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Ledger accounts, adjusting entries, financial statements, and closing entries; optional spreadsheet The unadjusted trial balance of Lakota Freight Co. at March 31, 2018, the end of the year, follows: Lakota Freight Co. Unadjusted Trial Balance March 31, 2018 Account No. Debit Balances Credit Balances Cash................................................ 11 12,000 Supplies............................................ 13 30,000 Prepaid Insurance.................................... 14 3,600 Equipment.......................................... 16 110,000 Accumulated Depreciation—Equipment............... 17 25,000 Trucks............................................... 18 60,000 Accumulated Depreciation—Trucks................... 19 15,000 Accounts Payable.................................... 21 4,000 Common Stock...................................... 31 26,000 Retained Earnings................................... 32 70,000 Dividends........................................... 33 15,000 Service Revenue..................................... 41 160,000 Wages Expense...................................... 51 45,000 Rent Expense........................................ 53 10,600 Truck Expense....................................... 54 9,000 Miscellaneous Expense............................... 59 4,800 300,000 300,000 The data needed to determine year-end adjustments are as follows: (A) Supplies on hand at March 31 are $7,500. (B) Insurance premiums expired during year are $1,800. (C) Depreciation of equipment during year is $8,350. (D) Depreciation of trucks during year is $6,200. (E) Wages accrued but not paid at March 31 are $600. Instructions 1. For each account listed in the trial balance, enter the balance in the appropriate Balance column of a four-column account and place a check mark (✓) in the Posting Reference column. 2. (Optional) Enter the unadjusted trial balance on an end-of-period spread sheet and complete the spreadsheet. Add the accounts listed in part (3) as needed. 3. Journalize and post the adjusting entries, inserting balances in the accounts affected. Record the adjusting entries on Page 26 of the journal. The following additional accounts from Lakota Freight Co.’s chart of accounts should be used: Wages Payable, 22; Supplies Expense, 52; Depreciation Expense—Equipment, 55; Depreciation Expense—Trucks, 56; Insurance Expense, 57. 4. Prepare an adjusted trial balance. 5. Prepare an income statement, a retained earnings statement, and a balance sheet. 6. Journalize and post the closing entries. Record the closing entries on Page 27 of the journal. (Income Summary is account #34 in the chart of accounts.) Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. 7. Prepare a post-closing trial balance.

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Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

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Section
BuyFindarrow_forward

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
Chapter 4, Problem 4.4APR
Textbook Problem
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Ledger accounts, adjusting entries, financial statements, and closing entries; optional spreadsheet

The unadjusted trial balance of Lakota Freight Co. at March 31, 2018, the end of the year, follows:

Lakota Freight Co.

Unadjusted Trial Balance

March 31, 2018

  Account No. Debit Balances Credit Balances
Cash................................................ 11 12,000
Supplies............................................ 13 30,000
Prepaid Insurance.................................... 14 3,600
Equipment.......................................... 16 110,000
Accumulated Depreciation—Equipment............... 17 25,000
Trucks............................................... 18 60,000
Accumulated Depreciation—Trucks................... 19 15,000
Accounts Payable.................................... 21 4,000
Common Stock...................................... 31 26,000
Retained Earnings................................... 32 70,000
Dividends........................................... 33 15,000
Service Revenue..................................... 41 160,000
Wages Expense...................................... 51 45,000
Rent Expense........................................ 53 10,600
Truck Expense....................................... 54 9,000
Miscellaneous Expense............................... 59 4,800
300,000 300,000

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

(A) Supplies on hand at March 31 are $7,500.

(B) Insurance premiums expired during year are $1,800.

(C) Depreciation of equipment during year is $8,350.

(D) Depreciation of trucks during year is $6,200.

(E) Wages accrued but not paid at March 31 are $600.

Instructions

1. For each account listed in the trial balance, enter the balance in the appropriate Balance column of a four-column account and place a check mark (✓) in the Posting Reference column.

2. (Optional) Enter the unadjusted trial balance on an end-of-period spread sheet and complete the spreadsheet. Add the accounts listed in part (3) as needed.

3. Journalize and post the adjusting entries, inserting balances in the accounts affected. Record the adjusting entries on Page 26 of the journal. The following additional accounts from Lakota Freight Co.’s chart of accounts should be used: Wages Payable, 22; Supplies Expense, 52; Depreciation Expense—Equipment, 55; Depreciation Expense—Trucks, 56; Insurance Expense, 57.

4. Prepare an adjusted trial balance.

5. Prepare an income statement, a retained earnings statement, and a balance sheet.

6. Journalize and post the closing entries. Record the closing entries on Page 27 of the journal. (Income Summary is account #34 in the chart of accounts.) Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry.

7. Prepare a post-closing trial balance.

1.

To determine

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:

  • The title of accounts.
  • The debit side (Dr) and,
  • 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.

Account:         Cash                                                              Account no. 11
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓       12,000  
        
Account:   Supplies                                                            Account no. 13
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓       30,000  
  31 Adjusting 26   22,500 7,500  
Account:    Prepaid Insurance                                                  Account no. 14
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓       3,600  
  31 Adjusting 26   1,800 1,800  
Account:    Equipment                                                             Account no. 16
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓       110,000  
        
Account:  Accumulated Depreciation-Office equipment        Account no. 17
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓         25,000
  31 Adjusting 26   8,350   33,350
Account:    Trucks                                                                    Account no. 18
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓       60,000  
        
Account:  Accumulated Depreciation- Truck                      Account no. 19
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓         15,000
  31 Adjusting 26   6,200   21,200
Account:     Accounts Payable                                                      Account no. 21
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓         4,000
        
Account:     Wages Payable                                                        Account no. 22
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Adjusting 26   600   600
        
Account:          Common Stock                                                         Account no. 31
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓ 1   26,000   26,000
        
Account:         Retained Earnings                                                       Account no. 32
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓         70,000
  31 Closing 27   51,150   121,150
  31 Closing 27 15,000     106,150
Account:          Dividends                                                         Account no. 33
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2018            
March 31 Balance ✓ 1     15,000  
  31 Closing 27   15,000    
Account:         Income Summary                                                       Account no...

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 adjusted trial balance for Company L, as of March 31, 2018.

5.

To determine

The net income or net loss of Company L for the month of March.

To determine

To Prepare: The retained earnings statement for the year ended March 31, 2018.

To determine

To Prepare: The retained earnings statement for the year ended March 31, 2018.

6.

To determine

To Journalize: The closing entries for Company L.

7.

To determine

To prepare: The post–closing trial balance of Company L for the month ended March 31, 2018.

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Chapter 4 Solutions

Corporate Financial Accounting
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