ACCT 201 Lecture Notes - Lecture 6: Retained Earnings, Accounts Payable, Accounts Receivable

65 views3 pages

goldjellyfish848

19 Jun 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

ACCT 201 – Lecture 5 – Chapter 3

Chapter 3

Assets = Liabilities + Common Stock + Revenue – Expense – Dividends

oRevenue, Expense, and Dividends all make up retained earnings, as noted in

previous notes

Closing Journal Entry

oThe chart above is an example of a closing journal entry

oRetained earnings is a running balance in this while net income and dividends

restart after every period

Why use closing entries?

oMove Revenue, Expenses, and Dividends into Retained Earning

oZero out Revenue, Expenses, and Dividends to start counting again in the new

period

Revenue, Expenses, and Dividends = “Temporary Accounts”

oThis is why net income and dividends in the closing journal entry restart after

every period

Other Accounts (such as accounts payable, accounts receivable, etc.) = “Permanent

Accounts”

oThis is why retained earnings does not restart every period

find more resources at oneclass.com

Unlock document

This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Acct 201 lecture 5 chapter 3. Assets = liabilities + common stock + revenue expense dividends: revenue, expense, and dividends all make up retained earnings, as noted in previous notes. Closing journal entry: the chart above is an example of a closing journal entry, retained earnings is a running balance in this while net income and dividends restart after every period. Why use closing entries: move revenue, expenses, and dividends into retained earning, zero out revenue, expenses, and dividends to start counting again in the new period. Revenue, expenses, and dividends = temporary accounts : this is why net income and dividends in the closing journal entry restart after every period. Other accounts (such as accounts payable, accounts receivable, etc. ) Accounts : this is why retained earnings does not restart every period. Example: service revenue = 100; utilities expense = 20; salaries expense = 10; dividends =

Related Questions

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

purpleporcupine232

Selected transactions completed by Canyon Ferry BoatingCorporation during the current fiscal year are as follows:

Jan.	8	Split the common stock 2 for 1 andreduced the par from $80 to $40 per share. After the split, therewere 171,000 common shares outstanding.
Apr.	30	Declared semiannual dividends of$0.70 on 16,000 shares of preferred stock and $0.21 on the commonstock payable on July 1.
Jul.	1	Paid the cash dividends.
Oct.	31	Declared semiannual dividends of$0.70 on the preferred stock and $0.16 on the common stock (beforethe stock dividend). In addition, a 2% common stock dividend wasdeclared on the common stock outstanding. The fair market value ofthe common stock is estimated at $54.
Dec.	31	Paid the cash dividends and issuedthe certificates for the common stock dividend.

Journalize the transactions. If no entry is required, simplyskip to the next transaction. Refer to the Chart of Accounts forexact wording of account titles.

CHART OF ACCOUNTSCanyon Ferry Boating CorporationGeneralLedger

	ASSETS
110	Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
151	Prepaid Insurance
181	Land
193	Equipment
194	AccumulatedDepreciation-Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
226	Interest Payable
231	Cash Dividends Payable
236	Stock Dividends Distributable
241	Salaries Payable
261	Mortgage Note Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess ofPar-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess ofPar-Preferred Stock
331	Paid-In Capital from Sale ofTreasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

EXPENSES

510

Cost of Merchandise Sold

Office Supplies Expense

537

Organizational Expenses

562

Depreciation Expense-Equipment

590

Miscellaneous Expense

710

Interest Expense

Journalize the transactions. If no entry is required, simplyskip to the next transaction. Refer to the Chart of Accounts forexact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST.REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13

peachhornet570

Module 14 Accounting for Corporations Problem 13-4A -

1. Instruction

Morrow Enterprises Inc. manufactures bathroom fixtures. Thestockholdersâ equity accounts of Morrow Enterprises Inc., withbalances on January 1, 2016, are as follows:

Common Stock, $20 stated value(500,000 shares authorized, 375,000 shares issued)	$7,500,000
Paid-In Capital in Excess of StatedValueâCommon Stock	825,000
Retained Earnings	33,600,000
Treasury Stock (25,000 shares, atcost)	450,000

The following selected transactions occurred during theyear:

Jan.	22	Paid cash dividends of $0.08 pershare on the common stock. The dividend had been properly recordedwhen declared on December 1 of the preceding fiscal year for$28,000.
Apr.	10	Issued 75,000 shares of commonstock for $24 per share.
Jun.	6	Sold all of the treasury stock for$26 per share.
Jul.	5	Declared a 4% stock dividend oncommon stock, to be capitalized at the market price of the stock,which is $25 per share.
Aug.	15	Issued the certificates for thedividend declared on July 5.
Nov.	23	Purchased 30,000 shares of treasurystock for $19 per share.
Dec.	28	Declared a $0.10-per-share dividendon common stock.
	31	Closed the credit balance of theincome summary account, $1,125,000.
	31	Closed the two dividends accountsto Retained Earnings.

Required:

Enter the January 1 balances inT accounts for the stockholdersâ equity accounts listed.

Journalize the entries torecord the transactions, and post to the eight selected accounts.No post ref is required in the journal. Refer to the Chart ofAccounts for exact wording of account titles.

Prepare a retained earningsstatement for the year ended December 31, 2016. Enter all amountsas positive numbers. The word âLessâ is not required.*

Prepare the StockholdersâEquity section of the December 31, 2016, balance sheet. âLessâ orâDeductâ will automatically appear if it is required. *

* Refer to the list of Amount Descriptions provided for theexact wording of the answer choices for text entries2.

2.CHART OF ACCOUNTSMorrow Enterprises Inc.General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
151	Prepaid Insurance
181	Land
193	Equipment
194	AccumulatedDepreciation-Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
226	Interest Payable
231	Cash Dividends Payable
236	Stock Dividends Distributable
241	Salaries Payable
261	Mortgage Note Payable

	EQUITY
311	Common Stock
313	Paid-In Capital in Excess of StatedValue-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess ofPar-Preferred Stock
331	Paid-In Capital from Sale ofTreasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

EXPENSES

510

Cost of Merchandise Sold

Office Supplies Expense

537

Organizational Expenses

562

Depreciation Expense-Equipment

590

Miscellaneous Expense

710

Interest Expense

3. AmountDescriptions
Cash balance, July 31, 2016
Common stock, $20 stated value;500,000 shares authorized, 375,000 issued
Common stock, $20 stated value;500,000 shares authorized, 438,000 issued
Common stock, $20 stated value;500,000 shares authorized, 468,000 issued
Decrease in retained earnings
Dividends
Excess of issue price over statedvalue
For the Year Ended December 31,2016
From sale of treasury stock
Increase in retained earnings
Net income
Net loss
Retained earnings
Retained earnings, December 31,2016
Retained earnings, January 1,2016
Total
Total paid-in capital
Total stockholdersâ equity

4. T Accounts:

A. Enter the January 1 balances in T accounts for thestockholdersâ equity accounts listed. Post the journal entries frompart B to the eight selected accounts. No post ref is required inthe journal.

Common Stock

Paid-In Capital inExcess of Stated Value-Common Stock

Retained Earnings

Treasury Stock

Paid-In Capital fromSale of Treasury Stock

Stock DividendsDistributable

Stock Dividends

Cash Dividends

5. Journal

B. Journalize the entries to record the transactions. No postref is required in the journal. Refer to the Chart of Accounts forexact wording of account titles.

PAGE 10

JOURNAL

6.Retained Earning Statements

C. Prepare a retained earnings statement for the year endedDecember 31, 2016. Enter all amounts as positive numbers. The wordâLessâ is not required. Refer to the list of Amount Descriptionsprovided for the exact wording of the answer choices for textentries.

Morrow Enterprises

Retained Earnings Statement

For the Year Ended December 31, 2016

1
2
3
4
5

7. Stockholdersâ Equity

D. Prepare the Stockholdersâ Equity section of the December 31,2016 balance sheet. âLessâ or âDeductâ will automatically appear ifit is required. Refer to the list of Amount Descriptions providedfor the exact wording of the answer choices for text entries.

Stockholdersâ Equity

1	Paid-in capital:
2
3
4
5
6
7
8

pinkbee658

ACCT 201 Lecture Notes - Lecture 6: Retained Earnings, Accounts Payable, Accounts Receivable

Document Summary

Get access

Related Documents

ACCT 201 Lecture Notes - Lecture 2: Accounts Payable, Accounting Equation, Retained Earnings

ACCT 201 Lecture Notes - Lecture 3: Deferral, Deferred Income, Accrual

ACCT 201 Lecture Notes - Lecture 4: Financial Statement, Accounting Equation, Income Statement

Related Questions