chapter_4_completing_of_the_accounting_cycle

Chapter_4_completing - COMPLETING OF THE ACCOUNTING CYCLE Chapter 4 4-1 Preparing adjusting entries completing the worksheet preparing the

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Unformatted text preview: COMPLETING OF THE ACCOUNTING CYCLE Chapter 4 4-1 Preparing adjusting entries, completing the worksheet, preparing the financial statements, closing entries and post—closing trial balance. Roberta Day, M.D., a podiatrist, adjusts and closes the accounts and prepares financial statements at the end of each calendar year. The worksheet on the following page has been prepared at December 31, 2009. a) Identify and prepare in journal entry form the adjusting entries recorded in the worksheet to: 1. Record supplies used. 2. Record annual depreciation. 3. Record services provided that had been paid for in advance. 4. Record accrued interest. 5. Record accrued salaries. General Journal Account Titles Ref. Debit Credit f 1- or 3 E‘ nun- ~99 . \ k i Q C smqu N _ l“ W 3. L QN®YNA egg-N953 EEEE‘Q (QBNL “r ’\” -"\ “£\“_$L r m “a h ‘k b) Complete the worksheet on the following page. Chapter 4 — Completing the Accounting Cycle Page 45 2&0 massage/x 2t wEBEEoU - v. SEED ow uwwm . £809 _ 0—hour: “OZ 00063 8063 00m 3 0093 mEorr coo.m ooonm omcomxm cocflooaofl 83: 83: T 025me mozmazm L com 0% oEmNmm 8:33 83 83 1 03:5 5285 83 J 183 85mg 3285 o L ( r 832 832 280% L F ll 9% / 08.2 8m 82 H $8me 322% L / flDOaJNV 4 ooodm ooodm omcomxm Eom L 99 90/ 0852 Sea 833 2.55m 80m wooqmflw L 806m 83m @335 ,le .m 8%,,» T f 256m L oooxmm 23:30 Sam .m Q82 83% L r Scam , 2:2-wco: 2%? $82 00w r a com; r ooo.m L oomnm 02:33. 3:33: foal r coo; coo; ozmbi mEzooo< 900 m coonmfi coonm coed Edam EOEEQBQWQ Eoo< 03 3 08% 08.3 32:93am a. a9 , L 83 oooé coo“: Emmi magma ooonw r ooofiw oEmZuoom Bazooo< 8qu 83 89m 58 .5 .5 .5 .5 .5 .5 .5 .5 .5 .5 «81m E2535 coin—«m REF m~=o5~m=aw< moan—am HIE 83F 2:593. eons—«m 2:3:— _ Bani—E 533.32: $3 .3 33283 83m 23> 2: Em 83m :53 -d.2 San Steam c) Prepare the income statement for the year ended December 31, 2009. 1. V r.‘ \\. .m‘ A1 _ \ {m s m 'n‘ 'r . ‘- amva loo \ RE; x§§mwe \qu '3‘... v ‘m - 9 _.m. Nmm I" “.m L_ (1) Prepare the owner’s equity statement for the year ended December 31, 2009. r— F‘KSLM‘ % Eh I“ ~ 8" '““ Q . \“.9 V —. MRKM s . gm _ _— ' \ 1 x .L. ‘ V5 ,, t mi "' Q ““ mg nu ' m \255. 9mm: 33me OLE mgfitxmhfleu 39000 Chapter 4 — Completing the Accounting Cycle Page 47 e) Prepare a balance sheet at December 31, 2009. “‘ ‘E ‘g ‘h ‘5‘ {A ' “ M. 90.9.! M; n “1“. b: m. m \‘. - _ .9 «a z: 3L -‘ ‘3 l 4— % VS = _ Rams}: ‘. \ 00 WK 6 3“ ~_..\ 0.. QB 3.1 ‘S ‘ in R \) -.:\—\» "u p‘ l {a 19—! (JUV ‘ .. ‘ ’ '9A “Lu. n. \.. I "I Page 48 Chapter 4 — Completing the Accounting Cycle f) Prepare journal entries to close the temporary accounts G1 0 (9 mm- :- ~ — -m-_I1 é-I-gmhrm , -—-|m m I; a-I .1 ' -—-—-i :-I - _ I_I' Q9 mu. - mo I-I :-I - Im- -- -—-nr-:ml -- -—-m- -- -—-mn -- -—lml _-I - I—li (‘5) mm- -u. 3.» I ,__, I; ‘-I - ' camel -- -—- l¥ @ Em-Kmn‘ _I; x -- IL"- Fecs Revenue Rent Ex nse 100,000 26,000 (D New N (3 Degradation Bx ensi 3,000 $000® Chapter 4 — The Recording Process Page 49 h) The dollar amount of the entry to close Income Summary appears on which financial statement(s)? meow figgl-wbl é ow neg mm STE;wa - i) The ending balance in R. Day, Capital, aficr the closing emn‘es are posted, appears on which financial statemends)? %D‘\§>«\~\L€ %\ 9 VT . j) Prepare a post-closing trial balance. _:nmm_ Page 50 Chapter 4 ~ Completion of the Accounting Cycle 4—3 Summary of the accounting cycle. a) The steps in the accounting cycle are listed below. Place a number in each blank, indicating the order in which they are perfomed. Prepare an adjusted trial balance Prepare a post-closing trial balance Joumalize the transactions Journalize and post adjusting entries Analyze business transactions Prepare financial statements Prepare a trial balance Post to ledger accounts Reversing entries JournaliZe and post closing entries b) VVhiSh steps in part a can be used in the worksheet? Illllfil’tt Identifying account classifications. a) For the following accounts, indicate their main classification: (A)sset, (C)ontra—asset, (L)iability, (O)wner’s Equity, (R)evenue or (Ehrpense. If the main classification is (A)sset, (C)ontra—asset, or (L)iability, indicate also the subgroup classification, selecting from the following: Current Assets (CA) Intangible Assets (IA) Long—Term Investments (LTI) Current Liabilities (CL) Property, Plant and Equipment (PPE) long-Term Liabilities (LTL) MAIN SUB-GROUP CLASSIFICATION CLASSIFICATION 1. Supplies Pr 2. Accounts payable C: l 3. C. J. Nelson, Capital 0 4. Depreciation expense E S. Prepaid insurance _ 6. Uneamed ticket revenue E 3 7. Accumulated depreciation C : _ Chapter 4 — The Recording Process MAIN SUB-GROUP CLASSIFICATION CLASSIFICATION 8. Notes payable (IO-year) LT \_ 9. Patents and trademarks 10. Investment in Axco stock 1 1 . Ticket revenue l2. Supplies expense ‘ 13. Building 14. Cash 15. Short-tam investments B: B: b) Which of the above accounts will have their balances transferred to the pflanent owner’s equity account through the preparation of closing entries? 0) Give the names of at least two other temporary accounts that will be closed to {is CW W‘MWWQW 4-4 Preparing a classified balance sheet. Prepare a classified balance sheet for Delta Company from the accounts listed below. (Note: $20,000 of the mortgage payable is due for payment next year.) Cash $14,000 Building $100,000 Short-term investments 7,000 Accumulated Depreciation 80,000 Accounts receivable 30,000 Notes payable (due in 90 days) 15,000 Supplies 9,000 Accounts payable 17,000 Prepaid insurance 2,000 Mortgage payable 100,000 Land 100,000 J_. Delta, capital 50,000 Page 5 2 Chapter 4 - Completion of the Accounting Cycle Delta Company Balance Sheet December 31 , 2009 Assets Currelt Assets: —~‘ ’5‘“ S :N a T‘ . " <5 me Lt E: §§§ 2N govtm _ Wymfiw Property, plant & equipment: Liabilities and Owner’s Equity Current liabilities: T ‘ "\ LOng—term liabilities: m PPM?) an n Owner's equity: - '2 Q' '.\.‘ '_M . ,- t, | —'r _ \\ «9 ‘ntg. “\Ct‘ Chapter 4 — Completing the Accounting Cycle Page 53 4—5A Reversing entries. The Katz Company closes its books at the end of each calendar year. The company has a five day work week and pays its employees each Friday. The payroll for the week is $10,000. On Tuesday, December 31, 2008, the following adjusting entry was made for two days of accrued wages. 1 Date Explanation Credit 12/31/08 Salaries Expense Salaries Payable On December 31, 2008, the following closing entry was made to transfer a full year of payroll expense to Income Summary. 4,000 Explanation 12/31/08 520,000 — Salaries Expense — c) Assume that the company does not use reversing entries. Record the payment of the payroll on Friday, January 3, 2009. Explanation Page 54 Chapter 4 — Completing the Accounting Cycle 4-6 |F“'|"OP |O FWD-“>09???” Chapter 4 — Completing the Accounting Cycle d) Assume the company prepares a trial balance as of January 3, 2009. What will the balance in the Salaries Expense account be if the company uses reversing entries? s £9 990 e) What will the balance in the Salaries Expense account be if the company does not use reversing entries? $ (0000 Accounting terms and concepts. Listed below are several accounting terms and concepts. Match the letter of each with the appropriate phrase which states its meaning. Current liabilities Liquidity Order of liquidity Property, plant & equipment Service enterprise Stockholders’ equity Temporary accounts Worksheet Accounting cycle Classified balance sheet Closing entries Correcting entries Current assets Income summary Permanent accounts Post-closing trial balance 13 .0: a arr-a A multi-columned form used to organize accounting data. Revenue, expense and drawing accounts that are closed or zeroed out at the end of the accounting period. Asset, contra—asset, liability and owner’s capital accounts that are not closed or zeroed out at the end of the accounting period. F ourjoumal entries whose purpose is to zero out the temporary accounts and bring the owner’s capital account to the proper year end balance. A temporary account used only in closing revenue and expense accounts. A trial balance that contains only the permanent accounts after the temporary accounts have been zeroed out. Steps in the accounting process that are repeated each accounting period. Page 55 W? W" Whlr’ 10. ll. 12. 13. 14. 15. 16. Unnecessary entries if the records are free of errors. Grouping accounts into subgroups improves the usefulness of this statement. Assets that are expected to be converted into cash or used up within one year A type of business that earns revenue by performing a service, not by selling tangible product. The order in which current assets are expected to be converted into cash. Long-lived assets that are expected to be used by the business, not held for resale. Obligations that are expected to be paid within one year. The ability of the company to pay its bills when they are due. The name given to the owner's equity of a corporation. Page 56 Chapter 4 - Completing the Accounting Cvcle ...
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This note was uploaded on 05/20/2008 for the course ACCOUNTING ACC102 taught by Professor Murphy during the Spring '07 term at Monroe CC.

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Chapter_4_completing - COMPLETING OF THE ACCOUNTING CYCLE Chapter 4 4-1 Preparing adjusting entries completing the worksheet preparing the

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