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Chapter 4: Q35PSB (page 236)

The adjusted trial balance of Rocket Real Estate Appraisal at June 30, 2018, follows: ROCKET REAL ESTATE APPRAISAL Adjusted Trial Balance June 30, 2018Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Building Accumulated Depreciation鈥擝uilding Land 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 Interest Expense Balance \( 5,000 \) 178,100 \( 178,100 12,800 \) 25,200 71,000 8,000 1,000 2,100 37,000 25,800 5,500 1,600 1,700 18,700 5,000 33,000 48,100 4,100 32,000 600 8,000 2,900 7,100 Utilities Expense Depreciation Expense鈥擝uilding Total . Requirements 1. Prepare the company鈥檚 income statement for the year ended June 30, 2018. 2. Prepare the company鈥檚 statement of retained earnings for the year ended June 30, 2018. 3. Prepare the company鈥檚 classified balance sheet in report form at June 30, 2018. 4. Journalize the closing entries. 5. Open the T-accounts using the balances from the adjusted trial balance, and post the closing entries to the T-accounts. 6. Prepare the company鈥檚 post-closing trial balance at June 30, 2018.

Short Answer

Expert verified

(1) In income statement, net loss is $6,600.

(2) In statement of retained earnings, ending balance is $600.

(3) In balance sheet, total assets and total liabilities & stockholders鈥� equity equals $72,400.

(4) Closing entries are mentioned in Step 4.

(5) T accounts are mentioned in Step 5.

(6) In post-closing trial balance, total debits and credits equals $97,600.

Step by step solution

01

Step-by-Step-SolutionStep 1: Income Statement

(1) Income statement is shown as follows:

ROCKET REAL ESTATE APPRAISAL
Income Statement
Year Ended June 30, 2018

Revenues

Service Revenue

$48,100

Expenses

Insurance Expense

$4,100

Salaries Expense

32,000

Supplies Expense

600

Interest Expense

8,000

Utilities Expense

2,900

Depreciation Expense鈥擝uilding

7,100

Total Expenses

54,700

Net Loss

$(6,600)

02

Statement of Retained Earnings

(2) Statement of retained earnings is shown as follows:

ROCKET REAL ESTATE APPRAISAL
Statement of Retained Earnings
Year Ended June 30, 2018

Retained Earnings, Beginning Balance

$33,000

Net loss for the year

(6,600)

26,400

Dividends

(25,800)

Retained Earnings, November 30, 2018

$600

03

Classified Balance Sheet

(3) Balance Sheet is shown as follows:

ROCKET REAL ESTATE APPRAISAL
Balance Sheet
June 30, 2018
Assets

Current Assets:

Cash

$5,000

Accounts Receivable

5,500

Office Supplies

1,600

Prepaid Insurance

1,700

Total Current Assets

$13,800

Property, Plant, and Equipment:

Land

12,800

Building

$71,000

Less: Accumulated Depreciation- Building

(25,200)

45,800

Total Property, Plant, and Equipment:

58,600

Total Assets

$72,400

Liabilities




Current Liabilities:


Accounts Payable

18,700

Interest Payable

8,000

Salaries Payable

2,100

Unearned revenue

1,000

Total Current Liabilities:

$29,800

Long-term Liabilities


Notes Payable

37,000

Total Liabilities



66,800

Stockholders鈥� Equity

Common Stock



5,000

Retained Earnings



600

Total Stockholders鈥� Equity



5,600

Total Liabilities and Stockholders鈥� Equity



$72,400

04

Closing entries for the period

(4) Closing entries are as follows:

Date

Accounts and Explanation

Debit

Credit

Dec. 31

Service Revenue

$48,100

Income Summary

$85,000

To close revenue.

Dec. 31

Income Summary

$54,700

Insurance Expense

$4,100

Salaries Expense

$32,000

Supplies Expense

$600

Interest Expense

$8,000

Utilities Expense

$2,900

Depreciation Expense鈥擝uilding

$7,100

To close expenses.

Dec. 31

Retained Earnings

$6,600

Income Summary

$6,600

To close Income Summary

Dec. 31

Retained Earnings

$25,800

Dividends

$25,800

To close Dividends

05

T Accounts

(5) T accounts are shown as follows:

Posting of closing entry is shown as follows:


Retained Earnings

Clos.

$6,600

$33,000

Adj. Bal.

Clos.

$25,800

$600

Bal.


Dividends

Adj. Bal.

$25,800

$25,800

Clos.

Bal.

0


Income Summary

Clos.

$54,700

$48,100

Clos.

Bal.

$6,600

$6,600

Clos.

Bal.

0

Service Revenue

Clos.

$48,100

$48,100

Adj. Bal.

0

Bal.


Insurance Expense

Adj. Bal.

$4,100

$4,100

Clos.

Bal.

0

Salaries Expense

Adj. Bal.

$32,000

$32,000

Clos.

Bal.

0

Supplies Expense

Adj. Bal.

$600

$600

Clos.

Bal.

0

Interest Expense

Adj. Bal.

$8,000

$8,000

Clos.

Bal.

0

Utilities Expense

Adj. Bal.

$2,900

$2,900

Clos.

Bal.

0

Depreciation Expense鈥擝uilding

Adj. Bal.

$7,100

$7,100

Clos.

Bal.

0

06

Post-Closing trial balance

(6) Post-closing trial balance is shown as follows:

ROCKET REAL ESTATE APPRAISAL
Post-Closing Trial Balance
June 30, 2018

Balance

Account Title

Debit

Credit

Cash

$5,000

Accounts Receivable

5,500

Office Supplies

1,600

Prepaid Insurance

1,700

Land

12,800

Building

71,000

Accumulated Depreciation鈥擝uilding

$25,200

Accounts Payable

18,700

Interest Payable

8,000

Salaries Payable

2,100

Unearned Revenue

1,000

Notes Payable (long-term)

37,000

Common Stock

5,000

Retained Earnings

600

Total

$97,600

$97,600

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Most popular questions from this chapter

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.

12. Dividends

What is the closing process?

Refer to the data in Short Exercise S4-1. Prepare Dalton鈥檚 unclassified balance sheet at December 31, 2018. Use the account form.

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.

For each account listed, identify the category that it would appear on a classified balance sheet. Use the following categories: Current Assets; Long-term Investments; Property, Plant, and Equipment; Intangible Assets; Current Liabilities; Long-term Liabilities; and Stockholders鈥� Equity. If the item does not belong on the classified balance sheet, put an X. a. Land (used in operations) b. Accumulated Depreciation鈥擡quipment c. Common Stock d. Service Revenue e. Investment in Starbucks Corporation (to be held long-term) f. Accounts Receivable g. Equipment h. Buildings i. Notes Payable (due in 10 years) j. Unearned Revenue k. Cash l. Accounts Payable m. Prepaid Rent n. Dividends o. Land (held for investment purposes) p. Depreciation Expense.
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