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Problem 4-5A Preparing a work sheet, adjusting and closing entries, and financial statements Problem 4-6A Preparing adjusting, reversing, and next

Problem 4-5A
Preparing a work sheet, adjusting and closing entries, and financial statements
Problem 4-6A
Preparing adjusting, reversing, and next period entries

Preparing Entries and Statements
Problem 4-5A
Preparing a work sheet, adjusting and closing entries, and financial
statements
The following unadjusted trial balance is for Adams Construction Co. as
of the end of its 2005 fiscal year. The June 30, 2004, credit balance of
the owner’s capital account was $52,660, and the owner invested
$25,000 cash in the company during the 2005 fiscal year.
Required
1. Prepare a 10-column work sheet for fiscal year 2005, starting with
the unadjusted trial balance and including adjustments based on these
additional facts:
a. The supplies available at the end of fiscal year 2005 had a cost of
$3,200.
b. The cost of expired insurance for the fiscal year is $3,900.
c. Annual depreciation on equipment is $8,500.
d. The June utilities expense of $550 is not included in the unadjusted
trial balance because the bill arrived after the trial balance was
prepared. The $550 amount owed needs to be recorded.
e. The company’s employees have earned $1,600 of accrued wages at
fiscal year-end.
f. The rent expense incurred and not yet paid or recorded at fiscal
year-end is $200.
g. Additional property taxes of $900 have been assessed for this fiscal
year but have not been paid or recorded in the accounts.
h. The long-term note payable bears interest at 1% per month. The
unadjusted Interest Expense account equals the amount paid for the first
11 months of the 2005 fiscal year. The $240 accrued interest for June
has not yet been paid or recorded. (Note that the company is required to
make a $5,000 payment toward the note payable during the 2006 fiscal
year.)
2. Use the work sheet to enter the adjusting and closing entries; then
journalize them.
3. Prepare the income statement and the statement of owner’s equity
for the year ended June 30 and the classified balance sheet at June 30,
2005.
Analysis Component
4. Analyze the following separate errors and describe how each would
affect the 10-column work sheet. Explain whether the error is likely to
be discovered in completing the work sheet and, if not, the effect of
the error on the financial statements.
a. Assume that the adjustment for supplies used consisted of a credit to
Supplies for $3,200 and a debit for $3,200 to Supplies Expense.
b. When the adjusted trial balance in the work sheet is completed, the
$17,500 Cash balance is incorrectly entered in the Credit column.
Check (3) Total assets, $120,250; current liabilities, $14,290; Net
income, $39,300
Problem 4-6A
Preparing adjusting, reversing, and next period entries
The following six-column table for Bull’s-eye Ranges includes the
unadjusted trial balance as of December 31, 2005.
Required
1. Complete the six-column table by entering adjustments that reflect
the following information:
a. As of December 31, 2005, employees had earned $900 of unpaid and
unrecorded salaries. The next payday is January 4, at which time $1,600
of salaries will be paid.
b. The cost of supplies still available at December 31, 2005, is $2,700.
c. The notes payable requires an interest payment to be made every three
months. The amount of unrecorded accrued interest at December 31, 2005,
is $1,250. The next interest payment, at an amount of $1,500, is due on
January 15, 2006.
d. Analysis of the unearned member fees account shows $5,600 remaining
unearned at December 31, 2005.
e. In addition to the member fees included in the revenue account
balance, the company has earned another $9,100 in unrecorded fees that
will be collected on January 31, 2006. The company is also expected to
collect $8,000 on that same day for new fees earned in January 2006.
f. Depreciation expense for the year is $12,500.
2. Prepare journal entries for the adjustments entered in the six-column
table for part 1.
3. Prepare journal entries to reverse the effects of the adjusting
entries that involve accruals.
4. Prepare journal entries to record the cash payments and cash
collections described for January.
Check (1) Adjusted trial balance totals, $224,000

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