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Last Chance Company offers legal consulting advice to prison inmates. Last Chance Company prepared the end-of-period spreadsheet that follows at June 30, 2016, the end of the fiscal year. Instructions 1. Prepare an income statement for the year ended June 30. 2. Prepare a statement of owner’s equity for the year ended June 30. No additional investments were made during the year. 3. Prepare a balance sheet as of June 30. 4. On the basis of the end-of-period spreadsheet, journalize the closing entries. 5. Prepare a post-closing trial balance.

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Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436

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Chapter
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BuyFindarrow_forward

Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436
Chapter 4, Problem 1PB
Textbook Problem
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Last Chance Company offers legal consulting advice to prison inmates. Last Chance Company prepared the end-of-period spreadsheet that follows at June 30, 2016, the end of the fiscal year.

Instructions

  1. 1. Prepare an income statement for the year ended June 30.
  2. 2. Prepare a statement of owner’s equity for the year ended June 30. No additional investments were made during the year.
  3. 3. Prepare a balance sheet as of June 30.
  4. 4. On the basis of the end-of-period spreadsheet, journalize the closing entries.
  5. 5. Prepare a post-closing trial balance.

Chapter 4, Problem 1PB, Last Chance Company offers legal consulting advice to prison inmates. Last Chance Company prepared

(1)

To determine

Prepare an income statement for the year ended June 30, 2016.

Explanation of Solution

Financial statement: A financial statement is the complete record of financial transactions that take place in a company at a particular point of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. It helps them to know the exact financial position of the company. There are four basic financial statements; they are:

  • Balance Sheet
  • Income statement
  • Statement of owners’ equity
  • Statement of cash flows

Closing entries: Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts. It is passed at the end of the accounting 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.

An income statement for the year ended June 30, 2016 is as follows:

Company LC
Income Statement
For the year ended June 30, 2016
Particula...

(2)

To determine

Prepare statement of owners’ equity for the year ended June 30, 2016.

(3)

To determine

Prepare balance sheet of Company LC at June 30, 2016.

(4)

To determine

Journalize the closing entries for Company LC.

(5)

To determine

Journalize the closing entries for Company LC.

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Chapter 4 Solutions

Financial Accounting
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