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Chapter 4: Q1PS (page 243)

Refer to the Practice Set data provided in Chapters 2 and 3 for Crystal Clear Cleaning.

Requirements

1. Prepare a worksheet (optional) at November 30, 2018. Use the unadjusted trial balance from Chapter 2 and the adjusting entries from Chapter 3.

2. Prepare an income statement and statement of retained earnings for the month ended November 30, 2018. Also prepare a classified balance sheet at November 30, 2018, using the report format. Assume the Notes Payable is long-term. Use the worksheet prepared in Requirement 1 or the adjusted trial balance from Chapter 3.

3. Prepare closing entries at November 30, 2018, and post to the accounts. Open T-accounts for Income Summary and Retained earnings. Determine the ending balance in each account. Denote each closing amount as Clos. and each account balance as Balance.

4. Prepare a post-closing trial balance at November 30, 2018.

Short Answer

Expert verified

Post-Closing Trial Balance: $72,900

Step by step solution

01

Worksheet

Crystal Clear Company

Worksheet

November 30, 2018

Account Names

Unadjusted Trial Balance

Adjustments

Adjusted Trial Balance

Debit

Credit

Debit

Credit

Debit

Credit

Cash

$ 51,650

$ 51,650

Accounts Receivables

4,000

4,000

Cleaning Supplies

320

$ 270

50

Prepaid Rent

4,000

4,000

Prepaid Insurance

4,800

4,800

Equipment

5,400

5,400

Truck

3,000

3,000

Accounts Payable

$ 1,245

$ 1,245

Unearned Revenue

15,000

15,000

Notes Payable

36,000

36,000

Common Stock

18,000

18,000

Dividends

1,400

1,400

Service Revenue

5,100

5,100

Salaries Expense

400

400

Advertising Expense

200

200

Utilities Expense

175

175

Supplies Expense

$ 270

270

Depreciation Expense

150

150

Accumulated Depreciation

150

150

Interest Expense

59

59

Accrued Interest

59

59

Total

$ 75,345

$ 75,345

$ 479

$ 479

$ 75,554

$ 75,554

02

Income statement, statement of retained earnings and balance sheet

Income Statement

Canyon Canoe Company

Amount

Particular

Service Revenue

5,100

Salaries Expense

400

Advertising Expense

200

Utilities Expense

175

Supplies Expense

270

Depreciation Expense

150

Interest Expense

59

Total Expenses

1,254

Net Income

$ 3,846

Retained Earnings Statement

Particular

Amount

Beginning Balance

0

Add: Net Income

$ 3,846

Less: Dividends

1,400

Ending Balance

$ 2,446

Balance Sheet

December 31, 2018

Assets

Amount

Current Assets

Cash

$ 51,650

Accounts Receivables

4,000

Cleaning Supplies

50

Prepaid Rent

4,000

Prepaid Insurance

4,800

Total Current Assets

$ 64,500

Non-current Assets

Equipment

5,400

Truck

3,000

Less: Accumulated Depreciation

150

8,250

Total Non-Current Assets

$ 8,250

Total Assets

$ 72,750

Liabilities and Shareholder鈥檚 equity

Current Liability

Accounts Payable

1,245

Unearned Revenue

15,000

Accrued Interest

59

Total Current Liability

$ 16,304

Non-Current Liability

Notes Payable

36,000

Total Non-Current Liability

36,000

Total Liability

52,304

Shareholders鈥� Equity

Wilson, Capital

$ 18,000

Add: Retained Earnings

2,446

Total Shareholders鈥� Equity

$ 20,446

Total Liabilities and Shareholders鈥� Equity

$ 72,750

03

Adjusting entries and posting into ledger

Date

Particular

Debit

Credit

2018

Dec 31

Total Revenue

$ 5,100

Income Summary

$ 5,100

Being revenue account closed

Dec 31

Income Summary

1,254

Salaries Expense

400

Advertising Expense

200

Utilities Expense

175

Supplies Expense

270

Depreciation Expense

150

Interest Expense

59

Being all expenses closed to the income summary

Dec 31

Income Summary

3,846

Retained Earnings

3,846

Being net income closed to retained earnings

Income Summary

Clos. 2

$ 1,254

$ 5,100

Clos. 1

Clos. 3

3,846

3,846

Clos.

0

Retained Earnings

0

Adj. Bal.

Clos. 4

1,400

$ 3,846

Clos. 3

2,446

Bal.

04

Post closing trial balance

Crystal Clear Cleaning

Post Closing Trial Balance

November 30, 2018

Balance

Account Title

Debit

Credit

Cash

$ 51,650

Accounts Receivables

4,000

Cleaning Supplies

50

Prepaid Rent

4,000

Prepaid Insurance

4,800

Equipment

5,400

Truck

3,000

Accumulated Depreciation

$ 150

Accounts Payable

1,245

Unearned Revenue

15,000

Notes Payable

36,000

Common Stock

18,000

Accrued Interest

59

Retained Earnings

2,446

Total

$ 72,900

$ 72,900

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Most popular questions from this chapter

The adjusted trial balance of Boston Irrigation System at December 31, 2018, follows BOSTON IRRIGATION SYSTEM Adjusted Trial Balance December 31, 2018 0 Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Building Accumulated Depreciation鈥擝uilding Equipment Accumulated Depreciation鈥擡quipment Accounts Payable Interest Payable Salaries Payable Unearned Revenue Notes Payable (long-term) Common Stock Dividends Retained Earnings Service Revenue Insurance Expense Salaries Expense Supplies Expense Balance \( 11,800 \) 211,900 \( 211,900 28,000 \) 25,000 63,000 32,100 2,600 2,200 2,100 12,000 21,000 46,000 29,500 6,300 7,700 32,700 2,200 74,500 1,100 16,400 1,100 2,200 2,500 1,800 Interest Expense Depreciation Expense鈥擡quipment Depreciation Expense鈥擝uilding Tota June 30, 2018. : Requirements 1. Prepare the company鈥檚 income statement for the year ended December 31, 2018. 2. Prepare the company鈥檚 statement of retained earnings for the year ended December 31, 2018. 3. Prepare the company鈥檚 classified balance sheet in report form at December 31, 2018. 4. Journalize the closing entries for Boston Irrigation System. 5. Compute the company鈥檚 current ratio at December 31, 2018. At December 31, 2017, the current ratio was 2.3. Did the company鈥檚 ability to pay current debts improve or deteriorate, or did it remain the same?

For each account listed, identify the category in which it would appear on a classified balance sheet.

6. Investments in stock of another company held long-term

Grant Film Productions wishes to expand and has borrowed \(100,000. As a condition for making this loan, the bank requires that the business maintain a current ratio of at least 1.50. Business has been good but not great. Expansion costs have brought the current ratio down to 1.40 on December 15. Rita Grant, owner of the business, is considering what might happen if she reports a current ratio of 1.40 to the bank. One course of action for Grant is to record in December \)10,000 of revenue that the business will earn in January of next year. The contract for this job has been signed. Requirements 1. Journalize the revenue transaction, and indicate how recording this revenue in December would affect the current ratio. 2. Discuss whether it is ethical to record the revenue transaction in December. Identify the accounting principle relevant to this situation, and give the reasons underlying your conclusion.

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.

What is the closing process?
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