at January 31 are $2,850.
b. Insurance premiums expired during the year are $3,150.
c. Depreciation of equipment during the year is $5,250.
d. Depreciation of trucks during the year is $4,000.
e. Wages accrued but not paid at January 31 are $900.


Instructions

1. For each account listed in the unadjusted trial balance, enter the balance in the appropriate Balance column of a four-column account and place a check mark (✓) in the Posting Reference column.

2. (Optional.) Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet) and complete the spreadsheet. Add the accounts listed in part (3) as needed.

3. Journalize and post the adjusting entries, inserting balances in the accounts affected. Record the adjusting entries on Page 26 of the journal. The following additional accounts  from Recessive Interiors’ chart of accounts should be used: Wages Payable, 22; Depreciation Expense—Equipment, 54; Supplies Expense, 55; Depreciation Expense— Trucks, 56; Insurance Expense, 57.

4. Prepare an adjusted trial balance.

5. Prepare an income statement, a statement of owner’s equity (no additional investments were made during the year), and a balance sheet.

6. Journalize and post the closing entries. Record the closing entries on Page 27 of the journal. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry.

7. Prepare a post-closing trial balance.


Answer:










1., 3., and 6.
Account: Cash Account No. 11
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 13,100
Account: Supplies Account No. 13
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 8,000
31 Adjusting 26 5,150 2,850
Account: Prepaid Insurance Account No. 14
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 7,500
31 Adjusting 26 3,150 4,350
Account: Equipment Account No. 16
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 113,000
Account: Accumulated Depreciation—Equipment Account No. 17
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 12,000
31 Adjusting 26 5,250 17,250
Account: Trucks Account No. 18
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 90,000
Account: Accumulated Depreciation—Trucks Account No. 19
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 27,100
31 Adjusting 26 4,000 31,100
Account: Accounts Payable Account No. 21
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 4,500
Account: Wages Payable Account No. 22
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Adjusting 26 900 900
Account: Jeanne McQuay, Capital Account No. 31
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 126,400
31 Closing 27 46,150 172,550
31 Closing 27 3,000 169,550
Account: Jeanne McQuay, Drawing Account No. 32
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 3,000
31 Closing 27 3,000 — —
Account: Income Summary Account No. 33
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Closing 27 155,000 155,000
31 Closing 27 108,850 46,150
31 Closing 27 46,150 — —
Account: Service Revenue Account No. 41
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 155,000
31 Closing 27 155,000 — —
Account: Wages Expense Account No. 51
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 72,000
31 Adjusting 26 900 72,900
31 Closing 27 72,900 — —
Account: Rent Expense Account No. 52
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 7,600
31 Closing 27 7,600 — —
Account: Truck Expense Account No. 53
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 5,350
31 Closing 27 5,350 — —
Account: Depreciation Expense—Equipment Account No. 54
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Adjusting 26 5,250 5,250
31 Closing 27 5,250 — —
Account: Supplies Expense Account No. 55
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Adjusting 26 5,150 5,150
31 Closing 27 5,150 — —
Account: Depreciation Expense—Trucks Account No. 56
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Adjusting 26 4,000 4,000
31 Closing 27 4,000 — —
Account: Insurance Expense Account No. 57
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Adjusting 26 3,150 3,150
31 Closing 27 3,150 — —
Account: Miscellaneous Expense Account No. 59
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Jan. 31 Balance √ 5,450
31 Closing 27 5,450 — —
2. Optional (Appendix)
RECESSIVE INTERIORS
End-of-Period Spreadsheet (Work Sheet)
For the Year Ended January 31, 2014
Account Title
Unadjusted
Trial Balance Adjustments
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 13,100 13,100 13,100
Supplies 8,000 (a) 5,150 2,850 2,850
Prepaid Insurance 7,500 (b) 3,150 4,350 4,350
Equipment 113,000 113,000 113,000
Accum. Depr.—Equipment 12,000 (c) 5,250 17,250 17,250
Trucks 90,000 90,000 90,000
Accum. Depr.—Trucks 27,100 (d) 4,000 31,100 31,100
Accounts Payable 4,500 4,500 4,500
Wages Payable (e) 900 900 900
Jeanne McQuay, Capital 126,400 126,400 126,400
Jeanne McQuay, Drawing 3,000 3,000 3,000
Service Revenue 155,000 155,000 155,000
Wages Expense 72,000 (e) 900 72,900 72,900
Rent Expense 7,600 7,600 7,600
Truck Expense 5,350 5,350 5,350
Depr. Exp.—Equipment (c) 5,250 5,250 5,250
Supplies Expense (a) 5,150 5,150 5,150
Depr. Exp.—Trucks (d) 4,000 4,000 4,000
Insurance Expense (b) 3,150 3,150 3,150
Miscellaneous Expense 5,450 5,450 5,450
325,000 325,000 18,450 18,450 335,150 335,150 108,850 155,000 226,300 180,150
Net income 46,150 46,150
155,000 155,000 226,300 226,300
3. JOURNAL Page 26
Date
Post.
Ref. Debit Credit
2014 Adjusting Entries
Jan. 31 Supplies Expense 55 5,150
Supplies 13 5,150
Supplies used ($8,000 – $2,850).
31 Insurance Expense 57 3,150
Prepaid Insurance 14 3,150
Insurance expired.
31 Depreciation Expense—Equipment 54 5,250
Accumulated Depr.—Equipment 17 5,250
Equipment depreciation.
31 Depreciation Expense—Trucks 56 4,000
Accumulated Depr.—Trucks 19 4,000
Truck depreciation.
31 Wages Expense 51 900
Wages Payable 22 900
Accrued wages.
RECESSIVE INTERIORS
Adjusted Trial Balance
January 31, 2014
Debit
Balances
Credit
Balances
Cash 13,100
Supplies 2,850
Prepaid Insurance 4,350
Equipment 113,000
Accumulated Depreciation—Equipment 17,250
Trucks 90,000
Accumulated Depreciation—Trucks 31,100
Accounts Payable 4,500
Wages Payable 900
Jeanne McQuay, Capital 126,400
Jeanne McQuay, Drawing 3,000
Service Revenue 155,000
Wages Expense 72,900
Rent Expense 7,600
Truck Expense 5,350
Depreciation Expense—Equipment 5,250
Supplies Expense 5,150
Depreciation Expense—Trucks 4,000
Insurance Expense 3,150
Miscellaneous Expense 5,450
335,150 335,150
5. RECESSIVE INTERIORS
Income Statement
For the Year Ended January 31, 2014
Service revenue $155,000
Expenses:
Wages expense $72,900
Rent expense 7,600
Truck expense 5,350
Depreciation expense—equipment 5,250
Supplies expense 5,150
Depreciation expense—trucks 4,000
Insurance expense 3,150
Miscellaneous expense 5,450
Total expenses 108,850
Net income $ 46,150
RECESSIVE INTERIORS
Statement of Owner’s Equity
For the Year Ended January 31, 2014
Jeanne McQuay, capital, February 1, 2013 $126,400
Net income for the year $46,150
Less withdrawals 3,000
Increase in owner’s equity 43,150
Jeanne McQuay, capital, January 31, 2014 $169,550
RECESSIVE INTERIORS
Balance Sheet
January 31, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $13,100 Accounts payable $4,500
Supplies 2,850 Wages payable 900
Prepaid insurance 4,350 Total liabilities $ 5,400
Total current assets $ 20,300
Property, plant, and equipment:
Equipment $113,000 Owner’s Equity
Less accum. depreciation 17,250 $95,750 Jeanne McQuay, capital 169,550
Trucks $ 90,000
Less accum. depreciation 31,100 58,900
Total property, plant, and
equipment 154,650 Total liabilities and owner’s
Total assets $174,950 equity $174,950
6. JOURNAL Page 27
Date
Post.
Ref. Debit Credit
2014 Closing Entries
Jan. 31 Service Revenue 41 155,000
Income Summary 33 155,000
31 Income Summary 33 108,850
Wages Expense 51 72,900
Rent Expense 52 7,600
Truck Expense 53 5,350
Depreciation Expense—Equipment 54 5,250
Supplies Expense 55 5,150
Depreciation Expense—Trucks 56 4,000
Insurance Expense 57 3,150
Miscellaneous Expense 59 5,450
31 Income Summary 33 46,150
Jeanne McQuay, Capital 31 46,150
31 Jeanne McQuay, Capital 31 3,000
Jeanne McQuay, Drawing 32 3,000
RECESSIVE INTERIORS
Post-Closing Trial Balance
January 31, 2014
Debit
Balances
Credit
Balances
Cash 13,100
Supplies 2,850
Prepaid Insurance 4,350
Equipment 113,000
Accumulated Depreciation—Equipment 17,250
Trucks 90,000
Accumulated Depreciation—Trucks 31,100
Accounts Payable 4,500
Wages Payable 900
Jeanne McQuay, Capital 169,550
223,300 223,300

The unadjusted trial balance of La Mesa Laundry at August 31, 2014, the end of the current fiscal year, is shown below

The unadjusted trial balance of La Mesa Laundry at August 31, 2014, the end of the current fiscal year, is shown below.


La Mesa Laundry
Unadjusted Trial Balance
August 31, 2014
Debit
Balances
Credit
Balances
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,800
Laundry Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Laundry Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,800
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,200
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,800
Bobbi Downey, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000
Bobbi Downey, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
Laundry Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248,000
Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,800
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,200
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
400,000 400,000



The data needed to determine year-end adjustments are as follows:
a. Wages accrued but not paid at August 31 are $2,200.
b. Depreciation of equipment during the year is $8,150.
c. Laundry supplies on hand at August 31 are $2,000.
d. Insurance premiums expired during the year are $5,300.


Instructions

1. For each account listed in the unadjusted trial balance, enter the balance in a T account. Identify the balance as “Aug. 31 Bal.” In addition, add T accounts for Wages Payable, Depreciation Expense, Laundry Supplies Expense, Insurance Expense, and Income Summary.

2. (Optional.) Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet) and complete the spreadsheet. Add the accounts listed in part (1) as needed.

3. Journalize and post the adjusting entries. Identify the adjustments by “Adj.” and the new balances as “Adj. Bal.”

4. Prepare an adjusted trial balance.

5. Prepare an income statement, a statement of owner’s equity (no additional investments were made during the year), and a balance sheet.

6. Journalize and post the closing entries. Identify the closing entries by “Clos.”

7. Prepare a post-closing trial balance.



Answer:







1., 3., and 6.
Cash
Aug. 31 Bal. 3,800
Laundry Supplies
Aug. 31 Bal. 9,000 Aug. 31 Adj.
31 Adj. Bal. 2,000
Prepaid Insurance
Aug. 31 Bal. 6,000 Aug. 31 Adj.
31 Adj. Bal. 700
Laundry Equipment
Aug. 31 Bal. 180,800
7,000
5,300
Accumulated Depreciation
Aug. 31 Bal. 49,200
31 Adj. 8,150
31 Adj. Bal. 57,350
Accounts Payable
Aug. 31 Bal. 7,800
Wages Payable
Aug. 31 Adj. 2,200
Bobbi Downey, Capital
Aug. 31 Clos. 2,400 Aug. 31 Bal. 95,000
31 Clos. 27,350
31 Bal. 119,950
Bobbi Downey, Drawing
Aug. 31 Bal. 2,400 Aug. 31 Clos. 2,400
Income Summary
Aug. 31 Clos. 220,650 Aug. 31 Clos. 248,000
Clos. 27,350
Laundry Revenue
248,000
Wages Expense
Rent Expense Utilities
Expense Depreciation
Expense
138,000
43,200
16,000
8,150
Laundry Supplies Expense
Aug. 31 Adj. 7,000 Aug. 31 Clos. 7,000
Insurance Expense
Aug. 31 Adj. 5,300 Aug. 31 Clos. 5,300
Miscellaneous Expense
Aug. 31 Bal. 3,000 Aug. 31 Clos. 3,000
2. Optional (Appendix)
LA MESA LAUNDRY
End-of-Period Spreadsheet (Work Sheet)
For the Year Ended August 31, 2014
Account Title
Unadjusted
Trial Balance Adjustments
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 3,800 3,800 3,800
Laundry Supplies 9,000 (c) 7,000 2,000 2,000
Prepaid Insurance 6,000 (d) 5,300 700 700
Laundry Equipment 180,800 180,800 180,800
Accum. Depreciation 49,200 (b) 8,150 57,350 57,350
Accounts Payable 7,800 7,800 7,800
Wages Payable (a) 2,200 2,200 2,200
Bobbi Downey, Capital 95,000 95,000 95,000
Bobbi Downey, Drawing 2,400 2,400 2,400
Laundry Revenue 248,000 248,000 248,000
Wages Expense 135,800 (a) 2,200 138,000 138,000
Rent Expense 43,200 43,200 43,200
Utilities Expense 16,000 16,000 16,000
Depreciation Expense (b) 8,150 8,150 8,150
Laundry Supplies Exp. (c) 7,000 7,000 7,000
Insurance Expense (b) 5,300 5,300 5,300
Miscellaneous Expense 3,000 3,000 3,000
400,000 400,000 22,650 22,650 410,350 410,350 220,650 248,000 189,700 162,350
Net income 27,350 27,350
248,000 248,000 189,700 189,700
Adjusting Entries
2014
Aug. 31 Wages Expense 2,200
Wages Payable 2,200
Accrued wages.
31 Depreciation Expense 8,150
Accumulated Depreciation 8,150
Equipment depreciation.
31 Laundry Supplies Expense 7,000
Laundry Supplies 7,000
Supplies used ($9,000 – $2,000).
31 Insurance Expense 5,300
Prepaid Insurance 5,300
Insurance expired.
LA MESA LAUNDRY
Adjusted Trial Balance
August 31, 2014
Debit
Balances
Credit
Balances
Cash 3,800
Laundry Supplies 2,000
Prepaid Insurance 700
Laundry Equipment 180,800
Accumulated Depreciation 57,350
Accounts Payable 7,800
Wages Payable 2,200
Bobbi Downey, Capital 95,000
Bobbi Downey, Drawing 2,400
Laundry Revenue 248,000
Wages Expense 138,000
Rent Expense 43,200
Utilities Expense 16,000
Depreciation Expense 8,150
Laundry Supplies Expense 7,000
Insurance Expense 5,300
Miscellaneous Expense 3,000
410,350 410,350
LA MESA LAUNDRY
Income Statement
For the Year Ended August 31, 2014
Laundry revenue $248,000
Expenses:
Wages expense $138,000
Rent expense 43,200
Utilities expense 16,000
Depreciation expense 8,150
Laundry supplies expense 7,000
Insurance expense 5,300
Miscellaneous expense 3,000
Total expenses 220,650
Net income $ 27,350
5.
LA MESA LAUNDRY
Statement of Owner’s Equity
For the Year Ended August 31, 2014
Bobbi Downey, capital, September 1, 2013 $ 95,000
Net income for the year $27,350
Less withdrawals 2,400
Increase in owner’s equity 24,950
Bobbi Downey, capital, August 31, 2014 $119,950
LA MESA LAUNDRY
Balance Sheet
August 31, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $ 3,800 Accounts payable $7,800
Laundry supplies 2,000 Wages payable 2,200
Prepaid insurance 700 Total liabilities $ 10,000
Total current assets $ 6,500
Property, plant, and equipment:
Laundry equipment $180,800
Less accum. depreciation 57,350 Owner’s Equity
Total property, plant, and Bobbi Downey, capital 119,950
equipment 123,450 Total liabilities and owner’s
Total assets $129,950 equity $129,950
Closing Entries
2014
Aug. 31 Laundry Revenue 248,000
Income Summary 248,000
31 Income Summary 220,650
Wages Expense 138,000
Rent Expense 43,200
Utilities Expense 16,000
Depreciation Expense 8,150
Laundry Supplies Expense 7,000
Insurance Expense 5,300
Miscellaneous Expense 3,000
31 Income Summary 27,350
Bobbi Downey, Capital 27,350
31 Bobbi Downey, Capital 2,400
Bobbi Downey, Drawing 2,400
LA MESA LAUNDRY
Post-Closing Trial Balance
August 31, 2014
Debit
Balances
Credit
Balances
Cash 3,800
Laundry Supplies 2,000
Prepaid Insurance 700
Laundry Equipment 180,800
Accumulated Depreciation 57,350
Accounts Payable 7,800
Wages Payable 2,200
Bobbi Downey, Capital 119,950
187,300 187,300