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T accounts, adjusting entries, financial statements, and closing entries; optional end-of-period spreadsheet The unadjusted trial balance of La Mesa Laundry at August 31, 2019, the end of the fiscal year, follows: La Mesa Laundry Unadjusted Trial Balance August 31,2019 Debit Balances Credit Balances Cash 3,800 Laundry Supplies 9,000 Prepaid Insurance 6,000 Laundry Equipment 180,800 Accumulated Depreciation 49,200 Accounts Payable 7,800 Bobbi Downey. Capital 95,000 Bobbi Downey. Drawing 2,400 Laundry Revenue 248,000 Wages Expense 135,800 Rent Expense 43,200 Utilities Expense 16,000 Miscellaneous Expense 3,000 400,000 400,000 The data needed to determine year-end adjustments are as follows: a. Wages accrued but not paid at August 31 are $2,200. b. Depreciation of equipment during the year is $8,150. c. Laundry supplies on hand at August 31 are $2,000. d. Insurance premiums expired during the year are $5,300. Instructions 1. For each account listed in the unadjusted trial balance, enter the balance in a T account. Identity the balance as "Aug. 31 Bal." In addition, add T accounts for Wages Payable, Depreciation Expense, Laundry Supplies Expense, and Insurance Expense. 2. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (1) as needed. 3. Journalize and post the adjusting entries. Identity the adjustments as "Adj." and the new balances as "Adj. Bal." 4. Prepare an adjusted trial balance. 5. Prepare an income statement, a statement of owner's equity (no additional investments were made during the year), and a balance sheet. 6. Journalize and post the closing entries. Identify the closing entries as "Clos." 7. Prepare a post-closing trial balance.

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Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

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Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
Chapter 4, Problem 4.3BPR
Textbook Problem
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T accounts, adjusting entries, financial statements, and closing entries; optional end-of-period spreadsheet

The unadjusted trial balance of La Mesa Laundry at August 31, 2019, the end of the fiscal year, follows:

La Mesa Laundry

Unadjusted Trial Balance

August 31,2019

 

Debit

Balances

Credit Balances
Cash 3,800  
Laundry Supplies 9,000  
Prepaid Insurance 6,000  
Laundry Equipment 180,800  
Accumulated Depreciation   49,200
Accounts Payable   7,800
Bobbi Downey. Capital   95,000
Bobbi Downey. Drawing 2,400  
Laundry Revenue   248,000
Wages Expense 135,800  
Rent Expense 43,200  
Utilities Expense 16,000  
Miscellaneous Expense 3,000
400,000 400,000

The data needed to determine year-end adjustments are as follows:

a.    Wages accrued but not paid at August 31 are $2,200.

b.    Depreciation of equipment during the year is $8,150.

c.    Laundry supplies on hand at August 31 are $2,000.

d.    Insurance premiums expired during the year are $5,300.

Instructions

1.    For each account listed in the unadjusted trial balance, enter the balance in a T account. Identity the balance as "Aug. 31 Bal." In addition, add T accounts for Wages Payable, Depreciation Expense, Laundry Supplies Expense, and Insurance Expense.

2.    (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (1) as needed.

3.    Journalize and post the adjusting entries. Identity the adjustments as "Adj." and the new balances as "Adj. Bal."

4.    Prepare an adjusted trial balance.

5.    Prepare an income statement, a statement of owner's equity (no additional investments were made during the year), and a balance sheet.

6.    Journalize and post the closing entries. Identify the closing entries as "Clos."

7.    Prepare a post-closing trial balance.

To determine

1, 3, and 6:

Journal:

Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.

T-Accounts:

T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:

Ø The title of accounts.

Ø The debit side (Dr) and,

Ø The credit side (Cr).

Adjusted trial balance:

The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.

Adjusting entries:

An adjusting entry is prepared when the trial balance is not up-to-date, and complete, and they are usually prepared at the end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business.

Spreadsheet:

A spreadsheet is a worksheet. It is used while preparing a financial statement. It is a type of form having multiple columns and it is used in the adjustment process. The use of a worksheet is optional for any organization. A worksheet can neither be considered as a journal nor a part of the general ledger.

Statement of owners’ equity:

This statement reports the beginning owner’s equity and all the changes, which led to ending owners’ equity. Additional capital, net income from income statement is added to and drawing is deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.

Income statement:

An income statement is one of the financial statements which shows the revenues, and expenses of the company. The income statement is prepared to ascertain the net income/loss of the company, by deducting the expenses from the revenues.

Netincome = Total revenues – Total expenses

Balance sheet:

A balance sheet is a financial statement consists of the assets, liabilities, and the stockholder’s equity of the company. The balance of the assets account must be equal to that of the liabilities and the stockholder’s equity account.

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: The T-accounts.

Explanation of Solution

Record the transactions directly in their respective T-accounts, and determine their balances.

Cash
August 31 Balance 3,800
Laundry Supplies
August 31 Balance 9,000 August 31 Adjusted 7,000
August 31 Adjusted balance 2,000
Prepaid Insurance
August 31 Balance 6,000 August 31 Adjusted 5,300
Adjusted balance 700
Laundry Equipment
August 31 Balance 180,800
Accumulated Depreciation
August 31 Balance 49,200
August 31 Adjusted 8,150
August 31 Adjusted balance 57,350
Accounts Payable
August 31 Balance 7,800
Wages Payable
August 31 Adjusted 2,200
BD, Capital
August 31 Closing 2,400 August 31 Balance 95,000
August 31 Closing 27,350
August 31 Balance 119,950
BD, Drawing

2.

To determine

To enter: The unadjusted trial balance on an end-of-period spreadsheet, and complete the spreadsheet.

3.

To determine

To Journalize and post: The adjusting entries.

4.

To determine

To prepare: An unadjusted trial balance for Laundry LM, as of August 31, 2019.

5.

To determine
The net income or net loss of Laundry LMfor the month of August.

6.

To determine

To Journalize: The closing entries for LM Laundry.

7.

To determine

To prepare: The post–closing trial balance of LM Laundryfor the month ended August 31, 2019.

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Chapter 4 Solutions

Accounting
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