Concept explainers
Accounting cycle; unadjusted
• LO2–3, LO2–5, LO2–7
The unadjusted trial balance as of December 31, 2018, for the Bagley Consulting Company appears below. December 31 is the company’s fiscal year-end.
Account Title | Debits | Credits |
Cash | 8,000 | |
Accounts receivable | 9,000 | |
Prepaid insurance | 3,000 | |
Land | 200,000 | |
Buildings | 50,000 | |
20,000 | ||
Office equipment | 100,000 | |
Accumulated depreciation—office equipment | 40,000 | |
Accounts payable | 35,050 | |
Salaries and wages payable | –0– | |
Deferred rent revenue | –0– | |
Common stock | 200,000 | |
56,450 | ||
Sales revenue | 90,000 | |
Interest revenue | 3,000 | |
Rent revenue | 7,500 | |
Salaries and wages expense | 37,000 | |
Depreciation expense | –0– | |
Insurance expense | –0– | |
Utility expense | 30,000 | |
Maintenance expense | 15,000 | |
Totals | 452,000 | 452,000 |
Required:
1. Enter the account balances in T-accounts.
2. From the trial balance and information given, prepare
a. The buildings have an estimated useful life of 50 years with no salvage value. The company uses the
b. The office equipment is
c. Prepaid insurance expired during the year, $1,500.
d. Accrued salaries and wages at year-end, $1,500.
e. Deferred rent revenue at year-end should be $1,200.
3. Prepare an adjusted trial balance.
4. Prepare closing entries.
5. Prepare a post-closing trial balance.
1.
T-account:
- T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.
- The components of the T-account are as follows:
-
- a) The title of the account
- b) The left or debit side
- c) The right or credit side
Adjusting entries:
Adjusting entries are the journal entries, which are recorded at the end of the accounting period to correct or adjust the revenue and expense accounts, to concede with the accrual principle of accounting.
Accounting rules for journal/adjusting entries:
- To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
- To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.
Adjusted Trial Balance:
An adjusted trial balance refers to the final trial balance resulting after posting the adjusting entries at the end of the period.
Closing Entries:
Closing entries are those journal entries which are passed to transfer the balances of temporary accounts to the permanent accounts. These are passed at the end of the period, to transfer the final balance.
Post-closing trial balance:
After passing all the journal entries and the closing entries of the permanent accounts and then further posting them to each of the respective accounts, a post-closing trial balance is prepared which consists of a list of all the permanent accounts. A post-closing trial balance serves as an evidence to prove that the balance of the permanent accounts is equal.
To Enter: The account balances in T-accounts.
Explanation of Solution
Enter account balances in T-accounts.
Cash Account:
Cash Account
December 31 | $8,000 | ||||
December 31 | $8,000 |
Accounts Receivable:
Accounts Receivable Account
December 31 | $9,000 | ||||
December 31 | $9,000 |
Prepaid Insurance:
Prepaid Insurance Account
December 31 | $3,000 | ||||
December 31 |
$3,000 |
Land:
Land Account
December 31 | $200,000 | ||||
December 31 | $200,000 |
Building:
Building Account
December 31 | $50,000 | ||||
December 31 | $50,000 |
Office Equipment:
Office Equipment Account
December 31 | $100,000 | ||||
December 31 | $100,000 |
Accumulated Depreciation - building:
Accumulated Depreciation - building Account
December 31 | $20,000 | ||||
December 31 | $20,000 |
Accumulated Depreciation – office equipment:
Accumulated Depreciation – office equipment Account
December 31 | $40,000 | ||||
December 31 | $40,000 |
Accounts Payable:
Accounts Payable Account
December 31 | $35,050 | ||||
December 31 | $35,050 |
Salaries and Wages Payable:
Salaries and Wages Payable Account
December 31 | 0 | ||||
December 31 | 0 |
Deferred Rent Revenue:
Deferred Rent Revenue Account
December 31 | 0 | ||||
December 31 | 0 |
Common Stock:
Common Stock Account
December 31 | $200,000 | ||||
December 31 | $200,000 |
Retained Earnings:
Retained Earnings Account
December 31 | $56,450 | ||||
December 31 | $56,450 |
Sales Revenue:
Sales Revenue Account
December 31 | $90,000 | ||||
December 31 | $90,000 |
Interest Revenue:
Interest Revenue Account
December 31 | $3,000 | ||||
December 31 | $3,000 |
Rent Revenue:
Rent Revenue Account
December 31 | $7,500 | ||||
December 31 | $7,500 |
Salaries and Wages Expense:
Salaries and Wages Expense Account
December 31 | $37,000 | ||||
December 31 | $37,000 |
Depreciation Expense:
Depreciation Expense Account
December 31 | 0 | ||||
December 31 | 0 |
Insurance Expense:
Insurance Expense Account
December 31 | 0 | ||||
December 31 | 0 |
Utility Expense:
Utility Expense Account
December 31 | $30,000 | ||||
December 31 | $30,000 |
Maintenance Expense:
Maintenance Expense Account
December 31 | $15,000 | ||||
December 31 | $15,000 |
2.
To Prepare: The adjusting entries, and post them to the accounts.
Explanation of Solution
Prepare the adjusting journal entry at December 31, 2018.
Date | Account Title and Explanation | Post Ref | Debit($) | Credit($) |
a. | Depreciation Expense (E–) | 1,000 | ||
Accumulated Depreciation (A–) buildings | 1,000 | |||
(To record the amount of depreciation for the year) | ||||
b. | Depreciation Expense (E–) | 10,000 | ||
Accumulated Depreciation (A–) office equipment | 10,000 | |||
(To record the amount of depreciation for the year) | ||||
c. | Insurance Expense (E–) | 1,500 | ||
Prepaid Insurance (A–) | 1,500 | |||
(To record the amount of prepaid insurance expired during the period) | ||||
d. | Salaries and Wages Expense (E –) | 1,500 | ||
Salaries and Wages Payable (L+) | 1,500 | |||
(To record the amount of accrued salaries for the month.) | ||||
e. | Rent Revenue (E+) | 1,200 | ||
Deferred Rent Revenue (L–) | 1,200 | |||
(To record the amount of Deferred service revenue earned during the period.) |
Table (1)
Working notes:
Calculate the amount of depreciation expense - Building:
Calculate the amount of depreciation expense – Office equipment:
Post the adjusting entries in T-accounts.
Cash Account:
Cash Account
December 31 | $8,000 | ||||
December 31 | $8,000 |
Accounts Receivable:
Accounts Receivable Account
December 31 | $9,000 | ||||
December 31 | $9,000 |
Prepaid Insurance:
Prepaid Insurance Account
December 31 | $3,000 | ||||
c. | $1,500 (Adjusting) | ||||
December 31 |
$1,500 |
Land:
Land Account
December 31 | $200,000 | ||||
December 31 | $200,000 |
Building:
Building Account
December 31 | $50,000 | ||||
December 31 | $50,000 |
Office Equipment:
Office Equipment Account
December 31 | $100,000 | ||||
December 31 | $100,000 |
Accumulated Depreciation - building:
Accumulated Depreciation - building Account
December 31 | $20,000 | ||||
a. | $1,000 (Adjusting) | ||||
December 31 | $21,000 |
Accumulated Depreciation – office equipment:
Accumulated Depreciation – office equipment Account
December 31 | $40,000 | ||||
b. | $10,000 (Adjusting) | ||||
December 31 | $50,000 |
Accounts Payable:
Accounts Payable Account
December 31 | $35,050 | ||||
December 31 | $35,050 |
Salaries and Wages Payable:
Salaries and Wages Payable Account
December 31 | 0 | ||||
d. | $1,500 (Adjusting) | ||||
December 31 | $1,500 |
Deferred Rent Revenue:
Deferred Rent Revenue Account
December 31 | 0 | ||||
e. | $1,200 (Adjusting) | ||||
December 31 | $1,200 |
Common Stock:
Common Stock Account
December 31 | $200,000 | ||||
December 31 | $200,000 |
Retained Earnings:
Retained Earnings Account
December 31 | $56,450 | ||||
December 31 | $56,450 |
Sales Revenue:
Sales Revenue Account
December 31 | $90,000 | ||||
December 31 | $90,000 |
Interest Revenue:
Interest Revenue Account
December 31 | $3,000 | ||||
December 31 | $3,000 |
Rent Revenue:
Rent Revenue Account
December 31 | $7,500 | ||||
e. | $1,200 (Adjusting) | ||||
December 31 | $6,300 |
Salaries and Wages Expense:
Salaries and Wages Expense Account
December 31 | $37,000 | ||||
d. | $1,500 (Adjusting) | ||||
December 31 | $38,500 |
Depreciation Expense:
Depreciation Expense Account
December 31 | 0 | ||||
a. | $1,000 (Adjusting) | ||||
b. | $10,000 (Adjusting) | ||||
December 31 | $11,000 |
Insurance Expense:
Insurance Expense Account
December 31 | 0 | ||||
c. | $1,500 (Adjusting) | ||||
December 31 | $1,500 |
Utility Expense:
Utility Expense Account
December 31 | $30,000 | ||||
December 31 | $30,000 |
Maintenance Expense:
Maintenance Expense Account
December 31 | $15,000 | ||||
December 31 | $15,000 |
3.
To Prepare: An adjusted trial balance.
Explanation of Solution
Prepare an adjusted trial balance for the year ended December 31, 2018.
Account Title | Debit ($) | Credit ($) |
Cash | 8,000 | |
Accounts Receivable | 9,000 | |
Prepaid insurance | 1,500 | |
Land | 200,000 | |
Building | 50,000 | |
Accumulated depreciation – building | 21,000 | |
Office equipment | 100,000 | |
Accumulated depreciation – office equipment | 50,000 | |
Accounts payable | 35,050 | |
Salaries and wages payable | 1,500 | |
Deferred rent revenue | 1,200 | |
Common stock | 200,000 | |
Retained earnings | 56,450 | |
Sales revenue | 90,000 | |
Interest revenue | 3,000 | |
Rent revenue | 6,300 | |
Salaries and wages expense | 38,500 | |
Depreciation expense | 11,000 | |
Insurance expense | 1,500 | |
Utility expense | 30,000 | |
Maintenance expense | 15,000 | |
Totals | $464,500 | $464,500 |
Table (2)
4.
To Prepare: The closing entries.
Explanation of Solution
Prepare closing entries for the month ended December 31, 2018.
Date | Accounts title and explanation | Post Ref. | Debit ($) |
Credit ($) |
December 31, 2018 | Sales Revenue (SE-) | 90,000 | ||
Interest Revenue (SE-) | 3,000 | |||
Rent Revenue (SE-) | 6,300 | |||
Income Summary (SE+) | 99,300 | |||
(To close the revenue accounts) | ||||
December 31 2018 | Income Summary (SE-) | 96,000 | ||
Salaries and Wages Expense (SE+) | 38,500 | |||
Depreciation Expense (SE+) | 11,000 | |||
Insurance Expense (SE+) | 1,500 | |||
Utility Expense (SE+) | 30,000 | |||
Maintenance Expense (SE+) | 15,000 | |||
(To close the expense accounts) | ||||
December 31 2018 | Income Summary (SE-) | 3,300 | ||
Retained Earnings (SE+) | 3,300 | |||
(To close the income summary account) |
Table (3)
5.
To Prepare: A post-closing trial balance.
Explanation of Solution
Prepare a post closing trial balance for Company BC at December 31, 2018.
Account title | Debit ($) | Credit ($) |
Cash | 8,000 | |
Accounts receivable | 9,000 | |
Prepaid insurance | 1,500 | |
Land | 200,000 | |
Buildings | 50,000 | |
Accumulated depreciation - Buildings | 21,000 | |
Office equipment | 100,000 | |
Accumulated depreciation – Office equipment | 50,000 | |
Accounts payable | 35,050 | |
Salaries and wages payable | 1,500 | |
Deferred rent revenue | 1,200 | |
Common stock | 200,000 | |
Retained earnings | 59,750 | |
Totals | $368,500 | $368,500 |
Table (4)
Want to see more full solutions like this?
Chapter 2 Solutions
GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
- jarrow_forwardQUESTION 14 The schedule of aging accounts for a Company, at the end of the year 2020, appears below Accounts Recenable $40 000 10 000 5.500 1800 57 300 Estmate Bad Debts Curent 130 days overdue 31-60 days overdue More than 60 days overdue Total 1% 5% 10% 20% The alowance was estimated by using the schedule of ageing accounts The allowance account had a debit balance of $600, before the estimate was made Required: Prepare the adjusting entry to record bad debts expense for 2020 (SHOW YOUR CALCULATIONS) CALT+IN+F10Mac)arrow_forwardQuestion 23 CS Flint Stone Works reported the following accounts receivable at December 31, 2022. The company also provided its estimate of the portion that it believes will not be collected for each category of aged receivable. Customer GVSU MSU Other customers Totals Estimated % Uncollectible $150,000 B) $137,200 $128,000 Current (D) $22,000 $10,000 SO $0 $10,000 0% 1-30 Days Past Due SO SO SO SO 1% What should Flint Stone Works report as its gross accounts receivable at December 31, 20227 31-60 Days 61-90 Days Past Due Past Due SO SO SO SO 2% SO SO $40,000 $40,000 5% Over 90 Days Past Due SO $20,000 $80,000 $100,000 20% Total $10,000 $20,000 $120,000 $150,000arrow_forward
- CH 9 Demonstration Problems i Saved Help Sav 1 Required Information [The following information applies to the questions displayed below.] During its first year of operations, Walnut Company completed the following two transactions. The annual accounting perlod ends December 31. Part 1 of 3 a. Paid and recorded wages of $149,000 during Year 1; however, at the end of Year 1, three days' wages are unpald and have not yet been recorded because the weekly payroll will not be paid to employees until January 6 of Year 2. Wages for the three days are $5,500. b. Collected rent revenue of $2,100 on December 12 of Year 1 for office space that Walnut rented to another company. The rent collected was for 30 days from December 12 of Year 1 to January 10 of Year 2. 1.25 polnts eBook Required: 1. With respect to wages, provide the adjusting entry required at the end of Year 1 and the journal entry required on January 6 of Year 2. (If no entry is required for a transaction/event, select "No journal…arrow_forwardAarrow_forwardfinancial accounting please give me the answer of this question thnaksarrow_forward
- Serial Problem Business Solutions LO P1, A1 Selected ledger account balances for Business Solutions follow. For Three MonthsEnded December 31, 2019 For Three MonthsEnded March 31, 2020 Office equipment $ 8,100 $ 8,100 Accumulated depreciation—Office equipment 405 810 Computer equipment 20,000 20,000 Accumulated depreciation—Computer equipment 1,250 2,500 Total revenue 31,334 44,900 Total assets 83,360 121,668 Required:1. Assume that Business Solutions does not acquire additional office equipment or computer equipment in 2020. Compute amounts for the year ended December 31, 2020, for Depreciation expense—Office equipment and for Depreciation expense—Computer equipment (assume use of the straight-line method).2. Given the assumptions in part 1, what is the book value of both the office equipment and the computer equipment as of December 31, 2020?3. Compute the three-month total asset turnover for Business…arrow_forwardPlease do not give solution in image format thankuarrow_forward1arrow_forward
- harrow_forwardAge of ReceivablesApril 30, 20X1 (1) (2) (3) (4) Month ofSales Age ofAccount Amounts Percent ofAmount Due April 0–30 $ 131,250 _______ March 31–60 93,750 _______ February 61–90 112,500 _______ January 91–120 37,500 _______ Total receivables $ 375,000 100% a. Calculate the percentage of amount due for each month.arrow_forward8:46 ☑ ← Contin...ent-1 g. .i| 98% READ ONLY - This is an older file format. To ma... Question 1 Accounts Trial Balance Smalls Bakery For the month ending Sept 30th 2023 Folio Debit $ Credit $ Cash 43,300.00 Equipment Accounts Payable 25,000.00 15,200.00 Capital Drawings 50,000.00 700.00 Sales 6,200.00 Rent Expense 1,000.00 Accident Insurance Expense 1,200.00 Advertising Expense 200.00 Total 71,400.00 71,400.00 Above is the Trial Balance of Smalls Bakery Instructions Prepare the Business' Statement of Financial Position (Balance Sheet) as at 30th September 2023 (25 marks) A Print Layout Headings Edit Share Read Aloud |||arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education