Pete's Roofing, Inc. Unadjusted Trial Balance December 31, 2014 Account Debit Credit Cash $ 5,000 Accounts Receivable 20,000 Supplies 6,000 Prepaid Rent 10,500 Equipment 850,000 Accumulated Depreciation 235,000 Other Assets 65,000 Accounts Payable 10,500 Unearned Service Revenue 12,500 Note Payable 60,000 Common Stock 285,000 Retained Earnings 35,000 Service Revenue 625,000 Wages Expense 205,000 Rent Expense 92,600 Interest Expense 8,900 Totals $ 1,263,000 $ 1,263,000 At year end, you have the following data for adjustments: An analysis indicates that prepaid rent on December 31 should be $4,000 A physical inventory shows that $1,650 of office supplies is on hand. Depreciation for 2014 is $40,000 An analysis indicates that unearned service revenue should be $6,500 Wages of $5,500 are owed but unpaid and unrecorded at year end. Six month's interest at 5% on the note was paid on September 30. Interest for the period October 1 to December 31 is unpaid and unrecorded. REQUIRED: Prepare the adjusting entries. 2. After posting the adjusting entries, prepare an adjusted trial balance.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
| Pete's Roofing, Inc. | |||
| Unadjusted |
|||
| December 31, 2014 | |||
| Account | Debit | Credit | |
| Cash | $ 5,000 | ||
| Accounts Receivable | 20,000 | ||
| Supplies | 6,000 | ||
| Prepaid Rent | 10,500 | ||
| Equipment | 850,000 | ||
| 235,000 | |||
| Other Assets | 65,000 | ||
| Accounts Payable | 10,500 | ||
| Unearned Service Revenue | 12,500 | ||
| Note Payable | 60,000 | ||
| Common Stock | 285,000 | ||
| 35,000 | |||
| Service Revenue | 625,000 | ||
| Wages Expense | 205,000 | ||
| Rent Expense | 92,600 | ||
| Interest Expense | 8,900 | ||
| Totals | $ 1,263,000 | $ 1,263,000 |
At year end, you have the following data for adjustments:
- An analysis indicates that prepaid rent on December 31 should be $4,000
- A physical inventory shows that $1,650 of office supplies is on hand.
- Depreciation for 2014 is $40,000
- An analysis indicates that unearned service revenue should be $6,500
- Wages of $5,500 are owed but unpaid and unrecorded at year end.
- Six month's interest at 5% on the note was paid on September 30. Interest for the period October 1 to December 31 is unpaid and unrecorded.
REQUIRED:
- Prepare the
adjusting entries .
2. After
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
