True/False (10 Points) 1. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. True
2. If total credits in the income statement columns of a worksheet exceed total debits, the enterprise has net income. True
3. A corporation can be organized for the purpose of making a profit or it may be nonprofit. True
4. Retained earnings represent the amount of cash available for dividends. False
5. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. True
Multiple Choice (10 Points)
6. The information for preparing a trial balance on a worksheet is obtained from a. financial statements. b. general ledger accounts. c. general journal entries. d. business documents
7. After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the a. adjusted trial balance. b. post-closing trial balance. c. the general journal. d. adjustments columns of the worksheet.
8. The account, Supplies, will appear in the following debit columns of the worksheet. a. Trial balance b. Adjusted trial balance c. Balance sheet d. All of these
9. Under the corporate form of business organization a. a stockholder is personally liable for the debts of the corporation. b. stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation. c. the corporation's life is stipulated in its charter. d. stockholders wishing to sell their corporation shares must get the approval of other stockholders.
10. The income statement and balance sheet columns of Pine Company's worksheet reflects the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. Totals $58,000 $48,000 $34,000 $44,000 The net income (or loss) for the period is a. $48,000 income. b. $10,000 income. c. $10,000 loss. d. not determinable. Problems (80 Points)
11. Prepare the necessary closing entries based on the following selected accounts. Accumulated Depreciation $10,000 Depreciation Expense 5,000 Retained Earnings 20,000 Dividends 12,000 Salaries Expense 18,000 Service Revenue 30,000
Service Revenue...... 30,000
Income Summary ...... 30,000
Income Summary ...... 23,000
Depreciation Expense ...... 5,000
Salaries Expense...... 18,000
Income Summary ...... 7,000
Retained Earningsl ...... 7,000
Retained Earnings...... 12,000
Dividends...... 12,000
12. The income statement of Gentry's Shoe Repair is as follows: GENTRY’S SHOE REPAIR Income Statement For the Month Ended April 30, 2008 Revenue Shoe Repair Revenue $7,500 Expenses Salaries Expense $3,400 Depreciation Expense 350 Utilities Expense 400 Rent Expense 600 Supplies Expense 1,050 Total Expenses 5,800 Net Income $1,700 On April 1, retained earnings had a balance of $12,900. During April, the company paid dividends of $3,000. Instructions (a) Prepare closing entries at April 30. (b) Prepare an retained earnings statement for the month of April.
(a) Shoe Repair Revenue ...... 7,500
Income Summary...... 7,500
Income Summary ...... 5,800
Salaries Expense...... 3,400
Depreciation Expense...... 350
Utilities Expense ...... 400
Rent Expense ...... 600
Supplies Expense ...... 1,050
Income Summary ...... 1,700
Retained Earnings ...... 1,700
Retained Earnings ...... 3,000
Dividends ...... 3,000
GENTRY'S SHOE REPAIR
Retained Earnings Statement
For the Month Ended April 30, 2008
Retained Earnings, April 1 $12,900
Add: Net Income 1,700
14,600
Less: Dividends 3,000
Retained Earnings, April 30 $11,600
13. The account balances appearing on the trial balance (below) were taken from the general ledger of Mann's Copy Shop at September 30. Additional information for the month of September which has not yet been recorded in the accounts is as follows: (a) A physical count of supplies indicates $600 on hand at September 30. (b) The amount of insurance that expired in the month of September was $500. (c) Depreciation on equipment for September was $700. (d) Rent owed on the copy shop for the month of September was $900 but will not be paid until October. Instructions Using the above information, complete the worksheet on below for Mann's Copy Shop for the month of September. MANN’S COPY SHOP Worksheet For the Month Ended September 30, 2008 Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Account Titles Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash 2,000 Supplies 2,100 Prepaid Insurance 3,200 Equipment 25,000 Accum. Depreciation— Equipment 5,500 Accounts Payable 3,400 Notes Payable 5,000 Common Stock 6,300 Retained Earnings 11,000 Dividends 3,400 Copy Revenue 5,900 Utilities Expense 1,400 Totals 37,100 37,100 Supplies Expense Insurance Expense Depreciation Expense Rent Expense Rent Payable Totals Net Income Totals
MANN’S COPY SHOPWorksheet
For the Month Ended September 30, 2008
Account Titles / Trial Balance / Adjustments / Adjusted Trial
Balance / Income
Statement / Balance
Sheet
Debit / Credit / Debit / Credit / Debit / Credit / Debit / Credit / Debit / Credit
Cash / $2,000 / $2,000 / $2,000
Supplies / $2,100 / $1,500 / $600 / $600
Prepaid Insurance / $3,200 / $500 / $2,700 / $2,700
Equipment / $25,000 / $25,000 / $25,000
Accum. Depreciation - Equipment / $5,500 / $700 / $6,200 / $6,200
Accounts Payable / $3,400 / $3,400 / $3,400
Notes Payable / $5,000 / $5,000 / $5,000
Common Stock / $6,300 / $6,300 / $6,300
Retained Earnings / $11,000 / $11,000 / $11,000
Dividends / $3,400 / $3,400 / $3,400
Copy Revenue / $5,900 / $5,900 / $5,900
Utilities Expense / $1,400 / $1,400 / $1,400
Totals / $37,100 / $37,100
Supplies Expense / $1,500 / $1,500 / $1,500
Insurance Expense / $500 / $500 / $500
Depreciation Expense / $700 / $700 / $700
Rent Expense / $900 / $900 / $900
Rent Payable / $900 / $900 / $900
Totals / $3,600 / $3,600 / $38,700 / $38,700 / $5,000 / $5,900 / $33,700 / $32,800
Net Income / $900 / $900
Totals / $5,900 / $5,900 / $33,700 / $33,700
14. Using information from the completed worksheet in problem 13 above, Prepare a formal Income Statement and Balance Sheet. Remember format is important. Bonus (15 Points)
MANN’S COPY SHOPIncome Statement
For the Month Ended September 30, 2008
Copy Revenue / $5,900
Utilities Expense / $1,400
Supplies Expense / $1,500
Insurance Expense / $500
Depreciation Expense / $700
Rent Expense / $900 / $5,000
Net Income / $900
MANN’S COPY SHOP
Balance Sheet
At September 30, 2008
Assets:
Current Assets:
Cash / $2,000
Supplies / $600
Prepaid Insurance / $2,700
Total Current Assets / $5,300
Noncurrent Assets:
Equipment / $25,000
Accum. Depreciation - Equipment / $6,200
Total Noncurrent Assets / $18,800
Total Assets / $24,100
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable / $3,400
Notes Payable / $5,000
Rent Payable / $900
Total Liabilities / $9,300
Stockholders' Equity:
Common Stock / $6,300
Retained Earnings / $8,500
Total Stockholders' Equity / $14,800
Total Liabilities and Stockholders' Equity / $24,100
15. The trial balances of Foley Company follow with the accounts arranged in alphabetic order. Analyze the data and prepare (a) the adjusting entries and (b) the closing entries made by Foley Company. Trial Balances Unadjusted Adjusted Post-Closing Accounts Payable $10,000 $10,000 $10,000 Accounts Receivable 2,200 3,200 3,200 Accumulated Depreciation 13,000 17,000 17,000 Advertising Expense 0 16,300 0 Cash 60,000 60,000 60,000 Depreciation Expense 0 4,000 0 Equipment 75,000 75,000 75,000 Common Stock 40,000 40,000 40,000 Retained Earnings 42,200 42,200 62,400 Dividends 11,000 11,000 0 Prepaid Advertising 17,800 1,500 1,500 Prepaid Rent 15,000 11,000 11,000 Rent Expense 0 4,000 0 Service Revenue 96,000 105,000 0 Supplies 3,200 700 700 Supplies Expense 2,000 4,500 0 Unearned Revenue 23,000 15,000 15,000 Wages Expense 38,000 45,000 0 Wages Payable 0 7,000 7,000
(a) Adjusting Entries:
Depreciation Expense ...... 4,000
Accumulated Depreciation...... 4,000
Advertising Expense...... 16,300
Prepaid Advertising...... 16,300
Unearned Revenue ...... 8,000
Service Revenue ...... 8,000
Accounts Receivable ...... 1,000
Service Revenue ...... 1,000
Rent Expense...... 4,000
Prepaid Rent...... 4,000
Supplies Expense...... 2,500
Supplies...... 2,500
Wages Expense ...... 7,000
Wages Payable...... 7,000
(b) Closing Entries:
Service Revenue...... 105,000
Income Summary ...... 105,000
Income Summary...... 73,800
Advertising Expense...... 16,300
Depreciation Expense ...... 4,000
Rent Expense...... 4,000
Supplies Expense...... 4,500
Wages Expense ...... 45,000
Income Summary...... 31,200
Retained Earnings...... 31,200
Retained Earnings...... 11,000
Dividends...... 11,000