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Chapter 3: Q19Q (page 128)

鈥淎 worksheet is a permanent accounting record, and its use is required in the accounting cycle. 鈥淒o you agree? Explain.

Short Answer

Expert verified

Disagree because it鈥檚 a worksheet and it assists in making adjusting entries and for closing the books at the end of the accounting period. The accounting statements are considered the permanent records, but this is not the case with the worksheet.

Step by step solution

01

Meaning of worksheet

Worksheet is a document used in the accounting department for inspecting and modelling the balances of accounts. It is beneficial for assuring that the accounting entries are obtained accurately.

02

Explanation for the statement

The statement is incorrect because a worksheet is not a permanent accounting record and its use is not needed in the accounting cycle. The worksheet is not a formal method for collecting and resolving information required for accounting statements. It is used alternatively as its aids in preparing financial statements.

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Most popular questions from this chapter

Distinguish between cash-basis accounting and accrual-basis accounting. Why is accrual-basis accounting acceptable for most businesses and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?

On January 1, 2017, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing \(90,000 cash. The new company, Arkansas Sales and Service, has the following transactions during January.

1. Pays \)6,000 in advance for 3 months鈥� rent of office, showroom, and repair space.

2. Purchases 40 personal computers at a cost of \(1,500 each, 6 graphics computers at a cost of \)2,500 each, and 25 printers at a cost of \(300 each, paying cash upon delivery

3. Sales, repair, and office employees earn \)12,600 in salaries and wages during January, of which \(3,000 was still payable at the end of January.

4. Sells 30 personal computers at \)2,550 each, 4 graphics computers for \(3,600 each, and 15 printers for \)500 each; \(75,000 is received in cash in January, and \)23,400 is sold on a deferred payment basis.

5. Other operating expenses of \(8,400 are incurred and paid for during January; \)2,000 of incurred expenses are payable at January 31.

Instructions

  1. Using the transaction data above, prepare (1) a cash-basis income statement and (2) an accrual-basis income statement for the month of January.
  2. Using the transaction data above, prepare (1) a cash-basis balance sheet and (2) an accrual-basis balance sheet as of January 31, 2017.
  3. Identify the items in the cash-basis financial statements that make cash-basis accounting inconsistent with the theory underlying the elements of financial statements.

When the accounts of Daniel Barenboim Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.

  1. The prepaid insurance account shows a debit of \(5,280, representing the cost of a 2-year fire insurance policy dated August 1 of the current year.
  2. On November 1, Rent Revenue was credited for \)1,800, representing revenue from a subrental for a 3-month period beginning on that date.
  3. Purchase of advertising materials for \(800 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of \)290 are on hand.
  4. Interest of $770 has accrued on notes payable.

Instructions

Prepare the following in general journal form.

  1. The adjusting entry for each item.
  2. The reversing entry for each item where appropriate.

Cooke Company has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below.

COOKE COMPANY

Worksheet

For The Month Ended September 30, 2017


Trial Balance
Adjusted Trial Balance

Account Titles

Dr.

Cr.

Dr.

Cr.

Cash

37,400

37,400

Supplies

18,600

4,200

Prepaid Insurance

31,900

3,900

Land

80,000

80,000

Equipment

120,000

120,000

Accumulated Depreciation鈥擡quipment

36,200

42,000

Accounts Payable

14,600

14,600

Unearned Service Revenue

2,700

700

Mortgage Payable

50,000

50,000

Common Stock

107,700

107,700

Retained Earnings, Sept. 1, 2017

2,000

2,000

Dividends

14,000

14,000

Service Revenue

278,500

280,500

Salaries and Wages Expense

109,000

109,000

Maintenance and Repairs Expense

30,500

30,500

Advertising Expense

9,400

9,400

Utilities Expenses

16,900

16,900

Property Tax Expense

18,000

21,000

Interest Expense

6,000

12,000

Totals

491,700

491,700

Insurance Expense

28,000

Supplies Expense

14,400

Interest Payable

6,000

Depreciation Expense

5,800

Property Taxes Payable

3,000

Totals

506,500

506,500

Instructions

(a) Prepare a complete worksheet.

(b) Prepare a classified balance sheet. (Note: $10,000 of the mortgage payable is due for payment in the next fiscal year.)

(c) Journalize the adjusting entries using the worksheet as a basis.

d) Journalize the closing entries using the worksheet as a basis.

(e) Prepare a post-closing trial balance.

Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2018. What is the date of Becker鈥檚 opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker鈥檚 first IFRS financial statements?
See all solutions

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