ACC M115 Lecture Notes - Lecture 14: Trial Balance, Financial Statement, Accounts Receivable

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24 Sep 2020

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It is all about splitting an expense or revenue item across two different accounting periods. The adjusting entry would be posted to the relevant ledger accounts, then another trial balance can be prepared. A company may prepare closing entries to facilitate the preparation of the financial statements and to prepare the accounting records to begin the next period. Closing entries formally transfer the balances of the revenue and expense accounts to a profit and loss (p&l) summary, then to retained profits. Closing entries also reset the revenue and expense account balances to zero to begin recording these items for the next accounting period. Revenue accounts have credit balances and are closed (reduced to zero) with debits to the revenue accounts and a credit to the p & l summary account. Expense accounts have debit balances and are closed with credits to the expense and debits to the p & l summary account.

Related Questions

P3-9 (Adjusting and Closing) Presented below is the trialbalance of the Crestwood Golf Club, Inc. as of
December 31. The books are closed annually on December 31.
CRESTWOOD GOLF CLUB, INC.
TRIAL BALANCE
DECEMBER 31

Debit Credit
Cash 15,000
Accounts Receivable 13,000
Allowance for Doubtful Accounts 1,100
Prepaid Insurance 9,000
Land 350,000
Buildings 120,000
Accumulated DepreciationâBuildings 38,400
Equipment 150,000
Accumulated DepreciationâEquipment 70,000
Common Stock 400,000
Retained Earnings 82,000
Dues Revenue 200,000
Green Fees Revenue 5,900
Rent Revenue 17,600
Utilities Expenses 54,000
Salaries and Wages Expense 80,000
Maintenance and Repairs Expense 24,000
$815,000 $815,000

Instructions
(a) Enter the balances in ledger accounts. Allow five lines foreach account.
(b) From the trial balance and the information given below, prepareannual adjusting entries and post
to the ledger accounts. (Omit explanations.)
(1) The buildings have an estimated life of 30 years with nosalvage value (straight-line method).
(2) The equipment is depreciated at 10% per year.
(3) Insurance expired during the year $3,500.
(4) The rent revenue represents the amount received for 11 monthsfor dining facilities. The December
rent has not yet been received.
(5) It is estimated that 12% of the accounts receivable will beuncollectible.
(6) Salaries and wages earned but not paid by December 31,$3,600.
(7) Dues received in advance from members $8,900.
(c) Prepare an adjusted trial balance.
(d) Prepare closing entries and post.

whitemouse491

Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2014. The annual reporting period ends December 31. The trial balance on January 1, 2015, appears below (amounts are rounded to thousands of dollars to simplify).

Account Titles	Debit		Credit
Cash	$	5
Accounts Receivable		4
Supplies		1
Equipment		6
Accumulated Depreciation			$	0
Software		12
Accumulated Amortization				5
Accounts Payable				7
Notes Payable (long-term)				0
Salaries and Wages Payable				0
Interest Payable				0
Income Tax Payable				0
Unearned Revenue				0
Common Stock				12
Retained Earnings				4
Service Revenue				0
Supplies Expense		0
Depreciation Expense		0
Salaries and Wages Expense		0
Amortization Expense		0
Interest Expense		0
Income Tax Expense		0

Totals	$	28	$	28

Transactions during 2015 (summarized in thousands of dollars) follow:
1.	Borrowed $26 cash on July 1, 2015, signing a six-month note payable.
2.	Purchased equipment for $23 cash on July 1, 2015.
3.	Issued additional shares of common stock for $6.
4.	Earned revenues for 2015 in the amount of $68, including $7 on credit and $61 received in cash.
5.	Recognized salaries and wages expenses for 2015 of $40, paid in cash.
6.	Purchased additional equipment, $2 cash.
7.	Collected accounts receivable, $9.
8.	Paid accounts payable, $12.
9.	Purchased on account supplies for future use, $8.
10.	Received a $5 cash deposit on work to start January 15, 2016.

Data for adjusting journal entries:

11.	Amortization for 2015, $5.
12.	Supplies of $6 were counted on December 31, 2015.
13.	Depreciation for 2015, $3.
14.	Accrued interest on notes payable of $1.
15.	Wages earned since the December 24 payroll not yet paid, $4.
.	16.Income tax for 2015 was $2 and will be paid in 2016. Q1 Record journal entries for transactions (1) through (10) Q2Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions 1-10, adjusting entries 11-16, and closing entry Q3Post the journal entries from requirement 2 to T-accounts and prepare an unadjusted trial balance Q4Record the adjusting journal entries (11) through (16) Q5Post the adjusting entries from requirement 4 and prepare an adjusted trial balance Q6Prepare an income statement. and Prepare statement of retained earnings and Prepare balance sheet Q7Prepare the closing journal entry. Q8Post the closing entry from requirement 7 and prepare a post-closing trial balance

bronzewater-buffalo862

Chandler, Inc. is owned by Roscoe Chandler and providesappraisal services to individuals and companies wishing to purchaseand sell fine art. Chandler, Inc. began business on January 1,2016, and is just completing its first year of business. Roscoeasks for your help in completing the accounting cycle for thecompany by assisting with the closing process.

Before the closing entries are made, you begin with an adjustedtrial balance. The closing entries are essentially the link fromthe adjusted trial balance to the post-closing trial balance.

Chandler, Inc.

ADJUSTED TRIAL BALANCE

December 31, 2016

	ACCOUNTTITLE	DEBIT	CREDIT
1	Cash	76,000.00
2	Accounts Receivable	29,000.00
3	Prepaid Insurance	16,000.00
4	Equipment	60,000.00
5	Accumulated Depreciation-Equipment		40,000.00
6	Accounts Payable		6,000.00
7	Salaries Payable		8,000.00
8	Income Taxes Payable		4,000.00
9	Common Stock		2,000.00
10	Retained Earnings		18,000.00
11	Dividends	5,000.00
12	Income Summary
13	Fees Earned		175,600.00
14	Rent Revenue		92,000.00
15	Interest Revenue		17,200.00
16	Salaries Expense	71,000.00
17	Selling Expense	25,600.00
18	Income Taxes Expense	15,000.00
19	Depreciation Expense-Equipment	47,200.00
20	Insurance Expense	17,000.00
21	Miscellaneous Expense	1,000.00
22	Totals	362,800.00	362,800.00

The final step of the accounting cycle is the closing process.The main goal of this stage of the cycle is to ensure that thebalance of each temporary account is returned to zero and that netincome is transferred to the retained earnings account. The firststep in successfully undertaking the closing process is tounderstand the difference between a temporary account and apermanent account. Roscoe has some questions about the process.

Answer questions (1) - (3) below.

1. If a temporary account has an ending balance of $57,000, whatis its beginning balance for the following accounting period?

2. If a permanent account has an ending balance of $57,000, whatis its beginning balance for the following accounting period?

3. Roscoe will be preparing his yearly financial statementsafter completing Chandler, Inc.âs closing process, and is asomewhat confused about the characteristics of the accounts on hisChart of Accounts. He has started by creating the chart below, andasks for your help in completing it. For each account or type ofaccount listed, choose all descriptions that apply.

Temporary Account

Permanent Account

Closed to Income SummaryAccount

Yes

Revenues

Asset accounts

Retained Earnings account

Expenses

Liability accounts

Dividends account

Roscoe has attempted to prepare the closing entries forChandler, Inc. on this panel. Heâs not sure if heâs entered thejournal entries correctly, and asks you to review them. You findthat two of the entries are correct, but two are incorrect.

Determine which entries are incorrect, and enter all four of theclosing entries for Chandler, Inc. as of Dec. 31 on the Journalpanel.

PAGE 25

JOURNAL

	DATE	DESCRIPTION	DEBIT	CREDIT
1		Closing Entries
2	Dec. 31	Income Summary	284,800.00
3		Fees Earned		175,600.00
4		Rent Revenue		92,000.00
5		Interest Revenue		17,200.00
6	31	Income Summary	176,800.00
7		Salaries Expense		71,000.00
8		Selling Expense		25,600.00
9		Income Taxes Expense		15,000.00
10		Depreciation Expense-Equipment		47,200.00
11		Insurance Expense		17,000.00
12		Miscellaneous Expense		1,000.00
13	31	Retained Earnings	461,600.00
14		Income Summary		461,600.00
15	31	Retained Earnings	5,000.00
16		Dividends		5,000.00

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ACC M115 Lecture Notes - Lecture 14: Trial Balance, Financial Statement, Accounts Receivable

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