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Chapter 6: Closing Entries and the Postclosing Trial Balance
Chapter Opener: Thinking Critically
Students should recognize that financial statements can be used to evaluate net profit or loss, return on
investments, expense trends, or growth in company net assets. The income statement is used to measure
net income or loss, while the balance sheet can be used to measure growth in assets or liabilities.
Executives and managers would use financial statements to make decisions about expanding business,
investing in new ventures, or hiring new employees.
Fast Facts
• Carnival has 27,000 employees, 24,000 of these employees work on board the company’s fleet of
20 cruise ships.
• Of the 3 million passengers Carnival serves annually, approximately 1,000,000 are seniors and 500,000
are children.
• Carnival became a publicly traded company in 1987.
• In 2003, Carnival Corporation merged with P & O Princess Cruises PLC, creating a global vacation leader
with 12 brands encompassing 66 ships and more than 100,000 lower berths, making it one of the largest
leisure travel companies in the world.
Accounting on the Job: Thinking Critically
Students’ responses will vary. A strong understanding of accounting procedures and tasks would be
beneficial to this professional. A computer science degree, along with several years of programming
experience, good communication skills, and excellent problem-solving abilities would also be helpful.
Accounting on the Job: Internet Application
Students can go to www.greatplains.com, www.peachtree.com, and www.microsoft.com. Job opportunities
selected by students will vary. Answers should include the job title, job description, education, and skill
requirements.
Managerial Implications
Answers will vary but could include monthly or quarterly. Students should want financial statements frequently
so that trends can be observed and timely decisions made before the business is negatively impacted.
Discussion Questions
These questions are designed to check the students’ understanding of the new terms, concepts, and
procedures presented in the chapter.
1. Worksheet
2. Balances of revenue and expense accounts are transferred to Income Summary. Next the balance of
the Income Summary account is transferred to the owner’s equity account.
3. Transfer results of operations to the owner’s capital account; Reduce balances of revenue, expense,
and drawing accounts to zero
4. Adjustments columns of the worksheet
5. Journalize and post adjusting entries; Journalize and post closing entries; Prepare a postclosing trial
balance
6. Source document info to general journal, to general ledger, to worksheet, to financial statements
7. (1) analyze
(2) journalize
(3) post
(4) prepare worksheet
(5) prepare financial statements
(6) journalize and post adjusting entries
(7) journalize and post closing entries
(8) prepare postclosing trial balance
(9) interpret financial information.
8. Steps to classify, record, and summarize financial data
9. Asset, liability, and owner’s capital
10. Avoids errors, proves total debits and credits are equal after the closing process.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Exercises
Exercise 6.1
GENERAL JOURNAL
Date
PAGE 4
Post.
Ref.
Description
Debit
Credit
Closing Entries
2007
Dec. 31
31
31
31
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eugene Henderson, Capital . . . . . . . . . . . . . . . . . . . .
Eugene Henderson, Capital . . . . . . . . . . . . . . . . . . . . . .
Eugene Henderson, Drawing . . . . . . . . . . . . . . . . . . .
Exercise 6.2
1. Analyze transactions.
2. Journalize the transactions.
3. Post the journal entries.
4. Prepare a worksheet.
5. Prepare financial statements.
6. Record adjusting entries.
7. Record closing entries.
8. Prepare a postclosing trial balance.
9. Interpret the financial information.
Exercise 6.3
1. Cash
2. Accounts Receivable
3. Supplies
4. Equipment
5. Accumulated Depreciation
6. Accounts Payable
7. Jane Nelson, Capital
94 䡲 Chapter 6
85,000
85,000
45,800
28,000
7,200
4,000
3,600
3,000
39,200
39,200
24,000
24,000
Exercise 6.4
1. E
2. B
3. I
4. B
5. B
6. I
7. B
8. B
9. I
10. B
11. B, E
12. I, E
13. B
14. I
15. B
Exercise 6.5
1. Total revenue for the period is $23,250.
2. Total expenses for the period are $15,150.
3. Net income for the period is $8,100.
4. Owner’s withdrawals for the period are $3,000.
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Exercise 6.6
GENERAL JOURNAL
PAGE 4
Description
Post.
Ref.
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . .
Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dennis Ortiz, Capital . . . . . . . . . . . . . . . . . . . . . . . . .
Dennis Ortiz, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dennis Ortiz, Drawing . . . . . . . . . . . . . . . . . . . . . . . .
401
399
399
510
511
514
517
518
519
523
399
301
301
302
Date
Debit
Credit
Closing Entries
2007
Mar. 31
31
31
31
138,000
138,000
103,290
5,040
4,800
14,400
70,800
1,950
2,700
3,600
34,710
34,710
3,000
3,000
GENERAL LEDGER
ACCOUNT
Dennis Ortiz, Capital
Date
2007
Mar. 31
31
31
Description
Balance
Closing
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
✓
J4
J4
Debit
Description
Closing
Closing
Closing
58,800
93,510
90,510
34,710
3,000
ACCOUNT NO.
Post.
Ref.
Debit
✓
J4
3,000
J4
J4
J4
Debit
Credit
138,000
103,290
34,710
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
302
Balance
Debit
Credit
Credit
3,000
–0–
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Income Summary
Date
2007
Mar. 31
31
31
Post.
Ref.
Dennis Ortiz, Drawing
Date
2007
Mar. 31
31
ACCOUNT NO.
399
Balance
Debit
Credit
138,000
34,710
–0–
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Description
Balance
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
138,000
–0–
138,000
ACCOUNT NO.
Debit
✓
J4
5,040
Description
Balance
Closing
96 䡲 Chapter 6
5,040
–0–
ACCOUNT NO.
Post.
Ref.
Debit
✓
J4
4,800
Debit
✓
J4
4,800
–0–
14,400
Debit
✓
J4
14,400
–0–
70,800
✓
J4
Debit
517
Balance
Debit
Credit
Credit
70,800
–0–
ACCOUNT NO.
Post.
Ref.
514
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
511
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
510
Balance
Debit
Credit
Credit
Supplies Expense
Date
2007
Mar. 31
31
Post.
Ref.
401
Balance
Debit
Credit
Credit
Salaries Expense
Date
2007
Mar. 31
31
✓
J4
Debit
Rent Expense
Date
2007
Mar. 31
31
Post.
Ref.
Insurance Expense
Date
2007
Mar. 31
31
ACCOUNT NO.
Depreciation Expense—Equipment
Date
2007
Mar. 31
31
Page 96
Fees Income
Date
2007
Mar. 31
31
2:41 PM
Credit
1,950
518
Balance
Debit
Credit
1,950
–0–
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ACCOUNT
Page 97
Telephone Expense
Date
Description
2007
Mar. 31
31
Post.
Ref.
Debit
2,700
Utilities Expense
Date
Description
2,700
–0–
ACCOUNT NO.
Post.
Ref.
Debit
Credit
✓
J4
Balance
Closing
519
Balance
Debit
Credit
Credit
✓
J4
Balance
Closing
ACCOUNT
2007
Mar. 31
31
ACCOUNT NO.
3,600
523
Balance
Debit
Credit
3,600
–0–
Exercise 6.7
GENERAL JOURNAL
Date
PAGE 4
Post.
Ref.
Description
Debit
Credit
Closing Entries
2007
Dec. 31
31
Herman Victoria, Capital . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Herman Victoria, Capital . . . . . . . . . . . . . . . . . . . . . . . .
Herman Victoria, Drawing . . . . . . . . . . . . . . . . . . . . . .
27,000
27,000
3,000
3,000
The new balance of Herman Victoria, Capital is $54,000.
($84,000 – $27,000 – $3,000)
Exercise 6.8
Analyze Transactions
↓
Journalize Transactions
↓
Post Transactions
↓
Prepare a Worksheet
↓
Prepare Financial Statements
↓
Record Adjusting Entries
↓
Record Closing Entries
↓
Prepare Postclosing Trial Balance
↓
Interpret Financial Information
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Problems
Problem 6.1A
GENERAL JOURNAL
Date
Description
PAGE 3
Post.
Ref.
Debit
Credit
Adjusting Entries
2007
Jan. 31
31
31
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Office Equipment . . . . . . . . . . .
Accumulated Depreciation—Office Equipment . . . . .
560
560
3,000
3,000
1,120
1,120
GENERAL JOURNAL
Date
Description
PAGE 4
Post.
Ref.
Debit
Credit
Closing Entries
2007
Jan. 31
31
31
31
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Travel Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Office Equipment . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lou Pelton, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lou Pelton, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lou Pelton, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . .
77,000
77,000
56,200
41,200
460
940
8,920
560
3,000
1,120
20,800
20,800
4,800
4,800
Analyze: Credit the drawing account; debit the capital account.
98 䡲 Chapter 6
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Problem 6.2A
GENERAL JOURNAL
PAGE 3
Description
Post.
Ref.
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Advertising . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . . . .
Accumulated Depreciation—Equipment . . . . . . . . . . .
517
121
526
131
523
142
Date
Debit
Credit
Adjusting Entries
2007
Dec. 31
31
31
600
600
750
750
600
600
GENERAL JOURNAL
PAGE 4
Description
Post.
Ref.
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Connie Youngblood, Capital . . . . . . . . . . . . . . . . . . . .
Connie Youngblood, Capital . . . . . . . . . . . . . . . . . . . . . .
Connie Youngblood, Drawing . . . . . . . . . . . . . . . . . . .
401
399
399
511
514
517
523
526
399
301
301
302
Date
Debit
Credit
Closing Entries
2007
Dec. 31
31
31
31
18,750
18,750
6,000
3,600
450
600
600
750
12,750
12,750
2,100
2,100
GENERAL LEDGER
ACCOUNT
Date
2007
Dec. 31
31
Description
Balance
Adjusting
ACCOUNT
Date
2007
Dec. 31
31
Supplies
ACCOUNT NO.
Post.
Ref.
Debit
✓
J3
Description
Balance
Adjusting
Balance
Debit
Credit
Credit
600
Prepaid Advertising
1,500
900
ACCOUNT NO.
Post.
Ref.
✓
J3
Debit
Credit
750
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
121
131
Balance
Debit
Credit
6,000
5,250
Chapter 6 䡲 99
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Adjusting
Description
Description
Balance
Closing
Description
Closing
Closing
Closing
ACCOUNT
Balance
Closing
ACCOUNT
2,100
Debit
✓
J4
2,100
Description
Balance
Closing
100 䡲 Chapter 6
2,100
–0–
ACCOUNT NO.
Post.
Ref.
Debit
18,750
18,750
12,750
–0–
6,000
12,750
✓
J4
Debit
18,750
–0–
18,750
✓
J4
Debit
401
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
399
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
302
Balance
Debit
Credit
Credit
Salaries Expense
Date
2007
Dec. 31
31
Post.
Ref.
301
33,000
45,750
43,650
12,750
ACCOUNT NO.
J4
J4
J4
Description
600
Balance
Debit
Credit
Credit
Fees Income
Date
2007
Dec. 31
31
✓
J4
J4
Debit
Income Summary
Date
2007
Dec. 31
31
31
600
ACCOUNT NO.
Post.
Ref.
142
Balance
Debit
Credit
Credit
Connie Youngblood, Drawing
Date
ACCOUNT
Debit
J3
Balance
Closing
Closing
ACCOUNT
ACCOUNT NO.
Connie Youngblood, Capital
Date
2007
Dec. 31
31
Post.
Ref.
Description
ACCOUNT
2007
Dec. 31
31
31
Page 100
Accumulated Depreciation—Equipment
Date
2007
Dec. 31
2:41 PM
Credit
3,600
511
Balance
Debit
Credit
3,600
–0–
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ACCOUNT
Date
2007
Dec. 31
31
Balance
Closing
Date
Adjusting
Closing
Date
Adjusting
Closing
Date
2007
Dec. 31
31
Post.
Ref.
Debit
✓
J4
450
Debit
J3
J4
Post.
Ref.
600
600
Adjusting
Closing
600
–0–
ACCOUNT NO.
Debit
J3
J4
600
600
Debit
J3
J4
523
Balance
Debit
Credit
Credit
600
–0–
ACCOUNT NO.
Post.
Ref.
517
Balance
Debit
Credit
Credit
Advertising Expense
Description
450
–0–
ACCOUNT NO.
Post.
Ref.
514
Balance
Debit
Credit
Credit
Depreciation Expense—Equipment
Description
ACCOUNT
ACCOUNT NO.
Supplies Expense
Description
ACCOUNT
2007
Dec. 31
31
Utilities Expense
Description
ACCOUNT
2007
Dec. 31
31
Page 101
Credit
750
750
526
Balance
Debit
Credit
750
–0–
YOUNGBLOOD ENTERPRISES
Postclosing Trial Balance
December 31, 2007
Account Name
Debit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Advertising . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Depreciation—Equipment . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . .
Connie Youngblood, Capital . . . . . . . . . . . .
23,100
3,000
900
5,250
15,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,250
Credit
600
3,000
43,650
47,250
Analyze: Fifteen accounts are listed in the Adjusted Trial Balance section. Eight accounts are listed on the
Postclosing Trial Balance.
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Problem 6.3A
GENERAL JOURNAL
PAGE 4
Description
Post.
Ref.
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melissa Vinzant, Capital . . . . . . . . . . . . . . . . . . . . . . .
Melissa Vinzant, Capital . . . . . . . . . . . . . . . . . . . . . . . . .
Melissa Vinzant, Drawing . . . . . . . . . . . . . . . . . . . . . .
401
399
399
511
514
517
519
523
399
301
301
302
Date
Debit
Credit
Closing Entries
2007
Dec. 31
31
31
31
69,000
69,000
22,410
2,400
450
1,800
14,400
3,360
46,590
46,590
3,600
3,600
GENERAL LEDGER
ACCOUNT
Melissa Vinzant, Capital
Date
2007
Dec. 1
31
31
Debit
Balance
Closing
3,600
Debit
✓
J4
Description
3,600
Closing
Closing
Closing
102 䡲 Chapter 6
3,600
–0–
ACCOUNT NO.
Post.
Ref.
J4
J4
J4
Debit
Credit
69,000
22,410
46,590
302
Balance
Debit
Credit
Credit
Income Summary
Date
27,810
74,400
70,800
46,590
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Melissa Vinzant, Drawing
Description
ACCOUNT
2007
Dec. 31
31
31
✓
J4
J4
Balance
Closing
Closing
Date
2007
Dec. 31
31
Post.
Ref.
Description
ACCOUNT
ACCOUNT NO.
399
Balance
Debit
Credit
69,000
46,590
–0–
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Price_SM_ch06.qxd
10/26/05
2:41 PM
ACCOUNT
Date
2007
Dec. 31
31
Balance
Closing
Date
Balance
Closing
Date
Balance
Closing
Date
2007
Dec. 31
31
Balance
Closing
Date
2007
Dec. 31
31
Date
2007
Dec. 31
31
69,000
–0–
69,000
ACCOUNT NO.
Post.
Ref.
Debit
✓
J4
Post.
Ref.
Balance
Closing
450
Balance
Closing
450
–0–
ACCOUNT NO.
Post.
Ref.
Debit
✓
J4
1,800
Debit
✓
J4
1,800
–0–
14,400
Debit
✓
J4
519
Balance
Debit
Credit
Credit
14,400
–0–
ACCOUNT NO.
Post.
Ref.
517
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
514
Balance
Debit
Credit
Credit
Utilities Expense
Description
2,400
–0–
ACCOUNT NO.
✓
J4
511
Balance
Debit
Credit
Credit
2,400
Debit
401
Balance
Debit
Credit
Credit
Salaries Expense
Description
ACCOUNT
✓
J4
Debit
Rent Expense
Description
ACCOUNT
Post.
Ref.
Depreciation Expense—Equipment
Description
ACCOUNT
ACCOUNT NO.
Advertising Expense
Description
ACCOUNT
2007
Dec. 31
31
Fees Income
Description
ACCOUNT
2007
Dec. 31
31
Page 103
Credit
3,360
523
Balance
Debit
Credit
3,360
–0–
Analyze: The balance in the Salaries Expense account is $0.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 6 䡲 103
104 䡲 Chapter 6
Totals
Net Income
62,100
9,900
8,000
6,000
40,000
Cash
Accounts Receivable
Supplies
Prepaid Advertising
Equipment
Accumulated Depreciation—Equip.
Accounts Payable
Clifton Davis, Capital
Clifton Davis, Drawing
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Advertising Expense
Depreciation Expense—Equip.
141,000
9,600
1,400
4,000
Debit
141,000
60,000
10,000
71,000
Credit
6,960
(a) 3,200
(b) 2,800
(c) 960
Debit
6,960
(c) 960
(a) 3,200
(b) 2,800
Credit
Adjustments
141,960
9,600
1,400
3,200
2,800
960
4,000
62,100
9,900
4,800
3,200
40,000
Debit
141,960
60,000
960
10,000
71,000
Credit
Adjusted
Trial Balance
60,000
60,000
60,000
60,000
Credit
17,960
42,040
9,600
1,400
3,200
2,800
960
Debit
Income
Statement
124,000
124,000
4,000
62,100
9,900
4,800
3,200
40,000
Debit
124,000
81,960
42,040
960
10,000
71,000
Credit
Balance Sheet
2:41 PM
Trial Balance
CLIFTON AUTO DETAILING SERVICE
Worksheet
Month Ended December 31, 2007
10/26/05
Account Name
Problem 6.4A
Price_SM_ch06.qxd
Page 104
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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2:41 PM
Page 105
GENERAL JOURNAL
Date
PAGE 3
Post.
Ref.
Description
Debit
Credit
Adjusting Entries
(a)
2007
Dec. 31
31
31
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Advertising . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
Depreciation Expense—Equipment . . . . . . . . . . . . . . . .
Accumulated Depreciation—Equipment . . . . . . . . . . .
517
121
3,200
526
131
2,800
523
142
960
3,200
2,800
960
GENERAL JOURNAL
PAGE 4
Description
Post.
Ref.
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clifton Davis, Capital . . . . . . . . . . . . . . . . . . . . . . . . .
Clifton Davis, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clifton Davis, Drawing . . . . . . . . . . . . . . . . . . . . . . . .
401
399
399
511
514
517
523
526
399
301
301
302
Date
Debit
Credit
Closing Entries
2007
Dec. 31
31
31
31
60,000
60,000
17,960
9,600
1,400
3,200
960
2,800
42,040
42,040
4,000
4,000
GENERAL LEDGER
ACCOUNT
Date
2007
Dec. 31
31
Description
Balance
Adjusting
ACCOUNT
Date
2007
Dec. 31
31
Supplies
ACCOUNT NO.
Post.
Ref.
Debit
✓
J3
Description
Balance
Adjusting
Balance
Debit
Credit
Credit
3,200
Prepaid Advertising
8,000
4,800
ACCOUNT NO.
Post.
Ref.
✓
J3
Debit
Credit
2,800
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
121
131
Balance
Debit
Credit
6,000
3,200
Chapter 6 䡲 105
Price_SM_ch06.qxd
ACCOUNT
10/26/05
Description
Adjusting
ACCOUNT
Description
Balance
Closing
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
Description
Closing
Closing
Closing
ACCOUNT
Balance
Closing
2007
Dec. 31
31
Post.
Ref.
✓
J4
J4
Debit
Description
Balance
Closing
106 䡲 Chapter 6
71,000
113,040
109,040
42,040
4,000
ACCOUNT NO.
Post.
Ref.
Debit
✓
J4
4,000
Debit
4,000
–0–
60,000
60,000
42,040
–0–
17,960
42,040
✓
J4
Debit
60,000
–0–
60,000
✓
J4
Debit
401
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
399
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
302
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Salaries Expense
Date
960
ACCOUNT NO.
J4
J4
J4
Description
ACCOUNT
960
Fees Income
Date
2007
Dec. 31
31
J3
142
Balance
Debit
Credit
Credit
Income Summary
Date
2007
Dec. 31
31
31
Debit
Clifton Davis, Drawing
Date
2007
Dec. 31
31
Post.
Ref.
ACCOUNT NO.
Clifton Davis, Capital
Date
2007
Dec. 31
31
31
Page 106
Accumulated Depreciation—Equipment
Date
2007
Dec. 31
2:41 PM
Credit
9,600
511
Balance
Debit
Credit
9,600
–0–
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Price_SM_ch06.qxd
10/26/05
2:41 PM
ACCOUNT
Utilities Expense
Date
2007
Dec. 31
31
Description
Balance
Closing
ACCOUNT
Description
Adjusting
Closing
ACCOUNT
Description
Adjusting
Closing
ACCOUNT
Debit
✓
J4
1,400
Description
Adjusting
Closing
1,400
–0–
ACCOUNT NO.
Post.
Ref.
Debit
J3
J4
Post.
Ref.
3,200
3,200
3,200
–0–
ACCOUNT NO.
J3
J4
960
960
Debit
J3
J4
523
Balance
Debit
Credit
Credit
960
–0–
ACCOUNT NO.
Post.
Ref.
517
Balance
Debit
Credit
Credit
Debit
514
Balance
Debit
Credit
Credit
Advertising Expense
Date
2007
Dec. 31
31
Post.
Ref.
Depreciation Expense—Equipment
Date
2007
Dec. 31
31
ACCOUNT NO.
Supplies Expense
Date
2007
Dec. 31
31
Page 107
Credit
2,800
2,800
526
Balance
Debit
Credit
2,800
–0–
CLIFTON AUTO DETAILING SERVICE
Postclosing Trial Balance
December 31, 2007
Account Name
Debit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Advertising . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Depreciation—Equipment . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . .
Clifton Davis, Capital . . . . . . . . . . . . . . . . .
62,100
9,900
4,800
3,200
40,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120,000
Credit
960
10,000
109,040
120,000
Analyze: Total debits of $124,000 were posted to the general ledger to complete the closing entries.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 6 䡲 107
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2:41 PM
Page 108
Problem 6.1B
GENERAL JOURNAL
Date
Description
PAGE 3
Post.
Ref.
Debit
Credit
Adjusting Entries
(a)
2007
Jan. 31
31
31
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
Depreciation Expense—Machinery . . . . . . . . . . . . . . . .
Accumulated Depreciation—Machinery . . . . . . . . . . .
523
121
5,720
514
131
740
511
142
2,240
5,720
740
2,240
GENERAL JOURNAL
PAGE 4
Description
Post.
Ref.
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Machinery . . . . . . . . . . . . . .
Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marvel Zimwalt, Capital . . . . . . . . . . . . . . . . . . . . . . .
Marvel Zimwalt, Capital . . . . . . . . . . . . . . . . . . . . . . . . .
Marvel Zimwalt, Drawing . . . . . . . . . . . . . . . . . . . . . .
401
399
399
511
514
517
520
523
526
529
399
301
301
302
Date
Debit
Credit
Closing Entries
2007
Jan. 31
31
31
31
65,600
65,600
48,400
2,240
740
6,000
32,000
5,720
420
1,280
17,200
17,200
4,800
4,800
Analyze: The adjusting entry for expired insurance created a debit to Insurance Expense, increasing the
Insurance Expense account balance to $740.
108 䡲 Chapter 6
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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2:41 PM
Page 109
Problem 6.2B
GENERAL JOURNAL
Date
PAGE 3
Post.
Ref.
Description
Debit
Credit
Adjusting Entries
(a)
2007
Dec. 31
31
31
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Advertising . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
Depreciation Expense—Equipment . . . . . . . . . . . . . . . .
Accumulated Depreciation—Equipment . . . . . . . . . . .
517
121
1,000
526
131
400
523
142
500
1,000
400
500
GENERAL JOURNAL
PAGE 4
Description
Post.
Ref.
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Randall Marshall, Capital . . . . . . . . . . . . . . . . . . . . . .
Randall Marshall, Capital . . . . . . . . . . . . . . . . . . . . . . . .
Randall Marshall, Drawing . . . . . . . . . . . . . . . . . . . . .
401
399
399
511
514
517
523
526
399
301
301
302
Date
Debit
Credit
Closing Entries
2007
Dec. 31
31
31
31
15,600
15,600
7,300
4,800
600
1,000
500
400
8,300
8,300
2,800
2,800
GENERAL LEDGER
ACCOUNT
Date
2007
Dec. 31
31
Description
Balance
Adjusting
ACCOUNT
Date
2007
Dec. 31
31
Supplies
ACCOUNT NO.
Post.
Ref.
Debit
✓
J3
Description
Balance
Adjusting
Balance
Debit
Credit
Credit
1,000
Prepaid Advertising
2,000
1,000
ACCOUNT NO.
Post.
Ref.
✓
J3
Debit
Credit
400
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
121
131
Balance
Debit
Credit
3,000
2,600
Chapter 6 䡲 109
Price_SM_ch06.qxd
ACCOUNT
10/26/05
Adjusting
Description
Balance
Closing
Description
Closing
Closing
Closing
ACCOUNT
Balance
Closing
2,800
Description
Balance
Closing
110 䡲 Chapter 6
2,800
–0–
ACCOUNT NO.
Post.
Ref.
Debit
15,600
15,600
8,300
–0–
7,300
8,300
✓
J4
Debit
15,600
–0–
15,600
✓
J4
Debit
401
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
399
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
302
Balance
Debit
Credit
Credit
Salaries Expense
Date
2007
Dec. 31
31
Debit
✓
J4
J4
J4
J4
Description
ACCOUNT
2,800
ACCOUNT NO.
Post.
Ref.
301
27,400
35,700
32,900
8,300
Fees Income
Date
2007
Dec. 31
31
✓
J4
J4
Income Summary
Date
500
Balance
Debit
Credit
Credit
Randall Marshall, Drawing
Date
2007
Dec. 31
31
31
500
Debit
142
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
Balance
Closing
Closing
ACCOUNT
Debit
J3
Description
ACCOUNT
ACCOUNT NO.
Randall Marshall, Capital
Date
2007
Dec. 31
31
Post.
Ref.
Description
ACCOUNT
2007
Dec. 31
31
31
Page 110
Accumulated Depreciation—Equipment
Date
2007
Dec. 31
2:41 PM
Credit
4,800
511
Balance
Debit
Credit
4,800
–0–
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Price_SM_ch06.qxd
10/26/05
2:41 PM
ACCOUNT
Utilities Expense
Date
2007
Dec. 31
31
Description
Balance
Closing
ACCOUNT
Description
Adjusting
Closing
ACCOUNT
Description
Adjusting
Closing
ACCOUNT
Debit
✓
J4
600
Description
Adjusting
Closing
600
–0–
ACCOUNT NO.
Post.
Ref.
Debit
J3
J4
Post.
Ref.
1,000
1,000
1,000
–0–
ACCOUNT NO.
J3
J4
500
500
Debit
J3
J4
523
Balance
Debit
Credit
Credit
500
–0–
ACCOUNT NO.
Post.
Ref.
517
Balance
Debit
Credit
Credit
Debit
514
Balance
Debit
Credit
Credit
Advertising Expense
Date
2007
Dec. 31
31
Post.
Ref.
Depreciation Expense—Equipment
Date
2007
Dec. 31
31
ACCOUNT NO.
Supplies Expense
Date
2007
Dec. 31
31
Page 111
Credit
400
400
526
Balance
Debit
Credit
400
–0–
CEDAR CANYON NURSERY AND LAWN
Postclosing Trial Balance
December 31, 2007
Account Name
Debit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Advertising . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Depreciation—Equipment . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . .
Randall Marshall, Capital . . . . . . . . . . . . . .
10,800
2,000
1,000
2,600
20,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,400
Credit
500
3,000
32,900
36,400
Analyze: Total credits of $34,000 were posted to the general ledger to complete the closing entries.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 6 䡲 111
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10/26/05
2:41 PM
Page 112
Problem 6.3B
GENERAL JOURNAL
PAGE 4
Description
Post.
Ref.
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shawn McGowan, Capital . . . . . . . . . . . . . . . . . . . . .
Shawn McGowan, Capital . . . . . . . . . . . . . . . . . . . . . . .
Shawn McGowan, Drawing . . . . . . . . . . . . . . . . . . . .
401
399
399
511
514
517
519
523
399
301
301
302
Date
Debit
Credit
Closing Entries
2007
Dec. 31
31
31
31
54,000
54,000
20,700
3,300
900
2,100
10,800
3,600
33,300
33,300
3,600
3,600
GENERAL LEDGER
ACCOUNT
Supplies
Date
2007
Dec. 31
Description
Balance
ACCOUNT
Description
Balance
ACCOUNT
Description
Balance
ACCOUNT
Credit
✓
Description
Balance
112 䡲 Chapter 6
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
Debit
Credit
✓
23,100
Debit
Credit
✓
Post.
Ref.
✓
131
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
121
3,000
141
Balance
Debit
Credit
36,000
Accumulated Depreciation—Equipment
Date
2007
Dec. 31
Debit
Equipment
Date
2007
Dec. 31
Post.
Ref.
Prepaid Rent
Date
2007
Dec. 31
ACCOUNT NO.
Debit
ACCOUNT NO.
Credit
142
Balance
Debit
Credit
900
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ACCOUNT
Shawn McGowan, Capital
Date
2007
Dec. 1
31
31
Description
Balance
Closing
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
Description
Closing
Closing
Closing
ACCOUNT
Date
2007
Dec. 31
31
2007
Dec. 31
31
Balance
Closing
Date
2007
Dec. 31
31
3,600
Debit
✓
J4
3,600
Balance
Closing
3,600
–0–
ACCOUNT NO.
Post.
Ref.
Debit
54,000
54,000
33,300
–0–
20,700
33,300
✓
J4
Debit
54,000
–0–
54,000
Debit
✓
J4
Post.
Ref.
✓
J4
3,300
–0–
ACCOUNT NO.
Credit
900
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
511
Balance
Debit
Credit
Credit
3,300
Debit
401
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
399
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
302
Balance
Debit
Credit
Credit
Depreciation Expense—Equip.
Description
57,450
90,750
87,150
33,300
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Advertising Expense
Description
ACCOUNT
Debit
Fees Income
Balance
Closing
Date
✓
J4
J4
J4
J4
J4
Description
ACCOUNT
Post.
Ref.
Income Summary
Date
2007
Dec. 31
31
31
ACCOUNT NO.
Shawn McGowan, Drawing
Date
2007
Dec. 31
31
Page 113
514
Balance
Debit
Credit
900
–0–
Chapter 6 䡲 113
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ACCOUNT
10/26/05
Description
Balance
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
Post.
Ref.
Debit
✓
J4
2,100
Description
Balance
Closing
2,100
–0–
ACCOUNT NO.
Post.
Ref.
Debit
✓
J4
10,800
✓
J4
Debit
519
Balance
Debit
Credit
Credit
10,800
–0–
ACCOUNT NO.
Post.
Ref.
517
Balance
Debit
Credit
Credit
Utilities Expense
Date
2007
Dec. 31
31
ACCOUNT NO.
Salaries Expense
Date
2007
Dec. 31
31
Page 114
Rent Expense
Date
2007
Dec. 31
31
2:41 PM
Credit
3,600
523
Balance
Debit
Credit
3,600
–0–
Analyze: Fees Income, Income Summary, Shawn McGowan—Capital, Shawn McGowan—Drawing,
Advertising, Depreciation, Rent, Salaries, and Utilities Expense.
114 䡲 Chapter 6
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Net Income
Totals
48,555
Cash
10,650
Accounts Receivable
3,780
Supplies
5,250
Computers
9,600
Accumulated Depreciation—Computers
Accounts Payable
Finley Graves, Capital
Finley Graves, Drawing
4,000
Pees Income
Salaries Expense
12,575
Supplies Expense
Depreciation Expense—Computers
Travel Expense
1,800
Utilities Expense
900
48,555
22,650
960
4,200
20,745
Credit
980
(a) 900
(b) 80
Debit
980
(b) 80
(a) 900
Credit
Adjustments
48,635
12,575
900
80
1,800
900
4,000
10,650
3,780
4,350
9,600
Debit
48,635
22,650
1,040
4,200
20,745
Credit
Adjusted
Trial Balance
22,650
16,255
6,395
12,575
900
80
1,800
900
Debit
22,650
22,650
22,650
Credit
Income
Statement
32,380
32,380
4,000
10,650
3,780
4,350
9,600
Debit
32,380
25,985
6,395
1,040
4,200
20,745
Credit
Balance Sheet
2:41 PM
Debit
Trial Balance
FINLEY GRAVES, CPA
Worksheet
Month Ended June 30, 2007
10/26/05
Account Name
Problem 6.4B
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Chapter 6 䡲 115
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Page 116
GENERAL JOURNAL
Date
PAGE 3
Post.
Ref.
Description
Debit
Credit
Adjusting Entries
2007
Jun. 30
30
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Computers . . . . . . . . . . . . . . . .
Accumulated Depreciation—Computers . . . . . . . . . .
900
900
80
80
GENERAL JOURNAL
PAGE 4
Description
Post.
Ref.
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Computers . . . . . . . . . . . . . .
Travel Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finley Graves, Capital . . . . . . . . . . . . . . . . . . . . . . . .
Finley Graves, Capital . . . . . . . . . . . . . . . . . . . . . . . . . .
Finley Graves, Drawing . . . . . . . . . . . . . . . . . . . . . . .
401
399
399
511
517
523
519
514
399
301
301
302
Date
Debit
Credit
Closing Entries
2007
Jun. 30
30
30
30
22,650
22,650
16,255
12,575
900
80
1,800
900
6,395
6,395
4,000
4,000
GENERAL LEDGER
ACCOUNT
Supplies
Date
2007
Jun. 30
30
Description
Balance
Adjusting
ACCOUNT
Post.
Ref.
Debit
✓
J3
Description
900
Balance
116 䡲 Chapter 6
5,250
4,350
ACCOUNT NO.
Post.
Ref.
✓
Debit
Credit
121
Balance
Debit
Credit
Credit
Computers
Date
2007
Jun. 30
ACCOUNT NO.
131
Balance
Debit
Credit
9,600
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ACCOUNT
Accumulated Depreciation—Computers
Date
2007
Jun. 30
30
Description
Balance
Adjusting
ACCOUNT
Description
Balance
Closing
Closing
ACCOUNT
Description
Balance
Closing
ACCOUNT
Description
Closing
Closing
Closing
ACCOUNT
Date
2007
Jun. 30
30
Date
2007
Jun. 30
30
Post.
Ref.
✓
J4
J4
Debit
4,000
Debit
✓
J4
4,000
Balance
Closing
4,000
–0–
ACCOUNT NO.
Post.
Ref.
Debit
22,650
22,650
6,395
–0–
16,255
6,395
✓
J4
Debit
22,650
–0–
22,650
✓
J4
Debit
401
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
399
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
302
Balance
Debit
Credit
Credit
Salaries Expense
Description
20,745
27,140
23,140
6,395
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Fees Income
Balance
Closing
960
1,040
80
ACCOUNT NO.
J4
J4
J4
Description
ACCOUNT
✓
J3
142
Balance
Debit
Credit
Credit
Income Summary
Date
2007
Jun. 30
30
30
Debit
Finley Graves, Drawing
Date
2007
Jun. 30
30
Post.
Ref.
ACCOUNT NO.
Finley Graves, Capital
Date
2007
Jun. 30
30
30
Page 117
Credit
12,575
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
511
Balance
Debit
Credit
12,575
–0–
Chapter 6 䡲 117
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ACCOUNT
900
Debit
J3
J4
900
900
Post.
Ref.
Debit
1,800
Depreciation Expense—Computers
Post.
Ref.
Description
Adjusting
Closing
1,800
–0–
ACCOUNT NO.
Debit
J3
J4
519
Balance
Debit
Credit
Credit
✓
J4
Balance
Closing
Date
900
–0–
ACCOUNT NO.
Description
517
Balance
Debit
Credit
Credit
Travel Expense
Date
900
–0–
ACCOUNT NO.
Post.
Ref.
514
Balance
Debit
Credit
Credit
Supplies Expense
Adjusting
Closing
ACCOUNT
Debit
✓
J4
Description
ACCOUNT
2007
Jun. 30
30
Post.
Ref.
Balance
Closing
Date
2007
Jun. 30
30
ACCOUNT NO.
Description
ACCOUNT
2007
Jun. 30
30
Page 118
Utilities Expense
Date
2007
Jun. 30
30
2:41 PM
523
Balance
Debit
Credit
Credit
80
80
80
–0–
FINLEY GRAVES, CPA
Postclosing Trial Balance
June 30, 2007
Account Name
Debit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computers . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Depreciation—Computers . .
Accounts Payable . . . . . . . . . . . . . . . . . . . .
Finley Graves, Capital . . . . . . . . . . . . . . . .
10,650
3,780
4,350
9,600
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,380
Credit
1,040
4,200
23,140
28,380
Analyze: Net Income for Finley Graves, CPA for the month of June 2007 was $6,395.
118 䡲 Chapter 6
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Totals
Net Income
170,580
1,680
11,100
6,000
40,800
9,000
7,200
10,800
84,000
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Machinery
Accumulated Depreciation—
Machinery
Accounts Payable
Tommy Brooks, Capital
Tommy Brooks, Drawing
Fees Income
Supplies Expense
Insurance Expense
Salaries Expense
Depreciation Expense—
Machinery
Utilities Expense
170,580
82,500
13,500
74,580
Credit
7,200
171,780
1,200
1,680
(c) 1,200
6,000
40,800
9,000
3,600
8,400
84,000
Debit
3,600
2,400
11,100
7,200
(c) 1,200
(a) 3,600
(b) 2,400
Credit
171,780
82,500
1,200
13,500
74,580
Credit
Adjusted
Trial Balance
(a) 3,600
(b) 2,400
Debit
Adjustments
82,500
82,500
82,500
82,500
Credit
19,980
62,520
1,200
1,680
3,600
2,400
11,100
Debit
Income
Statement
151,800
151,800
6,000
40,800
9,000
3,600
8,400
84,000
Debit
151,800
89,280
62,520
1,200
13,500
74,580
Credit
Balance Sheet
2:41 PM
Debit
Trial Balance
THE BARBER SHOP
Worksheet
Month Ended December 31, 2007
10/26/05
Account Name
Challenge Problem
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Page 120
THE BARBER SHOP
Income Statement
Month Ended December 31, 2007
Revenue
Fees Income . . . . . . . . . . . . . . . . . . . . . .
Expenses
Supplies Expense . . . . . . . . . . . . . . . . . .
Insurance Expense . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . .
Depreciation Expense—Machinery . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . .
82,500
3,600
2,400
11,100
1,200
1,680
Total Expenses . . . . . . . . . . . . . . . . . .
19,980
Net Income . . . . . . . . . . . . . . . . . . . . . . . . .
62,520
THE BARBER SHOP
Statement of Owner’s Equity
Month Ended December 31, 2007
Tommy Brooks, Capital, December 1, 2007
Net Income for December . . . . . . . . . . . . .
Less Withdrawals for December . . . . . . . . .
74,580
62,520
6,000
Increase in Capital . . . . . . . . . . . . . . . . . . .
56,520
Tommy Brooks, Capital, December 31, 2007
131,100
THE BARBER SHOP
Balance Sheet
December 31, 2007
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Insurance . . . . . . . . . . . . . . . . . . .
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Depreciation—Machinery . . .
40,800
9,000
3,600
8,400
84,000
1,200
Total Assets . . . . . . . . . . . . . . . . . . . . . . . .
82,800
144,600
Liabilities and Owner’s Equity
Liabilities
Accounts Payable . . . . . . . . . . . . . . . . . .
Owner’s Equity
Tommy Brooks, Capital . . . . . . . . . . . . . .
131,100
Total Liabilities and Owner’s Equity . . . . . .
144,600
120 䡲 Chapter 6
13,500
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Page 121
GENERAL JOURNAL
Date
PAGE 3
Post.
Ref.
Description
Debit
Credit
Adjusting Entries
2007
Dec. 31
31
31
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Machinery . . . . . . . . . . . . . . . .
Accumulated Depreciation—Machinery . . . . . . . . . . .
3,600
3,600
2,400
2,400
1,200
1,200
GENERAL JOURNAL
Date
PAGE 4
Post.
Ref.
Description
Debit
Credit
Closing Entries
2007
Dec. 31
31
31
31
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Machinery . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tommy Brooks, Capital . . . . . . . . . . . . . . . . . . . . . . .
Tommy Brooks, Capital . . . . . . . . . . . . . . . . . . . . . . . . .
Tommy Brooks, Drawing . . . . . . . . . . . . . . . . . . . . . .
82,500
82,500
19,980
3,600
2,400
11,100
1,200
1,680
62,520
62,520
6,000
6,000
THE BARBER SHOP
Postclosing Trial Balance
December 31, 2007
Account Name
Debit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Insurance . . . . . . . . . . . . . . . . . . .
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Depreciation—Machinery . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . .
Tommy Brooks, Capital . . . . . . . . . . . . . . . .
40,800
9,000
3,600
8,400
84,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
145,800
Credit
1,200
13,500
131,100
145,800
Analyze: The net income would be $67,320.
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Chapter 6 䡲 121
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Critical Thinking Problem
1. Strutton made the following errors preparing the closing entries:
a. Accumulated Depreciation and Accounts Payable are permanent accounts that continue from
accounting period to accounting period and, consequently, are not closed.
b. The Drawing account is not an expense account to be closed to Income Summary but is a reduction
of equity and is closed directly to the Capital account.
2.
GENERAL JOURNAL
PAGE 15
Date
2007
Dec. 31
Post.
Ref.
Description
Brenda Powell, Capital . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To correct errors made in closing entries
Debit
Credit
41,500
8,500
33,000
The proof of this entry is:
Fees Income . . . . . . . . . . . . . . . . . . . . .
Expenses:
Salaries Expense . . . . . . . . . . . . . . . . 78,000
Supplies Expense . . . . . . . . . . . . . . . . 5,000
Depreciation Expense . . . . . . . . . . . . 2,400
98,000
85,400
Net Income . . . . . . . . . . . . . . . . . . . . . . .
Withdrawals . . . . . . . . . . . . . . . . . . . . . .
12,600
(7,000)
Increase in Capital . . . . . . . . . . . . . . . . .
Capital, Beginning . . . . . . . . . . . . . . . . .
Capital, Ending . . . . . . . . . . . . . . . . . . . .
5,600
50,000
55,600
Capital balance per Strutton’s entries . .
Less debit from correcting entry . . . . . . .
97,100
(41,500)
Corrected ending Capital balance . . . . .
55,600
Note: It is not necessary to make an entry to correct the closing of the Drawing account to the Income
Summary account. Closing the Drawing account to the Income Summary account, which in turn was
closed to the Capital account, results in reducing the Capital account by the amount of the withdrawals.
So, while incorrect, Strutton’s entry with regard to Drawing achieves the correct end result.
3. The balance of the Capital account after closing entries have been posted must agree with the ending
Capital balance as shown on the statement of owner’s equity. Posting the entry closing the Income
Summary account increases the Capital account by the amount of the net income (or decreases it by
the amount of a net loss), while posting the entry closing the Drawing account decreases the Capital
account. These postings reflect the same changes to Capital that are shown on the statement of
owner’s equity and on the balance sheet, and, therefore, the ending Capital amount must be the same
for both.
Note that the errors James made in preparing the closing entries would not be revealed by the
postclosing trial balance. Since each entry Strutton made had equal debits and credits, the postclosing
trial balance would be in balance. The errors would not become evident until the next year when
postings were made to the Accumulated Depreciation and Accounts Payable accounts or when the
ledger account balances were compared to the balance sheet amounts.
122 䡲 Chapter 6
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Business Connections
Managerial Focus
1. No. A thorough analysis of the components of the income statement would reveal how costs directly
impact net income. The balance sheet helps determine the amount of the firm’s assets and its liquidity,
liabilities, and equity.
2. Current assets compared with current liabilities.
3. Timely preparation of financial statements, future planning, prompt payment of debts, developing
effective credit policies.
4. The income statement might help determine the adequacy of profit, how to improve revenue and hold
down expenses, how to reduce expenses without decreasing revenue, and how to even out the
business operating cycle. Balance sheet data might influence decisions concerning growth of equity, the
return on investment, adequacy of the firm’s assets, whether collections on accounts receivable should
be accelerated, and whether more capital is needed.
Ethical Dilemma
You should wait to verify the invoice is an actual invoice. At the end of the year Miscellaneous Expense will
be closed and the $1,000 expense will be in the previous year and not given the verification it so badly
needs.
Streetwise
1. Answers will vary, but permanent accounts may include Cash and Cash Equivalents, Short-Term
Investments, Receivables, etc. Temporary accounts include Sales, Selling and Store Operating
Expenses, Interest and Investment Income.
2. Dr. Inc. Summ., $16,504 million; Cr. Selling and Store Operating, $15,105 million; credit General and
Administrative, $1,399 million.
Financial Statement Analysis
1. Dr. Inc. Summ., $6,805,000,000; Cr. Labor and Fringe, $2,740,000,000; Cr. Materials, $1,627,000,000;
Cr. Conrail Fees, Rents, and Services, $342,000,000; Cr. Building and Equipment, Rent, $566,000,000;
Cr. Inland Trans., $320,000,000; Cr. Depreciation, $629,000,000; Cr. Rent, $581,000,000
2. Dr. Surface Transportation Revenue, $7,439,000,000; Dr. International Terminals, $226,000,000; Dr.
Other, $128,000,000; Cr. Inc. Summ., $7,793,000,000
Analyze Online: Answers will vary depending on the year.
Extending the Thought
Answers will vary. Students may suggest that skipping the preparation of the worksheet will increase the
chance for errors in the accounting records.
Business Communication
Students’ reports will vary. Students should demonstrate an understanding of the types of accounts that
should be closed at the end of an accounting period.
Team Work
1) Analyze transactions, 2) journalize the data about transactions, 3) post the data about transactions,
4) prepare a worksheet, 5) prepare financial statements, 6) record adjusting entries, 7) record closing
entries, 8) prepare a postclosing trial balance, and 9) interpret the financial information.
Internet Connection
Two years full time experience, pass a national exam, and sign a Code of Ethics.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 6 䡲 123
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Practice Test Answer Key
Part A
1. T
2. F
3. F
4. T
5. F
6. T
7. F
8. T
9. F
10. F
True–False
Part B
1. a
2. b
3. e
4. c
5. d
Matching
124 䡲 Chapter 6
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Mini-Practice Set 1: Service Business Accounting Cycle
GENERAL JOURNAL
Date
Description
2008
Jan. 2
2
7
12
12
13
14
15
PAGE 3
Post.
Ref.
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bought supplies for cash, Check 1015
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased one year of insurance, Check 1016
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash and on account
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for advertising on radio, Check 1017
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Returned damaged supplies for cash refund
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash & on account
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
121
101
2,500
134
101
3,600
101
111
401
12,800
1,575
101
111
950
526
101
1,850
101
111
2,000
101
121
178
101
111
401
16,050
1,590
Credit
2,500
3,600
14,375
950
1,850
2,000
178
17,640
Mini-Practice Set 1 䡲 125
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GENERAL JOURNAL
Date
2008
Jan. 20
20
20
21
22
23
26
27
28
Description
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bought supplies on account
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash & on account
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Maintenance Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid cash for equipment maintenance, Check 1018
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid cash for newspaper ads, Check 1019
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly telephone bill, Check 1020
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Made payment to creditor, Check 1021
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly utility bill, Check 1022
126 䡲 Mini-Practice Set 1
PAGE 4
Post.
Ref.
Debit
121
202
1,700
101
111
401
8,950
4,670
101
111
1,450
529
101
3,275
526
101
1,568
532
101
390
101
111
3,690
202
101
6,000
514
101
560
Credit
1,700
13,620
1,450
3,275
1,568
390
3,690
6,000
560
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Page 127
GENERAL JOURNAL
Date
2008
Jan. 29
31
31
31
31
31
Description
PAGE 5
Post.
Ref.
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash & on account
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly salaries, Checks 1023–1027
Jason Taylor, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owner withdrew cash for personal use,
Check 1028
Maintenance Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for monthly maintenance services,
Check 1029
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bought equipment for cash and on account,
Check 1030
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash and on account
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
101
111
401
13,870
1,530
511
101
12,500
302
101
3,000
529
101
980
141
101
202
15,000
101
111
401
2,350
1,300
Credit
15,400
12,500
3,000
980
3,500
11,500
3,650
Mini-Practice Set 1 䡲 127
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GENERAL JOURNAL
PAGE 6
Description
Post.
Ref.
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . . . .
Accumulated Depreciation—Equipment . . . . . . . . . . .
517
121
535
134
520
137
523
142
4,172
Closing Entries
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance Expense . . . . . . . . . . . . . . . . . . . . . . . .
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jason Taylor, Capital . . . . . . . . . . . . . . . . . . . . . . . . .
Jason Taylor, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jason Taylor, Drawing . . . . . . . . . . . . . . . . . . . . . . . .
401
309
309
511
514
517
520
523
526
529
532
535
309
301
301
302
64,685
Date
Debit
Credit
Adjusting Entries
2008
Jan. 31
31
31
31
31
31
31
31
128 䡲 Mini-Practice Set 1
4,172
300
300
3,500
3,500
367
367
64,685
29,462
12,500
560
4,172
3,500
367
3,418
4,255
390
300
35,223
35,223
3,000
3,000
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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ACCOUNT
Date
2008
Jan. 1
2
2
7
12
12
13
14
15
20
20
21
22
23
26
27
28
29
31
31
31
31
31
2008
Jan. 1
7
12
13
15
20
20
26
29
31
Cash
Description
Balance
ACCOUNT
Date
Page 129
ACCOUNT NO.
Post.
Ref.
✓
J3
J3
J3
J3
J3
J3
J3
J3
J4
J4
J4
J4
J4
J4
J4
J4
J5
J5
J5
J5
J5
J5
Debit
Description
Balance
Balance
Debit
Credit
Credit
2,500
3,600
12,800
950
1,850
2,000
178
16,050
8,950
1,450
3,275
1,568
390
3,690
6,000
560
13,870
12,500
3,000
980
3,500
2,350
Accounts Receivable
83,500
81,000
77,400
90,200
91,150
89,300
91,300
91,478
107,528
116,478
117,928
114,653
113,085
112,695
116,385
110,385
109,825
123,695
111,195
108,195
107,215
103,715
106,065
ACCOUNT NO.
Post.
Ref.
✓
J3
J3
J3
J3
J4
J4
J4
J5
J5
Debit
Credit
1,575
950
2,000
1,590
4,670
1,450
3,690
1,530
1,300
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
101
111
Balance
Debit
Credit
5,000
6,575
5,625
3,625
5,215
9,885
8,435
4,745
6,275
7,575
Mini-Practice Set 1 䡲 129
Price_SM_ch06.qxd
ACCOUNT
Date
2008
Jan. 1
2
14
20
31
Adjusting
Adjusting
Date
Balance
Adjusting
Date
2008
Jan. 1
31
Balance
Date
2008
Jan. 1
31
Date
2008
Jan. 1
20
27
31
✓
J3
J3
J4
J6
2,500
178
1,700
4,172
Balance
Adjusting
Debit
J3
J6
3,600
300
Balance
130 䡲 Mini-Practice Set 1
3,600
3,300
ACCOUNT NO.
Post.
Ref.
Debit
✓
J6
3,500
Debit
✓
J5
Post.
Ref.
3,500
–0–
22,000
37,000
ACCOUNT NO.
✓
J6
367
734
367
✓
J4
J4
J5
Debit
142
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
141
Balance
Debit
Credit
Credit
15,000
Debit
137
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
134
Balance
Debit
Credit
Credit
Accounts Payable
Description
2,000
4,500
4,322
6,022
1,850
ACCOUNT NO.
Post.
Ref.
121
Balance
Debit
Credit
Credit
Accumulated Depreciation—Equipment
Description
ACCOUNT
Debit
Equipment
Description
ACCOUNT
Post.
Ref.
Prepaid Rent
Description
ACCOUNT
ACCOUNT NO.
Prepaid Insurance
Description
ACCOUNT
Page 130
Supplies
Balance
Date
2008
Jan. 1
31
2:41 PM
Description
ACCOUNT
2008
Jan. 2
31
10/26/05
Credit
1,700
6,000
11,500
202
Balance
Debit
Credit
7,000
8,700
2,700
14,200
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2:41 PM
ACCOUNT
Jason Taylor, Capital
Date
2008
Jan. 1
31
31
Description
Balance
Closing
Closing
ACCOUNT
Description
Description
Closing
Closing
Closing
ACCOUNT
Debit
3,000
3,000
Debit
Description
Closing
3,000
–0–
64,685
64,685
35,223
–0–
29,462
35,223
Debit
14,375
17,640
13,620
15,400
3,650
14,375
32,015
45,635
61,035
64,685
–0–
64,685
J5
J6
Debit
Credit
12,500
12,500
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
401
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
309
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
302
Balance
Debit
Credit
Credit
Salaries Expense
Date
2008
Jan. 31
31
Post.
Ref.
J3
J3
J4
J5
J5
J6
Closing
ACCOUNT
3,000
ACCOUNT NO.
J6
J6
J6
Description
108,633
143,856
140,856
35,223
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Fees Income
Date
2008
Jan. 7
15
20
29
31
31
✓
J6
J6
Debit
Income Summary
Date
2008
Jan. 31
31
31
Post.
Ref.
J5
J6
Closing
ACCOUNT
ACCOUNT NO.
Jason Taylor, Drawing
Date
2008
Jan. 31
31
Page 131
511
Balance
Debit
Credit
12,500
–0–
Mini-Practice Set 1 䡲 131
Price_SM_ch06.qxd
ACCOUNT
10/26/05
Description
Description
Adjusting
Closing
Description
Adjusting
Closing
ACCOUNT
Description
Adjusting
Closing
ACCOUNT
560
J6
J6
Debit
Description
Closing
132 䡲 Mini-Practice Set 1
560
–0–
4,172
4,172
4,172
–0–
ACCOUNT NO.
Post.
Ref.
J5
J6
Debit
Post.
Ref.
J6
J6
3,500
3,500
–0–
ACCOUNT NO.
367
367
J3
J4
J6
Debit
523
Balance
Debit
Credit
Credit
367
–0–
ACCOUNT NO.
Post.
Ref.
520
Balance
Debit
Credit
Credit
3,500
Debit
517
Balance
Debit
Credit
Credit
Advertising Expense
Date
2008
Jan. 12
22
31
560
ACCOUNT NO.
Post.
Ref.
514
Balance
Debit
Credit
Credit
Depreciation Expense—Equipment
Date
2008
Jan. 31
31
Debit
Rent Expense
Date
2008
Jan. 31
31
Post.
Ref.
Supplies Expense
Date
ACCOUNT
ACCOUNT NO.
J4
J6
Closing
ACCOUNT
2008
Jan. 31
31
Page 132
Utilities Expense
Date
2008
Jan. 28
31
2:41 PM
Credit
1,850
1,568
3,418
526
Balance
Debit
Credit
1,850
3,418
–0–
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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2:41 PM
ACCOUNT
Maintenance Expense
Date
2008
Jan. 21
31
31
Description
Date
2008
Jan. 31
31
Post.
Ref.
Debit
Description
3,275
980
4,255
J4
J6
Closing
Debit
390
390
Adjusting
Closing
390
–0–
ACCOUNT NO.
Post.
Ref.
J6
J6
Debit
Credit
300
300
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
532
Balance
Debit
Credit
Credit
Insurance Expense
Description
3,275
4,255
–0–
ACCOUNT NO.
Post.
Ref.
529
Balance
Debit
Credit
Credit
Telephone Expense
Date
ACCOUNT
ACCOUNT NO.
J4
J5
J6
Closing
ACCOUNT
2008
Jan. 23
31
Page 133
535
Balance
Debit
Credit
300
–0–
Mini-Practice Set 1 䡲 133
134 䡲 Mini-Practice Set 1
Totals
Net Income
187,885
3,418
390
4,255
12,500
560
3,000
106,065
7,575
6,022
3,500
3,600
37,000
187,885
64,685
367
14,200
108,633
Credit
8,339
(a) 4,172
(b) 3,500
(d) 367
(c) 300
Debit
(d)
8,339
367
(a) 4,172
(b) 3,500
(c) 300
Credit
188,252
12,500
560
4,172
3,500
367
300
3,418
390
4,255
3,000
106,065
7,575
1,850
–0–
3,300
37,000
Debit
188,252
64,685
734
14,200
108,633
Credit
Adjusted
Trial Balance
64,685
64,685
64,685
64,685
Credit
29,462
35,223
12,500
560
4,172
3,500
367
300
3,418
390
4,255
Debit
Income
Statement
158,790
158,790
3,000
106,065
7,575
1,850
–0–
3,300
37,000
Debit
158,790
123,567
35,223
734
14,200
108,633
Credit
Balance Sheet
2:41 PM
Debit
Adjustments
10/26/05
Cash
Accounts Receivable
Supplies
Prepaid Rent
Prepaid Insurance
Equipment
Accumulated Deprec.—Equip.
Accounts Payable
Jason Taylor, Capital
Jason Taylor, Drawing
Income Summary
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depreciation Expense—Equip.
Insurance Expense
Advertising Expense
Telephone Expense
Maintenance Expense
Account Name
Trial Balance
JT’S CONSULTING SERVICES
Worksheet
Month Ended January 31, 2008
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Page 135
JT’S CONSULTING SERVICES
Income Statement
Month Ended January 31, 2008
Revenue
Fees Income . . . . . . . . . . . . . . . . . . . . . .
Expenses
Salaries Expense . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . .
Supplies Expense . . . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . .
Depreciation Expense—Equipment . . . .
Insurance Expense . . . . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . .
Telephone Expense . . . . . . . . . . . . . . . .
Maintenance Expense . . . . . . . . . . . . . .
64,685
12,500
560
4,172
3,500
367
300
3,418
390
4,255
Total Expenses . . . . . . . . . . . . . . . . . .
29,462
Net Income . . . . . . . . . . . . . . . . . . . . . . . . .
35,223
JT’S CONSULTING SERVICES
Statement of Owner’s Equity
Month Ended January 31, 2008
Jason Taylor, Capital, January 1, 2008 . . . .
Net Income for January . . . . . . . . . . . . . . .
Less Withdrawals for January . . . . . . . . . .
108,633
35,223
3,000
Increase in Capital for January . . . . . . . . . .
32,223
Jason Taylor, Capital, January 31, 2008 . . .
140,856
JT’S CONSULTING SERVICES
Postclosing Trial Balance
January 31, 2008
Account Name
Debit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Insurance . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Depreciation—Equipment . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . .
Jason Taylor, Capital . . . . . . . . . . . . . . . . .
106,065
7,575
1,850
3,300
37,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155,790
Credit
734
14,200
140,856
155,790
Analyze:
Part A: Total assets increased by $39,423 ($155,056 – $115,633).
Total liabilities increased by $7,200 ($14,200 – $7,000).
Owner’s capital increased by $32,223 ($140,856 – $108,633).
Part B: The balance of Cash increased by $22,565 ($106,065 – $83,500).
The balance of Accounts Receivable increased by $2,575 ($7,575 – $5,000).
Part C: Yes, the firm’s financial position improved through the increases in capital of $32,223
($140,856 – $108,633).
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Mini-Practice Set 1 䡲 135
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JT’S CONSULTING SERVICES
Balance Sheet
January 31, 2008
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Accumulated Depreciation—Equipment . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106,065
7,575
1,850
3,300
37,000
734
36,266
155,056
Liabilities & Owner’s Equity
Liabilities
Accounts Payable . . . . . . . . . . . . . . . . . . . . .
Owner’s Equity
Jason Taylor, Capital . . . . . . . . . . . . . . . . . . .
140,856
Total Liabilities & Owner’s Equity . . . . . . . . . . .
155,056
136 䡲 Mini-Practice Set 1
14,200
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.