Chapter 4, Problem 3GLP

To determine

Closing Entries: The journal entries prepare to close all the temporary accounts at the end of an accounting period is called closing entries.

Income Statement: The financial statement concerned with computation net income during an accounting period is called income statement. Net income is the excess amount of revenue over the expenses of a company and when the expenses are more than the revenue is termed as net loss.

Classified Balance Sheet: A classified balance sheet interprets the financial position of a business during particular period under different categories i.e. current assets, current liabilities, non-current assets, long-term liabilities, property, plant and equipment and owner's equity.

To Prepare:

Prepare closing entries, income statement and the classified balance sheet of Ace Construction Co. as of June 30, 2019. Prepare appropriate trial balance according to the information available.

Answer to Problem 3GLP

Particulars	Amount
Net Income	$30,890
Balance Sheet Total	$122,550
Post-Closing Trial Balance	$157,200

Explanation of Solution

ACE CONSTRUCTION CO. Six-Column Worksheet June 30, 2019.
		Trial Balance		Adjustments		Adjusted
No.	Account Title	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
101	Cash	$18,500				$18,500
126	Supplies	9,900			$6,600	3,300
128	Prepaid Insurance	7,200			3,800	3,400
167	Equipment	132,000				132,000
168	Accumulated Depreciation - Equipment		$26,250		8,400		$34,650
201	Accounts Payable		6,800		650		7,450
203	Interest Payable		0		250		250
208	Rent Payable		0		500		500
210	Wages Payable		0		1,800		1,800
213	Property taxes payable		0		1,000		1,000
251	Long-term notes payable		25,000				25,000
301	V. Ace, Capital		88,660				88,660
302	V. Ace, Withdrawals	33,000				33,000
401	Construction fees earned		132,100				132,100
612	Depreciation expense − Equipment	0		$8,400		8,400
623	Wages expense	46,860		1,800		48,660
633	Interest expense	2,750		250		3,000
637	Insurance expense	0		3,800		3,800
640	Rent expense	12,000		500		12,500
652	Supplies expense	0		6,600		6,600
683	Property taxes expense	7,800		1,000		8,800
684	Repairs expense	2,910				2,910
690	Utilities expense	5,890		650		6,540
	Totals	$278,810	$278,810	$23,000	$23,000	$291,410	$291,410

Closing Entries

Date	Particulars	Debit	Credit
2019
Dec. 31
A.	Construction fees earned	$132,100
	Income Summary		$132,100
B.	Income Summary	101,210
	Depreciation expense − Equipment		8,400
	Wages expense		48,660
	Interest expense		3,000
	Insurance expense		3,800
	Rent expense		12,500
	Supplies expense		6,600
	Property taxes expense		8,800
	Repairs expense		2,910
	Utilities expense		6,540
C.	Income Summary	30,890
	V. Ace, Capital		30,890
D.	V. Ace, Capital	33,000
	V. Ace, Withdrawals		33,000

ACE CONSTRUCTION CO.Income Statement June 30, 2019
Revenue:
Construction Fees Earned		$132,100
Expenses:
Depreciation expense − Equipment	8,400
Wages expense	48,660
Interest expense	3,000
Insurance expense	3,800
Rent expense	12,500
Supplies expense	6,600
Property taxes expense	8,800
Repairs expense	2,910
Utilities expense	6,540
Total Expense		$101,210
Net Income		$30,890

ACE CONSTRUCTION CO.Balance Sheet June 30, 2019
Assets
Current Assets:
Cash	$18,500
Supplies	3,300
Prepaid Insurance	3,400
Total Current Assets		25,200
Property, Plant and Equipment
Equipment	132,000
Less: Accumulated Depreciation	34,650	97,350
Total Assets		$122,550
Liabilities and Owner's Equity
Liabilities
Current Liabilities:
Accounts Payable	7,450
Interest Payable	250
Rent Payable	500
Wages Payable	1,800
Property taxes payable	1,000
Total Current Liabilities		11,000
Long-Term Liabilities
Long-term notes payable		25,000
Total Liabilities		36,000
Owner's Equity
V. Ace, Capital; June 1	53,660
Add: Additional Capital	35,000
Add: Net Income	30,890
Less: Withdrawal	33,000
V. Ace, Capital; June 30		86,550
Total Liabilities and Owner's Equity		$122,550

Post-Closing Trial Balance

ACE CONSTRUCTION CO.Post-Closing Trial Balance June 30, 2019
No.	Account Title	Debit	Credit
101	Cash	$18,500
126	Supplies	3,300
128	Prepaid Insurance	3,400
167	Equipment	132,000
168	Accumulated Depreciation - Equipment		$34,650
201	Accounts Payable		7,450
203	Interest Payable		250
208	Rent Payable		500
210	Wages Payable		1,800
213	Property taxes payable		1,000
251	Long-term notes payable		25,000
301	V. Ace, Capital		$86,550
	Total	$157,200	$157,200