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Chapter 4: Q10RQ (page 216)
How could a worksheet help in preparing financial statements?
Answer
In the worksheet, income statement balance sheet accounts are reported with the balances. Lastly net income or loss under income statement section is entered into balance sheet.
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What types of accounts are listed on the post-closing trial balance?
For each account listed, identify the category in which it would appear on a classified balance sheet.
3. Land
For each account listed, identify whether the account would appear in either the income statement section or the balance sheet section of the worksheet. Assuming normal balances, identify if the account would be recorded in the debit (DR) or credit (CR)
column.
Depreciation Expense鈥擝uilding
Winters Landscape Services accrued \(4,000 of Salaries Expense at December 31. Winters paid the next payroll at January 10 of
\)6,000. This payment included the accrued amount at December 31, plus $2,000 for the first few days of January.
23A. Record the adjusting entry to accrue Salaries Expense
Kathy Wintz formed a lawn service business as a summer job. To start the corporationon May 1, 2018, she deposited \(1,000 in a new bank account in the name of the business. The \)1,000 consisted of a \(600 loan from Bank One to her company, Wintz Lawn Service, and \)400 of her own money. The company issued \(400 of common stock to Wintz. Wintz rented lawn equipment, purchased supplies, and hired other students to mow and trim customers鈥� lawns.
At the end of each month, Wintz mailed bills to the customers. On August 31, she was ready to dissolve the corporation and return to college. Because she was so busy, she kept few records other than the checkbook and a list of receivables from customers.
At August 31, the business鈥檚 checkbook shows a balance of \)2,000, and customers still owe \(750. During the summer, the business collected \)5,500 from customers. The business checkbook lists payments for supplies totaling \(400, and it still has gasoline, weed trimmer cord, and other supplies that cost a total of \)50.
The business paid employees \(1,800 and still owes them \)300 for the final week of the summer. Wintz rented some equipment from Ludwig鈥檚 Machine Shop. On May 1, the business signed a six-month rental agreement on mowers and paid \(600 for the full rental period in advance. Ludwig鈥檚 will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Wintz has kept the mowers in excellent condition. In fact, the business had to pay \)300 to repair a mower.To transport employees and equipment to jobs, Wintz used a trailer that the business bought for \(300. The business estimates that the summer鈥檚 work used up one-third of the trailer鈥檚 service potential. The business checkbook lists a payment of \)500 for cash dividends paid during the summer. The business paid the loan back during August. (For simplicity, ignore any interest expense associated with the loan.)
Requirements
1. As a team, prepare the income statement and the statement of retained earnings of Wintz Lawn Service for the four months May 1 through August 31, 2018.
2. Prepare the classified balance sheet (report form) of Wintz Lawn Service at August 31, 2018.
3. Was Wintz鈥檚 summer work successful? Give your team鈥檚 reason for your answer.
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