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Financial statements and closing entries 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 retained earnings statement for the year ended June 30. 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 & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

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Chapter
Section
BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 4, Problem 4.1BPR
Textbook Problem
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Financial statements and closing entries

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 retained earnings statement for the year ended June 30.
  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 4.1BPR, Financial statements and closing entries Last Chance Company offers legal consulting advice to

(1)

To determine

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.

To Prepare: An income statement for the year ended June 30, 2016.

Explanation of Solution

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

...
Company LC
Income Statement
For the year ended June 30, 2016
Particulars Amount ($) Amount ($)
Revenues: $283,750  
    Fees Earned 3,000  
    Rent revenue   $286,750
Expenses:    
     Salaries Wages Expense $147,000  
     Advertising Expense 86,800  

(2)

To determine

To Prepare: The retained earnings statement for the year ended June 30, 2016.

(3)

To determine

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

(4)

To determine

To Journalize: The closing entries for Company LC.

(5)

To determine

To Journalize: The closing entries for Company LC.

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Chapter 4 Solutions

Financial & Managerial Accounting
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Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Retained earnings statement Marcie Davies owns and...Ch. 4 - Retained earnings statement Blake Knudson owns and...Ch. 4 - Classified balance sheet The following accounts...Ch. 4 - Classified balance sheet The following accounts...Ch. 4 - Closing entries After the accounts have been...Ch. 4 - Closing entries After the accounts have been...Ch. 4 - Accounting cycle From the following list of steps...Ch. 4 - Accounting cycle From the following list of steps...Ch. 4 - Working capital and current ratio Balance sheet...Ch. 4 - Working capital and current ratio Balance sheet...Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Classifying accounts Balances for each of the...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Income statement The following account balances...Ch. 4 - Income statement; net loss The following revenue...Ch. 4 - Income statement FedEx Corporation had the...Ch. 4 - Retained earnings statement Apex Systems Co....Ch. 4 - Retained earnings statement; net loss Selected...Ch. 4 - Classifying assets Identify each of the following...Ch. 4 - Balance sheet classification At the balance sheet...Ch. 4 - Balance sheet Optimum Weight Loss Co. offers...Ch. 4 - Balance sheet List the errors you find in the...Ch. 4 - Identifying accounts to be closed From the list...Ch. 4 - Closing entries Prior to its closing, Income...Ch. 4 - Closing entries with net income After all revenue...Ch. 4 - Closing entries with net loss Mira Services Co....Ch. 4 - Identifying permanent accounts Which of the...Ch. 4 - Post-closing trial balance An accountant prepared...Ch. 4 - Steps in the accounting cycle Rearrange the...Ch. 4 - Working capital and current ratio The following...Ch. 4 - Working capital and current ratio The following...Ch. 4 - Appendix 1 Completing an end-of-period spreadsheet...Ch. 4 - Adjustment data on an end-of-period spreadsheet...Ch. 4 - Completing an end-of-period spreadsheet Alert...Ch. 4 - Completing an end-of-period spreadsheet Alert...Ch. 4 - Adjustment data on an end-of-period spreadsheet...Ch. 4 - Completing an end-of-period spreadsheet Alert...Ch. 4 - Financial statements and closing entries Lamp...Ch. 4 - Financial statements and closing entries Finders...Ch. 4 - T accounts, adjusting entries, financial...Ch. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Complete accounting cycle For the past several...Ch. 4 - Financial statements and closing entries Last...Ch. 4 - Financial statements and dosing entries The Gorman...Ch. 4 - T accounts, adjusting entries, financial...Ch. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Complete accounting cycle For the past several...Ch. 4 - Comprehensive problem 1 Kelly Pitney began her...Ch. 4 - Continuing Problem The unadjusted trial balance of...Ch. 4 - Ethics and professional conduct in business...Ch. 4 - Financial statements The following is an excerpt...Ch. 4 - Financial statements Assume that you recently...

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