2 Full 5-4a 5-4b

CHAPTER 5 Closing Entries and the Post-Closing Trial Balance
SOLUTION
GENERAL JOURNAL PAGE 4
POST.
DATE DESCRIPTION REF. DEBIT CREDIT
1 20— Closing Entries 1

2 Dec. 31 Commissions Earned 92,824.00 2
3 Income from Services 23,050.00 3
4 Income Summary 115,874.00 4
5 5
6 31 Income Summary 37,194.00 6
7 Salary Expense 21,600.00 7
8 Rent Expense 11,200.00 8
9 Supplies Expense 1,635.00 9
10 Depreciation Expense, Equipment 2,100.00 10
11 Miscellaneous Expense 659.00 11
12 12
13 31 Income Summary 78,680.00 13
14 L. Thompson, Capital 78,680.00 14
15 15
16 31 L. Thompson, Capital 80,000.00 16
17 L. Thompson, Drawing 80,000.00 17
18 18
DISCUSSION QUESTIONS
Suggested Responses
1. a. 3 Prepare a trial balance.
b. 2 Post journal entries to the accounts in the ledger.
c. 7 Journalize and post the adjusting entries from the data on the work sheet.
d. 1 Analyze source documents and record business transactions in the journal.
e. 6 Prepare financial statements from the data on the work sheet.
f. 4 Gather adjustment data and record the adjusting entries on a work sheet.
g. 8 Journalize and post the closing entries
h. 9 Prepare a post-closing trial balance.
i. 5 Complete the work sheet.
2. The steps in the closing procedure are:
a. Close the revenue account(s) into Income Summary.
b. Close the expense accounts into Income Summary.
c. Close the Income Summary account into the Capital account, transferring the net
income or net loss to the Capital account.
d. Close the Drawing account into the Capital account.
3. The purpose of closing entries is to close out the temporary-equity or nominal
accounts (revenue, expense, and Drawing accounts) and to transfer the net income
or net loss to the Capital account, which prepares these accounts for the new fiscal
period. If the closing entries are not made, proper matching of revenues and
expenses in the fiscal period does not occur.
182 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
4. Since the closing procedure causes zero balances in the temporary owner’s equity
accounts, if you do not print, save, and back up (make a copy of) your financial
records, all accounts will be zero if you try to print your income statement. Similarly,
in your statement of owner’s equity, the net income or net loss and Drawing will be
zero.
5. Real accounts, also called permanent accounts, are the balance sheet accounts other
than Drawing; they are not closed at the end of the fiscal period. Examples are assets
(Cash, Accounts Receivable, Prepaid Insurance, etc.), liabilities (Accounts Payable,
etc.), and Capital. Nominal accounts, also called temporary accounts, are the income
statement and Drawing accounts; they are closed at the end of the fiscal period.
Examples are revenues (Service Revenue, etc.), expenses (Rent Expense, etc.), and
Drawing.
6. Income Summary is a place to gather or summarize the revenues and expenses in
order to calculate the net income or net loss to be transferred to the Capital account.
7. The purpose of the post-closing trial balance is to make sure that the debit balances
equal the credit balances and to check that all nominal accounts have zero balances
before proceeding to the next accounting period. The difference between a trial
balance and a post-closing trial balance is that a post-closing trial balance contains
only the real (permanent) accounts after adjustment, such as the assets, liabilities,
and Capital; whereas a trial balance before closing contains all five classifications of
accounts: assets, liabilities, revenue, expenses, and Capital (including Drawing).
8. The third closing entry to transfer the net income or net loss to the P. Hernandez,
Capital account for the appropriate period.
a. With a net income of $3,842.
GENERAL JOURNAL PAGE
POST.

2 Mar. 31 Income Summary 3,842.00 2
3 P. Hernandez, Capital 3,842.00 3
4 4
b. With a net loss of $1,781.
POST.

2 Jun. 30 P. Hernandez, Capital 1,781.00 2
4 4
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 183
SOLUTIONS TO EXERCISES
Exercise 5-1
CLOSED INCOME BALANCE
ACCOUNT TITLE REAL NOMINAL YES NO STATEMENT SHEET
0. Example: Building X X X
a. Prepaid Insurance X X X
b. Accounts Payable X X X
c. Wages Payable X X X
d. Service Revenue X X X
e. Rent Expense X X X
f. Supplies Expense X X X
g. Accumulated Depreciation,
X X X
Equipment
Exercise 5-2
POST.
1 20-- Closing Entries 1

2 (1) Professional Fees 3,850.00 2
4 4
5 (2) Income Summary 4,455.00 5
6 Wages Expense 3,110.00 6
7 Insurance Expense 460.00 7
8 Depreciation Expense, Equipment 750.00 8
10 10
11 (3) J. Cortez, Capital 605.00 11
12 Income Summary 605.00 12
13 13
14 (4) J. Cortez, Capital 400.00 14
15 J. Cortez, Drawing 400.00 15
16 16
Exercise 5-3
POST.

2 Dec. 31 Professional Fees 7,075.00 2
4 4
8 Depreciation Expense, Equipment 1,143.00 8
10 10
12 C. Harris, Capital 3,229.00 12
13 13
14 31 C. Harris, Capital 1,498.00 14
15 C. Harris, Drawing 1,498.00 15
16 16
17 17
18 18
Exercise 5-4
POST.

2 June 30 Service Revenue 6,797.00 2
3 Rental Revenue 3,576.00 3
5 5
9 Utilities Expense 465.00 9
11 11
13 K. Dunn, Capital 5,195.00 13
14 14
15 30 K. Dunn, Capital 4,000.00 15
16 K. Dunn, Drawing 4,000.00 16
17 17
18 18
Exercise 5-5
POST.

2 Dec. 31 Service Revenue 41,740.00 2
3 Rental Revenue 22,000.00 3
5 5
8 Utilities Expense 7,130.00 8
9 Miscellaneous Expense 2,200.00 9
10 10
12 S. Cederblom, Capital 5,890.00 12
13 13
14 31 S. Cederblom, Capital 17,000.00 14
15 S. Cederblom, Drawing 17,000.00 15
16 16
17 17
18 18
Exercise 5-6
a. 12 Dec. 31 D. Mau, Capital 9,030.00 12
14 14
15 31 D. Mau, Capital 12,000.00 15
16 D. Mau, Drawing 12,000.00 16
17 17
18 18
b. $42,380 ($63,410 – $9,030 – $12,000)
Exercise 5-7
INCOME STATEMENT OF BALANCE
ITEM STATEMENT OWNER'S EQUITY SHEET
0. Example: The total liabilities of the business

X
at the end of the year.
a. The amount of the owner's Capital

X X
balance at the end of the year.
b. The amount of depreciation expense

X
on equipment during the year.
c. The amount of the company's net

X X
income for the year.
d. The book value of the equipment. X
e. Total insurance expired during the

X
year.
f. Total accounts receivable at the

X
end of the year.
g. Total withdrawals by the owner. X
h. The cost of utilities used during the

X
year.
i. The amount of the owner's Capital

X
balance at the beginning of the year.
Exercise 5-8
The Lindal Clinic
Statement of Owner's Equity
For Year Ended December 31, 20--
P. Lindal, Capital, January 1, 20-- $124,000

Investment on May 12, 20-- $ 7,000
Net Income for the Year 20,418
Subtotal $27,418
Less Withdrawals for the Year 31,500
Decrease in Capital (4,082)
P. Lindal, Capital, December 31, 20-- $119,918
Problem 5-1A
Assets = Liabilities + Owner's Equity + Revenue – Expenses
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
+– –+ –+ –+ +–
B. Lyon, Capital Commissions Earned Rent Expense

(4) 1,550 Bal. 7,520 (1) 4,679 Bal. 4,679 Bal. 995 (2) 995
(3) 2,281
Bal. 8,251
Supplies Expense
B. Lyon, Drawing Bal. 575 (2) 575
Bal. 1,550 (4) 1,550
Depreciation Expense,
Income Summary Office Equipment
(2) 2,398 (1) 4,679 Bal. 462 (2) 462
(3) 2,281
Utilities Expense
Bal. 269 (2) 269
Miscellaneous Expense
Bal. 97 (2) 97
Problem 5-1A (concluded)

POST.

1. 2 May 31 Commissions Earned 4,679.00 2
4 4
2. 5 31 Income Summary 2,398.00 5
6 Rent Expense 995.00 6
7 Supplies Expense 575.00 7
8 Depreciation Expense, Office 8
9 Equipment 462.00 9
12 12
3. 13 31 Income Summary 2,281.00 13
14 B. Lyon, Capital 2,281.00 14
15 15
4. 16 31 B. Lyon, Capital 1,550.00 16
17 B. Lyon, Drawing 1,550.00 17
18 18
19 19
20 20
Problem 5-2A
+– –+ –+ –+ +–
G. Ho, Capital Consulting Revenue Rent Expense

(4) 2,400 Bal. 4,302 (1) 13,060 Bal. 13,060 Bal. 2,200 (2) 2,200
(3) 7,220
Bal. 9,122
Wages Expense
G. Ho, Drawing Bal. 1,828 (2) 1,828
Bal. 2,400 (4) 2,400
Supplies Expense
Income Summary Bal. 422 (2) 422
(2) 5,840 (1) 13,060
(3) 7,220
Insurance Expense
Bal. 325 (2) 325
Equipment
Bal. 835 (2) 835
Bal. 230 (2) 230

POST.

1. 2 May 31 Consulting Revenue 13,060.00 2
4 4
2. 5 31 Income Summary 5,840.00 5
12 12
3. 13 31 Income Summary 7,220.00 13
14 G. Ho, Capital 7,220.00 14
15 15
4. 16 31 G. Ho, Capital 2,400.00 16
17 G. Ho, Drawing 2,400.00 17
18 18
19 19
20 20
Problem 5-3A
Valerie Insurance Agency
Work Sheet
For Year Ended December 31, 20—
TRIAL BALANCE ADJUSTMENTS
ACCOUNT NAME DEBIT CREDIT DEBIT CREDIT
1 Cash 7,532.00
2 Office Equipment 2,398.00
3 Accumulated Depreciation, Office
4 Equipment 420.00 (a) 420.00
5 M. Valerie, Capital 18,614.00
6 M. Valerie, Drawing 18,000.00
7 Premiums Earned 33,400.00
8 Wages Expense 20,500.00 (b) 428.00
9 Rent Expense 2,200.00
10 Office Supplies Expense 315.00
11 Telephone Expense 736.00
12 Advertising Expense 645.00
13 Miscellaneous Expense 108.00
14 52,434.00 52,434.00
15 Depreciation Expense, Office
16 Equipment (a) 420.00
17 Wages Payable (b) 428.00
18 848.00 848.00
19 Net Income
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Problem 5-3A (continued)
ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET

DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
7,532.00 7,532.00 1
2,398.00 2,398.00 2
3
840.00 840.00 4
18,614.00 18,614.00 5
18,000.00 18,000.00 6
33,400.00 33,400.00 7
20,928.00 20,928.00 8
2,200.00 2,200.00 9
315.00 315.00 10
736.00 736.00 11
645.00 645.00 12
108.00 108.00 13
14
15
420.00 420.00 16
428.00 428.00 17
53,282.00 53,282.00 25,352.00 33,400.00 27,930.00 19,882.00 18
8,048.00 8,048.00 19
33,400.00 33,400.00 27,930.00 27,930.00 20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

POST.
1 20-- Adjusting Entries 1

2 Dec. 31 Depreciation Expense, Office 2
3 Equipment 514 420.00 3
4 Accumulated Depreciation, Office 4
5 Equipment 125 420.00 5
6 6
7 31 Wages Expense 511 428.00 7
8 Wages Payable 222 428.00 8
9 9
10 Closing Entries 10
11 31 Premiums Earned 411 33,400.00 11
12 Income Summary 313 33,400.00 12
13 13
14 31 Income Summary 313 25,352.00 14
15 Wages Expense 511 20,928.00 15
16 Rent Expense 512 2,200.00 16
17 Office Supplies Expense 513 315.00 17
19 Equipment 514 420.00 19
20 Telephone Expense 515 736.00 20
21 Advertising Expense 516 645.00 21
22 Miscellaneous Expense 519 108.00 22
23 23
24 31 Income Summary 313 8,048.00 24
25 M. Valerie, Capital 311 8,048.00 25
26 26
27 31 M. Valerie, Capital 311 18,000.00 27
28 M. Valerie, Drawing 312 18,000.00 28
29 29

GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 111
POST. BALANCE
DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
20--
Dec. 31 Balance 9 7,532.00
ACCOUNT Office Equipment ACCOUNT NO. 124
POST. BALANCE
20--
Dec. 31 Balance 9 2,398.00
ACCOUNT Accumulated Depreciation, Office Equipment ACCOUNT NO. 125
POST. BALANCE
20--
Dec. 31 Balance 9 420.00
31 Adj. 17 420.00 840.00
ACCOUNT Wages Payable ACCOUNT NO. 222
POST. BALANCE
20--
Dec. 31 Adj. 17 428.00 428.00
ACCOUNT M. Valerie, Capital ACCOUNT NO. 311
POST. BALANCE
20--
Dec. 31 Balance 9 18,614.00
31 Closing 17 8,048.00 26,662.00
31 Closing 17 18,000.00 8,662.00
ACCOUNT M. Valerie, Drawing ACCOUNT NO. 312
POST. BALANCE
20--
Dec. 31 Balance 9 18,000.00
31 Closing 17 18,000.00 — —

ACCOUNT Income Summary ACCOUNT NO. 313
POST. BALANCE
20--
Dec. 31 Closing 17 33,400.00 33,400.00
31 Closing 17 25,352.00 8,048.00
31 Closing 17 8,048.00 — —
ACCOUNT Premiums Earned ACCOUNT NO. 411
POST. BALANCE
20--
Dec. 31 Balance 9 33,400.00
31 Closing 17 33,400.00 — —
ACCOUNT Wages Expense ACCOUNT NO. 511
POST. BALANCE
20--
Dec. 31 Balance 9 20,500.00
31 Adj. 17 428.00 20,928.00
31 Closing 17 20,928.00 — —
ACCOUNT Rent Expense ACCOUNT NO. 512
POST. BALANCE
20--
Dec. 31 Balance 9 2,200.00
31 Closing 17 2,200.00 — —
ACCOUNT Office Supplies Expense ACCOUNT NO. 513
POST. BALANCE
20--
31 Closing 17 315.00 — —

ACCOUNT Depreciation Expense, Office Equipment ACCOUNT NO. 514
POST. BALANCE
20--
Dec. 31 Adj. 17 420.00 420.00
31 Closing 17 420.00 — —
ACCOUNT Telephone Expense ACCOUNT NO. 515
POST. BALANCE
20--
31 Closing 17 736.00 — —
ACCOUNT Advertising Expense ACCOUNT NO. 516
POST. BALANCE
20--
31 Closing 17 645.00 — —
ACCOUNT Miscellaneous Expense ACCOUNT NO. 519
POST. BALANCE
20--
31 Closing 17 108.00 — —
Valerie Insurance Agency

Post-Closing Trial Balance
December 31, 20--
ACCOUNT NAME DEBIT CREDIT
Cash 7,532
Office Equipment 2,398
Accumulated Depreciation, Office Equipment 840
Wages Payable 428
M. Valerie, Capital 8,662
9,930 9,930
Problem 5-4A
Bryan Company
Work Sheet
For Year Ended June 30, 20--
1 Cash 5,491.00
2 Accounts Receivable 624.00
3 Prepaid Insurance 1,280.00 (a) 495.00
4 Equipment 6,497.00
5 Accumulated Depreciation,
6 Equipment 2,672.00 (b) 670.00
7 Van 10,989.00
8 Accumulated Depreciation, Van 4,368.00 (c) 1,190.00
9 Accounts Payable 1,036.00
10 B. Bryan, Capital 18,583.00
11 B. Bryan, Drawing 18,000.00
12 Fees Earned 38,417.00
13 Salary Expense 18,600.00 (d) 540.00
14 Advertising Expense 1,887.00
15 Supplies Expense 397.00
16 Van Operating Expense 462.00
17 Utilities Expense 685.00
19 65,076.00 65,076.00
20 Insurance Expense (a) 495.00
21 Depreciation Expense,
22 Equipment (b) 670.00
23 Depreciation Expense, Van (c) 1,190.00
24 Salaries Payable (d) 540.00
25 2,895.00 2,895.00
26 Net Income
27
28
29
30
31
32
33
34
35
36
37
38

5,491.00 5,491.00 1
624.00 624.00 2
785.00 785.00 3
6,497.00 6,497.00 4
5
3,342.00 3,342.00 6
10,989.00 10,989.00 7
5,558.00 5,558.00 8
1,036.00 1,036.00 9
18,583.00 18,583.00 10
18,000.00 18,000.00 11
38,417.00 38,417.00 12
19,140.00 19,140.00 13
1,887.00 1,887.00 14
397.00 397.00 15
462.00 462.00 16
685.00 685.00 17
164.00 164.00 18
19
495.00 495.00 20
21
670.00 670.00 22
1,190.00 1,190.00 23
540.00 540.00 24
67,476.00 67,476.00 25,090.00 38,417.00 42,386.00 29,059.00 25
13,327.00 13,327.00 26
38,417.00 38,417.00 42,386.00 42,386.00 27
28
29
30
31
32
33
34
35
36
37
38

Bryan Company
Income Statement
Revenue:
Fees Earned $38,417
Expenses:
Salary Expense $19,140
Advertising Expense 1,887
Supplies Expense 397
Van Operating Expense 462
Utilities Expense 685
Insurance Expense 495
Depreciation Expense, Equipment 670
Depreciation Expense, Van 1,190
Miscellaneous Expense 164
Total Expenses 25,090
Net Income $13,327
Bryan Company
B. Bryan, Capital, July 1, 20-- $16,583

Investment on June 10, 20-- $ 2,000
Subtotal $15,327
Decrease in Capital (2,673)
B. Bryan, Capital, June 30, 20-- $13,910

Bryan Company
Balance Sheet
June 30, 20--
Assets
Cash $ 5,491
Accounts Receivable 624
Prepaid Insurance 785
Equipment $ 6,497
Less Accumulated Depreciation 3,342 3,155
Van $10,989
Total Assets $15,486
Liabilities
Accounts Payable $ 1,036
Salaries Payable 540
Total Liabilities $ 1,576
Owner's Equity
B. Bryan, Capital 13,910
Total Liabilities and Owner's Equity $15,486

POST.

2 June 30 Insurance Expense 495.00 2
3 Prepaid Insurance 495.00 3
4 4
5 30 Depreciation Expense, Equipment 670.00 5
6 Accumulated Depreciation, 6
8 8
9 30 Depreciation Expense, Van 1,190.00 9
10 Accumulated Depreciation, Van 1,190.00 10
11 11
12 30 Salary Expense 540.00 12
13 Salaries Payable 540.00 13
14 14
16 30 Fees Earned 38,417.00 16
18 18
19 30 Income Summary 25,090.00 19
21 Advertising Expense 1,887.00 21
23 Van Operating Expense 462.00 23
27 Depreciation Expense, Van 1,190.00 27
29 29
30 30 Income Summary 13,327.00 30
31 B. Bryan, Capital 13,327.00 31
32 32
33 30 B. Bryan, Capital 18,000.00 33
34 B. Bryan, Drawing 18,000.00 34
35 35
36 36
Problem 5-1B
+– –+ –+ –+ +–
M. Wally, Capital Commissions Earned Rent Expense

(4) 1,600 Bal. 6,221 (1) 4,997 Bal. 4,997 Bal. 990 (2) 990
(3) 2,713
Bal. 7,334
Supplies Expense
M. Wally, Drawing Bal. 480 (2) 480
Bal. 1,600 (4) 1,600
Income Summary Office Equipment
(2) 2,284 (1) 4,997 Bal. 420 (2) 420
(3) 2,713
Utilities Expense
Bal. 286 (2) 286
Bal. 108 (2) 108
Problem 5-1B (concluded)

POST.

1. 2 May 31 Commissions Earned 4,997.00 2
4 4
2. 5 31 Income Summary 2,284.00 5
6 Rent Expense 990.00 6
12 12
3. 13 31 Income Summary 2,713.00 13
14 M. Wally, Capital 2,713.00 14
15 15
4. 16 31 M. Wally, Capital 1,600.00 16
17 M. Wally, Drawing 1,600.00 17
18 18
19 19
20 20
Problem 5-2B
+– –+ –+ –+ +–
W. Emil, Capital Consulting Revenue Rent Expense

(4) 1,700 Bal. 5,367 (1) 9,546 Bal. 9,546 Bal. 1,800 (2) 1,800
(3) 4,616
Bal. 8,283 Wages Expense
Bal. 1,533 (2) 1,533
W. Emil, Drawing
Bal. 1,700 (4) 1,700
Supplies Expense
Bal. 365 (2) 365
Income Summary
(2) 4,930 (1) 9,546
(3) 4,616 Insurance Expense
Bal. 364 (2) 364
Equipment
Bal. 700 (2) 700
Bal. 168 (2) 168

POST.

1. 2 June 30 Consulting Revenue 9,546.00 2
4 4
2. 5 30 Income Summary 4,930.00 5
12 12
3. 13 30 Income Summary 4,616.00 13
14 W. Emil, Capital 4,616.00 14
15 15
4. 16 30 W. Emil, Capital 1,700.00 16
17 W. Emil, Drawing 1,700.00 17
18 18
19 19
20 20
Extra Form
POST.
1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
Problem 5-3B
Oliver Tour Company
Work Sheet
For Year Ended December 31, 20—
1 Cash 4,827.00
2 Office Equipment 4,042.00
3 Accumulated Depreciation, Office
4 Equipment 546.00 (a) 386.00
5 S. Oliver, Capital 26,756.00
6 S. Oliver, Drawing 24,000.00
7 Tour Revenue 34,057.00
8 Wages Expense 22,820.00 (b) 528.00
9 Rent Expense 2,930.00
10 Office Supplies Expense 360.00
11 Telephone Expense 941.00
14 61,359.00 61,359.00
15 Depreciation Expense, Office
16 Equipment (a) 386.00
17 Wages Payable (b) 528.00
18 914.00 914.00
19 Net Income
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Problem 5-3B (continued)

4,827.00 4,827.00 1
4,042.00 4,042.00 2
3
932.00 932.00 4
26,756.00 26,756.00 5
24,000.00 24,000.00 6
34,057.00 34,057.00 7
23,348.00 23,348.00 8
2,930.00 2,930.00 9
360.00 360.00 10
941.00 941.00 11
1,237.00 1,237.00 12
202.00 202.00 13
14
15
386.00 386.00 16
528.00 528.00 17
62,273.00 62,273.00 29,404.00 34,057.00 32,869.00 28,216.00 18
4,653.00 4,653.00 19
34,057.00 34,057.00 32,869.00 32,869.00 20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

POST.

2 Dec. 31 Depreciation Expense, Office 2
3 Equipment 514 386.00 3
4 Accumulated Depreciation, Office 4
5 Equipment 125 386.00 5
6 6
7 31 Wages Expense 511 528.00 7
9 9
11 31 Tour Revenue 411 34,057.00 11
12 Income Summary 313 34,057.00 12
13 13
14 31 Income Summary 313 29,404.00 14
15 Wages Expense 511 23,348.00 15
16 Rent Expense 512 2,930.00 16
19 Equipment 514 386.00 19
20 Telephone Expense 515 941.00 20
21 Advertising Expense 516 1,237.00 21
23 23
24 31 Income Summary 313 4,653.00 24
25 S. Oliver, Capital 311 4,653.00 25
26 26
27 31 S. Oliver, Capital 311 24,000.00 27
28 S. Oliver, Drawing 312 24,000.00 28
29 29

GENERAL LEDGER
POST. BALANCE
20--
Dec. 31 Balance 9 4,827.00
POST. BALANCE
20--
Dec. 31 Balance 9 4,042.00
POST. BALANCE
20--
31 Adj. 17 386.00 932.00
POST. BALANCE
20--
Dec. 31 Adj. 17 528.00 528.00
ACCOUNT S. Oliver, Capital ACCOUNT NO. 311
POST. BALANCE
20--
Dec. 31 Balance 9 26,756.00
31 Closing 17 4,653.00 31,409.00
31 Closing 17 24,000.00 7,409.00
ACCOUNT S. Oliver, Drawing ACCOUNT NO. 312
POST. BALANCE
20--
Dec. 31 Balance 9 24,000.00
31 Closing 17 24,000.00 — —

POST. BALANCE
20--
Dec. 31 Closing 17 34,057.00 34,057.00
31 Closing 17 29,404.00 4,653.00
31 Closing 17 4,653.00 — —
ACCOUNT Tour Revenue ACCOUNT NO. 411
POST. BALANCE
20--
Dec. 31 Balance 9 34,057.00
31 Closing 17 34,057.00 — —
POST. BALANCE
20--
Dec. 31 Balance 9 22,820.00
31 Adj. 17 528.00 23,348.00
31 Closing 17 23,348.00 — —
POST. BALANCE
20--
Dec. 31 Balance 9 2,930.00
31 Closing 17 2,930.00 — —
POST. BALANCE
20--
31 Closing 17 360.00 — —

POST. BALANCE
20--
Dec. 31 Adj. 17 386.00 386.00
31 Closing 17 386.00 — —
ACCOUNT Telephone Expense ACCOUNT NO. 515
POST. BALANCE
20--
31 Closing 17 941.00 — —
POST. BALANCE
20--
Dec. 31 Balance 9 1,237.00
31 Closing 17 1,237.00 — —
POST. BALANCE
20--
31 Closing 17 202.00 — —
Oliver Tour Company

December 31, 20--

Cash 4,827
Wages Payable 528
S. Oliver, Capital 7,409
8,869 8,869
Problem 5-4B
Miss Beverly's Tutoring Service
Work Sheet
1 Cash 6,491.00
3 Prepaid Insurance 1,280.00 (a) 470.00
4 Equipment 5,497.00
6 Equipment 2,472.00 (b) 948.00
7 Van 13,674.00
8 Accumulated Depreciation, Van 4,168.00 (c) 1,490.00
10 B. Morrow, Capital 14,848.00
11 B. Morrow, Drawing 18,000.00
12 Fees Earned 43,680.00
13 Salary Expense 16,000.00 (d) 574.00
15 Van Operating Expense 705.00
16 Supplies Expense 527.00
17 Utilities Expense 1,248.00
19 66,604.00 66,604.00
20 Insurance Expense (a) 470.00
22 Equipment (b) 948.00
23 Depreciation Expense, Van (c) 1,490.00
24 Salaries Payable (d) 574.00
25 3,482.00 3,482.00
26 Net Income
27
28
29
30
31
32
33
34
35
36
37
38

6,491.00 6,491.00 1
624.00 624.00 2
810.00 810.00 3
5,497.00 5,497.00 4
5
3,420.00 3,420.00 6
13,674.00 13,674.00 7
5,658.00 5,658.00 8
1,436.00 1,436.00 9
14,848.00 14,848.00 10
18,000.00 18,000.00 11
43,680.00 43,680.00 12
16,574.00 16,574.00 13
2,200.00 2,200.00 14
705.00 705.00 15
527.00 527.00 16
1,248.00 1,248.00 17
358.00 358.00 18
19
470.00 470.00 20
21
948.00 948.00 22
1,490.00 1,490.00 23
574.00 574.00 24
69,616.00 69,616.00 24,520.00 43,680.00 45,096.00 25,936.00 25
19,160.00 19,160.00 26
43,680.00 43,680.00 45,096.00 45,096.00 27
28
29
30
31
32
33
34
35
36
37
38

Income Statement
Revenue:
Fees Earned $43,680
Expenses:
Salary Expense $16,574
Van Operating Expense 705
Supplies Expense 527
Utilities Expense 1,248
Insurance Expense 470
Depreciation Expense, Equipment 948
Depreciation Expense, Van 1,490
Net Income $19,160

B. Morrow, Capital, July 1, 20-- $11,848

Investment on June 10, 20-- $ 3,000
Subtotal $22,160
Increase in Capital 4,160
B. Morrow, Capital, June 30, 20-- $16,008

Balance Sheet
June 30, 20--
Assets
Cash $ 6,491
Equipment $ 5,497
Van $13,674
Liabilities
Salaries Payable 574
Total Liabilities $ 2,010
Owner's Equity
B. Morrow, Capital 16,008

POST.

2 June 30 Insurance Expense 470.00 2
3 Prepaid Insurance 470.00 3
4 4
5 30 Depreciation Expense, Equipment 948.00 5
6 Accumulated Depreciation, 6
8 8
9 30 Depreciation Expense, Van 1,490.00 9
10 Accumulated Depreciation, Van 1,490.00 10
11 11
12 30 Salary Expense 574.00 12
13 Salaries Payable 574.00 13
14 14
16 30 Fees Earned 43,680.00 16
18 18
19 30 Income Summary 24,520.00 19
22 Van Operating Expense 705.00 22
24 Utilities Expense 1,248.00 24
27 Depreciation Expense, Van 1,490.00 27
29 29
30 30 Income Summary 19,160.00 30
31 B. Morrow, Capital 19,160.00 31
32 32
33 30 B. Morrow, Capital 18,000.00 33
34 B. Morrow, Drawing 18,000.00 34
35 35
36 36
ACCOUNTING CYCLE REVIEW PROBLEM A—SURF'S UP!
Suggested Audit Questions

1. What was the amount incurred for advertising on July 5?
2. How much of the concessions income was received in cash?
3. What was the amount of the principal paid on the mortgage?
4. How much did Lacy withdraw from the business?
5. What is the amount of accrued wages?
6. How much insurance expired during the month?
7. What is the amount of depreciation of the pool/slide facility?
8. What is the ending balance of Lacy's Capital account?
9. As of the end of the month, what is the amount of the book value of the pool/slide facility?
10. How much cash did Lacy pay as a down payment on the purchase of Surf's Up!?
Answers
1. $1,320
2. $250
3. $1,910
4. $4,700
5. $920
6. $1,020
7. $675
8. $163,691
9. $149,830
10. $120,000
ACCOUNTING CYCLE REVIEW PROBLEM A (continued)

POST.
1 20-- 1
2 July 1 Cash 111 150,000.00 2
3 L. Lacy, Capital 311 150,000.00 3
4 Invested cash in business. 4
5 5
6 2 Pool Furniture 126 3,800.00 6
7 Pool/Slide Facility 124 148,800.00 7
8 Building 122 96,200.00 8
9 Land 121 292,000.00 9
10 Cash 111 120,000.00 10
11 Mortgage Payable 223 420,800.00 11
12 Bought Surfs Up!. 12
13 13
14 2 Prepaid Insurance 114 12,240.00 14
15 Cash 111 12,240.00 15
16 Paid one-year premium for 16
17 insurance. 17
18 18
19 2 Pool/Slide Facility 124 1,225.00 19
20 Cash 111 500.00 20
21 Accounts Payable 221 725.00 21
22 Bought inner tubes from Worn Tires. 22
23 23
24 3 Cash 111 250.00 24
25 Concessions Income 412 250.00 25
26 Received payment for rental space 26
27 for video games and food 27
28 concessions. 28
29 29
30 5 Advertising Expense 513 1,320.00 30
31 Accounts Payable 221 1,320.00 31
32 Grand opening expenses from 32
33 Party Rentals ($620) and 33
34 City Star ($700). 34
35 35
36 6 Pool Maintenance Expense 511 800.00 36
37 Cash 111 800.00 37
38 July payment on contract to 38
39 All-Around Maintenance. 39
40 40

POST.
1 20-- 1
2 July 6 Miscellaneous Expense 522 128.00 2
3 Cash 111 128.00 3
4 Paid for employee picnic. 4
5 5
6 7 Cash 111 12,086.00 6
7 Income from Services 411 12,086.00 7
8 For services rendered. 8
9 9
10 9 Pool Maintenance Expense 511 646.00 10
12 Bought parts on account from 12
13 Arlen's Pool Supply. 13
14 14
15 14 Cash 111 10,445.00 15
18 18
19 15 Wages Expense 512 8,460.00 19
20 Cash 111 8,460.00 20
21 For period July 1 through July 14. 21
22 22
23 16 Accounts Payable 221 1,150.00 23
24 Cash 111 1,150.00 24
25 Paid Party Rentals and City 25
26 Star on account. 26
27 27
28 16 L. Lacy, Drawing 312 2,500.00 28
29 Cash 111 2,500.00 29
30 Withdrawal for personal use. 30
31 31
32 17 Pool Furniture 126 2,100.00 32
34 Bought pool furniture from Pool 34
35 Suppliers. 35
36 36
37 37
38 38
39 39
40 40

POST.
1 20-- 1
2 July 18 Miscellaneous Expense 522 248.00 2
3 Cash 111 248.00 3
4 Paid for costume alterations. 4
5 5
6 21 Cash 111 10,330.00 6
9 9
10 21 Accounts Payable 221 600.00 10
11 Cash 111 600.00 11
12 Partial payment to Worn Tires. 12
13 13
15 Pool Furniture 126 225.00 15
16 Received allowance from Pool 16
17 Suppliers for damaged chairs. 17
18 18
19 25 Utilities Expense 514 292.00 19
20 Cash 111 292.00 20
21 Received and paid telephone bill. 21
22 22
23 29 Wages Expense 512 8,227.00 23
24 Cash 111 8,227.00 24
25 For period July 15 through 28. 25
26 26
27 31 Cash 111 11,870.00 27
30 30
32 Cash 111 360.00 32
33 Paid Arlen's Pool Supply on account. 33
34 34
36 Cash 111 684.00 36
37 Received and paid water bill. 37
38 38
39 39
40 40

POST.
1 20-- 1
2 July 31 Mortgage Payable 223 1,910.00 2
3 Interest Expense 515 1,980.00 3
4 Cash 111 3,890.00 4
5 Paid installment on mortgage. 5
6 6
8 Cash 111 824.00 8
9 Received and paid electric bill. 9
10 10
11 31 Pool/Slide Facility 124 480.00 11
12 Cash 111 100.00 12
14 Bought inner tubes from Worn 14
15 Tires. 15
16 16
17 31 L. Lacy, Drawing 312 2,200.00 17
18 Cash 111 2,200.00 18
20 20
21 31 Accounts Receivable 112 234.00 21
23 Additional revenue from 23
24 concessions. 24
25 25
26 Adjusting Entries 26
27 31 Insurance Expense 517 1,020.00 27
28 Prepaid Insurance 114 1,020.00 28
29 29
30 31 Depreciation Expense, Building 518 480.00 30
31 Accumulated Depreciation, Building 123 480.00 31
32 32
33 31 Depreciation Expense, Pool/Slide Facility 519 675.00 33
34 Accumulated Depreciation, Pool/Slide 34
35 Facility 125 675.00 35
36 36
37 31 Depreciation Expense, Pool Furniture 520 120.00 37
38 Accumulated Depreciation, Pool 38
39 Furniture 127 120.00 39
40 40

POST.
1 20-- Adjusting Entries (continued) 1

2 July 2
3 31 Wages Expense 512 920.00 3
5 5
6 Closing Entries 6
7 31 Income from Services 411 44,731.00 7
9 Income Summary 313 45,215.00 9
10 10
11 31 Income Summary 313 26,824.00 11
12 Pool Maintenance Expense 511 1,446.00 12
13 Wages Expense 512 17,607.00 13
14 Advertising Expense 513 1,320.00 14
15 Utilities Expense 514 1,800.00 15
17 Insurance Expense 517 1,020.00 17
18 Depreciation Expense, Building 518 480.00 18
19 Depreciation Expense, Pool/Slide 19
20 Facility 519 675.00 20
21 Depreciation Expense, Pool Furniture 520 120.00 21
23 23
24 31 Income Summary 313 18,391.00 24
25 L. Lacy, Capital 311 18,391.00 25
26 26
27 31 L. Lacy, Capital 311 4,700.00 27
28 L. Lacy, Drawing 312 4,700.00 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
38 38
39 39
40 40

GENERAL LEDGER
POST. BALANCE
20--
July 1 1 150,000.00 150,000.00
2 1 120,000.00 30,000.00
2 1 12,240.00 17,760.00
2 1 500.00 17,260.00
3 1 250.00 17,510.00
6 1 800.00 16,710.00
6 2 128.00 16,582.00
7 2 12,086.00 28,668.00
14 2 10,445.00 39,113.00
15 2 8,460.00 30,653.00
16 2 1,150.00 29,503.00
16 2 2,500.00 27,003.00
18 3 248.00 26,755.00
21 3 10,330.00 37,085.00
21 3 600.00 36,485.00
25 3 292.00 36,193.00
29 3 8,227.00 27,966.00
31 3 11,870.00 39,836.00
31 3 360.00 39,476.00
31 3 684.00 38,792.00
31 4 3,890.00 34,902.00
31 4 824.00 34,078.00
31 4 100.00 33,978.00
31 4 2,200.00 31,778.00
ACCOUNT Accounts Receivable ACCOUNT NO. 112
POST. BALANCE
20--
July 31 4 234.00 234.00
ACCOUNT Prepaid Insurance ACCOUNT NO. 114
POST. BALANCE
20--
July 2 1 12,240.00 12,240.00
31 Adj. 4 1,020.00 11,220.00

ACCOUNT Land ACCOUNT NO. 121
POST. BALANCE
20--
July 2 1 292,000.00 292,000.00
ACCOUNT Building ACCOUNT NO. 122
POST. BALANCE
20--
July 2 1 96,200.00 96,200.00
ACCOUNT Accumulated Depreciation, Building ACCOUNT NO. 123
POST. BALANCE
20--
July 31 Adj. 4 480.00 480.00
ACCOUNT Pool/Slide Facility ACCOUNT NO. 124
POST. BALANCE
20--
July 2 1 148,800.00 148,800.00
2 1 1,225.00 150,025.00
31 4 480.00 150,505.00
ACCOUNT Accumulated Depreciation, Pool/Slide Facility ACCOUNT NO. 125
POST. BALANCE
20--
July 31 Adj. 4 675.00 675.00

ACCOUNT Pool Furniture ACCOUNT NO. 126
POST. BALANCE
20--
July 2 1 3,800.00 3,800.00
17 2 2,100.00 5,900.00
23 3 225.00 5,675.00
ACCOUNT Accumulated Depreciation, Pool Furniture ACCOUNT NO. 127
POST. BALANCE
20--
July 31 Adj. 4 120.00 120.00
ACCOUNT Accounts Payable ACCOUNT NO. 221
POST. BALANCE
20--
July 2 1 725.00 725.00
5 1 1,320.00 2,045.00
9 2 646.00 2,691.00
16 2 1,150.00 1,541.00
17 2 2,100.00 3,641.00
21 3 600.00 3,041.00
23 3 225.00 2,816.00
31 3 360.00 2,456.00
31 4 380.00 2,836.00
POST. BALANCE
20--
July 31 Adj. 5 920.00 920.00

ACCOUNT Mortgage Payable ACCOUNT NO. 223
POST. BALANCE
20--
July 2 1 420,800.00 420,800.00
31 4 1,910.00 418,890.00
ACCOUNT L. Lacy, Capital ACCOUNT NO. 311
POST. BALANCE
20--
July 1 1 150,000.00 150,000.00
31 Closing 5 18,391.00 168,391.00
31 Closing 5 4,700.00 163,691.00
ACCOUNT L. Lacy, Drawing ACCOUNT NO. 312
POST. BALANCE
20--
July 16 2 2,500.00 2,500.00
31 4 2,200.00 4,700.00
31 Closing 5 4,700.00 — —
POST. BALANCE
20--
July 31 Closing 5 45,215.00 45,215.00
31 Closing 5 26,824.00 18,391.00
31 Closing 5 18,391.00 — —
ACCOUNT Income from Services ACCOUNT NO. 411
POST. BALANCE
20--
July 7 2 12,086.00 12,086.00
14 2 10,445.00 22,531.00
21 3 10,330.00 32,861.00
31 3 11,870.00 44,731.00
31 Closing 5 44,731.00 — —

ACCOUNT Concessions Income ACCOUNT NO. 412
POST. BALANCE
20--
July 3 1 250.00 250.00
31 4 234.00 484.00
31 Closing 5 484.00 — —
ACCOUNT Pool Maintenance Expense ACCOUNT NO. 511
POST. BALANCE
20--
July 6 1 800.00 800.00
9 2 646.00 1,446.00
31 Closing 5 1,446.00 — —
POST. BALANCE
20--
July 15 2 8,460.00 8,460.00
29 3 8,227.00 16,687.00
31 Adj. 5 920.00 17,607.00
31 Closing 5 17,607.00 — —
POST. BALANCE
20--
July 5 1 1,320.00 1,320.00
31 Closing 5 1,320.00 — —

ACCOUNT Utilities Expense ACCOUNT NO. 514
POST. BALANCE
20--
July 25 3 292.00 292.00
31 3 684.00 976.00
31 4 824.00 1,800.00
31 Closing 5 1,800.00 — —
ACCOUNT Interest Expense ACCOUNT NO. 515
POST. BALANCE
20--
July 31 4 1,980.00 1,980.00
31 Closing 5 1,980.00 — —
ACCOUNT Insurance Expense ACCOUNT NO. 517
POST. BALANCE
20--
July 31 Adj. 4 1,020.00 1,020.00
31 Closing 5 1,020.00 — —
ACCOUNT Depreciation Expense, Building ACCOUNT NO. 518
POST. BALANCE
20--
July 31 Adj. 4 480.00 480.00
31 Closing 5 480.00 — —
ACCOUNT Depreciation Expense, Pool/Slide Facility ACCOUNT NO. 519
POST. BALANCE
20--
July 31 Adj. 4 675.00 675.00
31 Closing 5 675.00 — —

ACCOUNT Depreciation Expense, Pool Furniture ACCOUNT NO. 520
POST. BALANCE
20--
July 31 Adj. 4 120.00 120.00
31 Closing 5 120.00 — —
POST. BALANCE
20--
July 6 2 128.00 128.00
18 3 248.00 376.00
31 Closing 5 376.00 — —

Surf's Up!
Work Sheet
For Month Ended July 31, 20--
1 Cash 31,778.00
3 Prepaid Insurance 12,240.00 (a) 1,020.00
4 Land 292,000.00
5 Building 96,200.00
6 Pool/Slide Facility 150,505.00
7 Pool Furniture 5,675.00
9 Mortgage Payable 418,890.00
10 L. Lacy, Capital 150,000.00
11 L. Lacy, Drawing 4,700.00
12 Income from Services 44,731.00
13 Concessions Income 484.00
14 Pool Maintenance Expense 1,446.00
15 Wages Expense 16,687.00 (e) 920.00
18 Interest Expense 1,980.00
20 616,941.00 616,941.00
21 Insurance Expense (a) 1,020.00
23 Building (b) 480.00
25 Building (b) 480.00
27 Pool/Slide Facility (c) 675.00
29 Pool/Slide Facility (c) 675.00
31 Pool Furniture (d) 120.00
33 Pool Furniture (d) 120.00
34 Wages Payable (e) 920.00
35 3,215.00 3,215.00
36 Net Income
37
38
39
40

31,778.00 31,778.00 1
234.00 234.00 2
11,220.00 11,220.00 3
292,000.00 292,000.00 4
96,200.00 96,200.00 5
150,505.00 150,505.00 6
5,675.00 5,675.00 7
2,836.00 2,836.00 8
418,890.00 418,890.00 9
150,000.00 150,000.00 10
4,700.00 4,700.00 11
44,731.00 44,731.00 12
484.00 484.00 13
1,446.00 1,446.00 14
17,607.00 17,607.00 15
1,320.00 1,320.00 16
1,800.00 1,800.00 17
1,980.00 1,980.00 18
376.00 376.00 19
20
1,020.00 1,020.00 21
22
480.00 480.00 23
24
480.00 480.00 25
26
675.00 675.00 27
28
675.00 675.00 29
30
120.00 120.00 31
32
120.00 120.00 33
920.00 920.00 34
619,136.00 619,136.00 26,824.00 45,215.00 592,312.00 573,921.00 35
18,391.00 18,391.00 36
45,215.00 45,215.00 592,312.00 592,312.00 37
38
39
40

Surf's Up!
Income Statement
Revenue:
Income from Services $44,731
Concessions Income 484
Total Revenue $45,215
Expenses:
Pool Maintenance Expense $ 1,446
Wages Expense 17,607
Interest Expense 1,980
Insurance Expense 1,020
Depreciation Expense, Building 480
Depreciation Expense, Pool/Slide Facility 675
Depreciation Expense, Pool Furniture 120
Net Income $18,391
Surf's Up!
L. Lacy, Capital, July 1, 20-- $ 0

Investment on July 1, 20-- $150,000
Net Income for July 18,391
Subtotal $168,391
Less Withdrawals for July 4,700
L. Lacy, Capital, July 31, 20-- $163,691

Surf's Up!
Balance Sheet
July 31, 20--
Assets
Cash $ 31,778
Prepaid Insurance 11,220
Land 292,000
Building $ 96,200
Less Accumulated Depreciation 480 95,720
Pool/Slide Facility $150,505
Pool Furniture $ 5,675
Liabilities
Wages Payable 920
Mortgage Payable 418,890
Total Liabilities $422,646
Owner's Equity
L. Lacy, Capital 163,691
ACCOUNTING CYCLE REVIEW PROBLEM A (concluded)

Surf's Up!
July 31, 20--

Cash 31,778
Land 292,000
Building 96,200
Accumulated Depreciation, Building 480
Pool/Slide Facility 150,505
Accumulated Depreciation, Pool/Slide Facility 675
Pool Furniture 5,675
Accumulated Depreciation, Pool Furniture 120
Accounts Payable 2,836
Wages Payable 920
L. Lacy, Capital 163,691
587,612 587,612
ACCOUNTING CYCLE REVIEW PROBLEM B—WIND SAILORS
Suggested Audit Questions

1. What was the amount of cash paid for advertising on June 3?
2. How much of the concession income was received in cash?
3. What was the amount of the principal paid on the mortgage?
4. How much did Arden withdraw from the business?
5. What is the amount of accrued wages?
6. How much insurance expired during the month?
7. What is the amount of depreciation of the fan system in June?
8. What is the ending balance of Arden’s Capital account?
9. As of the end of the month, what is the amount of the book value of the pool structure?
10. How much cash did Arden pay as a down payment on the purchase of Wind Sailors?
Answers
1. $350
2. $150
3. $497
4. $2,700
5. $790
6. $1,000
7. $260
8. $87,591
9. $139,285
10. $60,000
ACCOUNTING CYCLE REVIEW PROBLEM B (continued)

POST.
1 20-- 1
2 June 1 Cash 111 85,000.00 2
3 R. Arden, Capital 311 85,000.00 3
4 Invested cash in business. 4
5 5
6 2 Sailboats 129 25,800.00 6
7 Fan System 127 13,300.00 7
8 Pool Structure 125 140,000.00 8
9 Land 121 37,000.00 9
10 Cash 111 60,000.00 10
11 Mortgage Payable 223 156,100.00 11
12 Bought Wind Sailors. 12
13 13
14 3 Advertising Expense 513 350.00 14
15 Cash 111 350.00 15
16 Paid bill for newspaper 16
17 advertising. 17
18 18
19 3 Prepaid Insurance 114 12,000.00 19
20 Cash 111 12,000.00 20
21 Paid one-year premium for 21
22 insurance. 22
23 23
24 3 Sailboats 129 7,200.00 24
25 Cash 111 3,200.00 25
27 Bought additional boats from 27
28 Larkin Manufacturing Co. 28
29 29
30 3 Cash 111 150.00 30
32 Received payment for rental 32
33 space for vending machines. 33
34 34
35 3 Advertising Expense 513 460.00 35
37 Promotional handouts from 37
38 Quick Printing. 38
39 39
40 40

POST.
1 20-- 1
2 June 3 Sailboat Rental Expense 511 700.00 2
3 Cash 111 700.00 3
4 Leased sailboats from K. Erdmon 4
5 Boat Co. 5
6 6
7 5 Miscellaneous Expense 522 96.00 7
8 Cash 111 96.00 8
9 Paid miscellaneous expenses. 9
10 10
11 8 Cash 111 2,855.00 11
14 14
15 9 Fan System 127 745.00 15
17 Bought an addition to fan system 17
18 on account from Stark Pool Supply. 18
19 19
20 15 Wages Expense 512 3,900.00 20
21 Cash 111 3,900.00 21
22 For period June 1 through June 14. 22
23 23
25 Cash 111 460.00 25
26 Paid Quick Printing on account. 26
27 27
28 16 R. Arden, Drawing 312 1,200.00 28
29 Cash 111 1,200.00 29
31 31
32 16 Sailboats 129 850.00 32
34 Bought sails on account from 34
35 Canvas Products, Inc. 35
36 36
37 16 Cash 111 4,850.00 37
40 40

POST.
1 20-- 1
2 June 19 Miscellaneous Expense 522 40.00 2
3 Cash 111 40.00 3
4 Paid miscellaneous expenses. 4
5 5
6 20 Accounts Payable 221 1,300.00 6
7 Cash 111 1,300.00 7
8 Partial payment to Larkin 8
9 Manufacturing Co. 9
10 10
11 22 Cash 111 8,260.00 11
14 14
16 Sailboats 129 380.00 16
17 Received allowance from Larkin 17
18 Manufacturing Co. for damaged 18
19 boat. 19
20 20
22 Cash 111 284.00 22
23 Received and paid telephone bill. 23
24 24
25 29 Wages Expense 512 4,973.00 25
26 Cash 111 4,973.00 26
27 For period June 15 through June 28. 27
28 28
30 Cash 111 475.00 30
31 Paid Stark Pool Supply on account. 31
32 32
34 Cash 111 345.00 34
35 Received and paid electric bill. 35
36 36
37 30 Mortgage Payable 223 497.00 37
39 Cash 111 1,848.00 39
40 Paid installment on mortgage. 40
41 41

POST.
1 20-- 1
2 June 30 Utilities Expense 514 590.00 2
3 Cash 111 590.00 3
4 Received and paid water bill. 4
5 5
6 30 Sailboats 129 5,320.00 6
7 Cash 111 1,550.00 7
9 Bought additional boats from 9
10 Ranger and Son. 10
11 11
12 30 R. Arden, Drawing 312 1,500.00 12
13 Cash 111 1,500.00 13
15 15
16 30 Cash 111 5,902.00 16
19 19
20 30 Accounts Receivable 112 28.00 20
22 Additional revenue from 22
23 concessions. 23
24 24
25 Adjusting Entries 25
26 30 Insurance Expense 516 1,000.00 26
27 Prepaid Insurance 114 1,000.00 27
28 28
29 30 Depreciation Expense, Pool Structure 517 715.00 29
30 Accumulated Depreciation, Pool 30
31 Structure 126 715.00 31
32 32
33 30 Depreciation Expense, Fan System 518 260.00 33
34 Accumulated Depreciation, Fan System 128 260.00 34
35 35
36 30 Depreciation Expense, Sailboats 519 900.00 36
37 Accumulated Depreciation, Sailboats 130 900.00 37
38 38
39 30 Wages Expense 512 790.00 39
41 41
42 42

POST.

2 June 30 Income from Services 411 21,867.00 2
5 5
6 30 Income Summary 313 16,754.00 6
7 Sailboat Rental Expense 511 700.00 7
8 Wages Expense 512 9,663.00 8
10 Utilities Expense 514 1,219.00 10
12 Insurance Expense 516 1,000.00 12
13 Depreciation Expense, Pool Structure 517 715.00 13
14 Depreciation Expense, Fan System 518 260.00 14
15 Depreciation Expense, Sailboats 519 900.00 15
17 17
18 30 Income Summary 313 5,291.00 18
19 R. Arden, Capital 311 5,291.00 19
20 20
21 30 R. Arden, Capital 311 2,700.00 21
22 R. Arden, Drawing 312 2,700.00 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
38 38
39 39
40 40
41 41

GENERAL LEDGER
POST. BALANCE
20--
June 1 1 85,000.00 85,000.00
2 1 60,000.00 25,000.00
3 1 350.00 24,650.00
3 1 12,000.00 12,650.00
3 1 3,200.00 9,450.00
3 1 150.00 9,600.00
3 2 700.00 8,900.00
5 2 96.00 8,804.00
8 2 2,855.00 11,659.00
15 2 3,900.00 7,759.00
16 2 460.00 7,299.00
16 2 1,200.00 6,099.00
16 2 4,850.00 10,949.00
19 3 40.00 10,909.00
20 3 1,300.00 9,609.00
22 3 8,260.00 17,869.00
24 3 284.00 17,585.00
29 3 4,973.00 12,612.00
30 3 475.00 12,137.00
30 3 345.00 11,792.00
30 3 1,848.00 9,944.00
30 4 590.00 9,354.00
30 4 1,550.00 7,804.00
30 4 1,500.00 6,304.00
30 4 5,902.00 12,206.00
POST. BALANCE
20--
June 30 4 28.00 28.00
POST. BALANCE
20--
June 2 1 12,000.00 12,000.00
30 Adj. 4 1,000.00 11,000.00

ACCOUNT Land ACCOUNT NO. 121
POST. BALANCE
20--
June 2 1 37,000.00 37,000.00
ACCOUNT Pool Structure ACCOUNT NO. 125
POST. BALANCE
20--
June 2 1 140,000.00 140,000.00
ACCOUNT Accumulated Depreciation, Pool Structure ACCOUNT NO. 126
POST. BALANCE
20--
June 30 Adj. 4 715.00 715.00
ACCOUNT Fan System ACCOUNT NO. 127
POST. BALANCE
20--
June 2 1 13,300.00 13,300.00
9 2 745.00 14,045.00
ACCOUNT Accumulated Depreciation, Fan System ACCOUNT NO. 128
POST. BALANCE
20--
June 30 Adj. 4 260.00 260.00

ACCOUNT Sailboats ACCOUNT NO. 129
POST. BALANCE
20--
June 2 1 25,800.00 25,800.00
3 1 7,200.00 33,000.00
16 2 850.00 33,850.00
23 3 380.00 33,470.00
30 4 5,320.00 38,790.00
ACCOUNT Accumulated Depreciation, Sailboats ACCOUNT NO. 130
POST. BALANCE
20--
June 30 Adj. 4 900.00 900.00
POST. BALANCE
20--
June 3 1 4,000.00 4,000.00
3 1 460.00 4,460.00
9 2 745.00 5,205.00
16 2 460.00 4,745.00
16 2 850.00 5,595.00
20 3 1,300.00 4,295.00
23 3 380.00 3,915.00
30 3 475.00 3,440.00
30 4 3,770.00 7,210.00
POST. BALANCE
20--
June 30 Adj. 4 790.00 790.00

ACCOUNT Mortgage Payable ACCOUNT NO. 223
POST. BALANCE
20--
June 2 1 156,100.00 156,100.00
30 3 497.00 155,603.00
ACCOUNT R. Arden, Capital ACCOUNT NO. 311
POST. BALANCE
20--
June 1 1 85,000.00 85,000.00
30 Closing 5 5,291.00 90,291.00
30 Closing 5 2,700.00 87,591.00
ACCOUNT R. Arden, Drawing ACCOUNT NO. 312
POST. BALANCE
20--
June 16 2 1,200.00 1,200.00
30 4 1,500.00 2,700.00
30 Closing 5 2,700.00 — —
POST. BALANCE
20--
June 30 Closing 5 22,045.00 22,045.00
30 Closing 5 16,754.00 5,291.00
30 Closing 5 5,291.00 — —
POST. BALANCE
20--
June 8 2 2,855.00 2,855.00
16 2 4,850.00 7,705.00
22 3 8,260.00 15,965.00
30 4 5,902.00 21,867.00
30 Closing 5 21,867.00 — —

ACCOUNT Concessions Income ACCOUNT NO. 412
POST. BALANCE
20--
June 3 1 150.00 150.00
30 4 28.00 178.00
30 Closing 5 178.00 — —
ACCOUNT Sailboat Rental Expense ACCOUNT NO. 511
POST. BALANCE
20--
June 3 2 700.00 700.00
30 Closing 5 700.00 — —
POST. BALANCE
20--
June 15 2 3,900.00 3,900.00
29 3 4,973.00 8,873.00
30 Adj. 4 790.00 9,663.00
30 Closing 5 9,663.00 — —
POST. BALANCE
20--
June 3 1 350.00 350.00
3 1 460.00 810.00
30 Closing 5 810.00 — —

POST. BALANCE
20--
June 24 3 284.00 284.00
30 3 345.00 629.00
30 4 590.00 1,219.00
30 Closing 5 1,219.00 — —
ACCOUNT Interest Expense ACCOUNT NO. 515
POST. BALANCE
20--
June 30 3 1,351.00 1,351.00
30 Closing 5 1,351.00 — —
POST. BALANCE
20--
June 30 Adj. 4 1,000.00 1,000.00
30 Closing 5 1,000.00 — —
ACCOUNT Depreciation Expense, Pool Structure ACCOUNT NO. 517
POST. BALANCE
20--
June 30 Adj. 4 715.00 715.00
30 Closing 5 715.00 — —
ACCOUNT Depreciation Expense, Fan System ACCOUNT NO. 518
POST. BALANCE
20--
June 30 Adj. 4 260.00 260.00
30 Closing 5 260.00 — —

ACCOUNT Depreciation Expense, Sailboats ACCOUNT NO. 519
POST. BALANCE
20--
June 30 Adj. 4 900.00 900.00
30 Closing 5 900.00 — —
POST. BALANCE
20--
June 5 2 96.00 96.00
19 3 40.00 136.00
30 Closing 5 136.00 — —

Wind Sailors
Work Sheet
For Month Ended June 30, 20--
1 Cash 12,206.00
3 Prepaid Insurance 12,000.00 (a) 1,000.00
4 Land 37,000.00
5 Pool Structure 140,000.00
6 Fan System 14,045.00
7 Sailboats 38,790.00
9 Mortgage Payable 155,603.00
10 R. Arden, Capital 85,000.00
11 R. Arden, Drawing 2,700.00
12 Income from Services 21,867.00
13 Concessions Income 178.00
14 Sailboat Rental Expense 700.00
15 Wages Expense 8,873.00 (e) 790.00
16 Advertising Expense 810.00
18 Interest Expense 1,351.00
20 269,858.00 269,858.00
21 Insurance Expense (a) 1,000.00
23 Pool Structure (b) 715.00
25 Fan System (c) 260.00
27 Sailboats (d) 900.00
29 Pool Structure (b) 715.00
31 Fan System (c) 260.00
33 Sailboats (d) 900.00
34 Wages Payable (e) 790.00
35 3,665.00 3,665.00
36 Net Income
37
38
39
40

12,206.00 12,206.00 1
28.00 28.00 2
11,000.00 11,000.00 3
37,000.00 37,000.00 4
140,000.00 140,000.00 5
14,045.00 14,045.00 6
38,790.00 38,790.00 7
7,210.00 7,210.00 8
155,603.00 155,603.00 9
85,000.00 85,000.00 10
2,700.00 2,700.00 11
21,867.00 21,867.00 12
178.00 178.00 13
700.00 700.00 14
9,663.00 9,663.00 15
810.00 810.00 16
1,219.00 1,219.00 17
1,351.00 1,351.00 18
136.00 136.00 19
20
1,000.00 1,000.00 21
22
715.00 715.00 23
24
260.00 260.00 25
26
900.00 900.00 27
28
715.00 715.00 29
30
260.00 260.00 31
32
900.00 900.00 33
790.00 790.00 34
272,523.00 272,523.00 16,754.00 22,045.00 255,769.00 250,478.00 35
5,291.00 5,291.00 36
22,045.00 22,045.00 255,769.00 255,769.00 37
38
39
40

Wind Sailors
Income Statement
Revenue:
Income from Services $21,867
Concessions Income 178
Total Revenue $22,045
Expenses:
Sailboat Rental Expense $ 700
Wages Expense 9,663
Advertising Expense 810
Interest Expense 1,351
Insurance Expense 1,000
Depreciation Expense, Pool Structure 715
Depreciation Expense, Fan System 260
Depreciation Expense, Sailboats 900
Net Income $ 5,291
Wind Sailors
R. Arden, Capital, June 1, 20-- $ 0

Investment on June 1, 20-- $85,000
Net Income for June 5,291
Subtotal $90,291
Less Withdrawals for June 2,700
R. Arden, Capital, June 30, 20-- $87,591

Wind Sailors
Balance Sheet
June 30, 20--
Assets
Cash $ 12,206
Land 37,000
Pool Structure $140,000
Fan System $ 14,045
Sailboats $ 38,790
Liabilities
Wages Payable 790
Total Liabilities $163,603
Owner's Equity
R. Arden, Capital 87,591
ACCOUNTING CYCLE REVIEW PROBLEM B (concluded)

Wind Sailors
June 30, 20--
Cash 12,206
Land 37,000
Pool Structure 140,000
Accumulated Depreciation, Pool Structure 715
Fan System 14,045
Accumulated Depreciation, Fan System 260
Sailboats 38,790
Accumulated Depreciation, Sailboats 900
Wages Payable 790
R. Arden, Capital 87,591
253,069 253,069
SOLUTIONS TO ACTIVITIES
CONSIDER AND COMMUNICATE
Suggested Response
Closing entries are necessary to comply with the matching principle. Closing entries
make it possible to have zero balances in temporary-equity accounts (revenue, expenses,
and Drawing). The closing entries are necessary to separate the revenue and expenses of
one period from those of another period. The closing entries allow the transfer of the
revenue and expenses through the Income Summary account to the Capital account as net
income or net loss, thus updating the owner’s Capital account. Since the closing entries
give the temporary-equity accounts zero balances, these accounts are ready to receive
revenue and expense amounts for the new fiscal period.
CRITICAL THINKING
Suggested Response
a. First, when the columns are added, it is clear that the balance of the Accounts Payable
account is missing. Subtracting the total of the Consulting Fees and the Capital account
from the total of the debit column, the Accounts Payable balance is $1,627 [$41,048 –
($13,818 + $25,603) = $1,627]. Perhaps you should ask the bookkeeper to add each
column and write the total, rather than copying the total from the first column to the
other. Second, a more serious problem is that the post-closing trial balance still lists the
temporary owner’s equity accounts, which should have been closed and should therefore
be zero.
POST.
DESCRIPTION REF. DEBIT CREDIT
1 b. Closing Entries 1
2 Consulting Fees 25,603.00 2
4 4
10 Insurance Expense 1,610.00 10
12 12
13 C. Tafoya, Capital 1,833.00 13
15 15
16 C. Tafoya, Capital 6,360.00 16
17 C. Tafoya, Drawing 6,360.00 17
18 18
c. The net loss is $1,833 ($27,436 – $25,603).
d. Decrease (a net loss plus withdrawals)
e. Ending Capital is $5,625.

Beginning Capital $13,818
Less: Net Loss $1,833
Withdrawals 6,360
Decrease in Capital 8,193
Ending Capital $ 5,625
f. The new balance of the post-closing trial balance is $7,252.

Debit Credit
Cash 3,412
Accounts Receivable 1,693
C. Tafoya, Capital — 5,625
7,252 7,252
A QUESTION OF ETHICS
Suggested Response
Regardless of what you are paid or how tired you are, altering numbers just to make things
balance is at least unethical. You may have to debit (or credit) a miscellaneous account
temporarily. Later you should be able to solve the mystery with the help of your supervisor
or a knowledgeable colleague.
WHAT’S WRONG WITH THIS PICTURE?

Suggested Response
Since the bookkeeper failed to journalize and post the adjusting entries from the work sheet
and made only the closing entries, the accounts requiring adjustment have not been fine-
tuned. This failure will produce unadjusted and, therefore, less accurate financial statements.
It will also send incorrect amounts forward into the next fiscal period.
ALL ABOUT YOU SPA: Closing Entries

POST.

2 June 30 Income from Services 411 18,347.00 2
4 4
5 30 Income Summary 313 11,570.38 5
6 Wages Expense 511 7,759.50 6
7 Rent Expense 512 1,650.00 7
9 Spa Supplies Expense 514 492.00 9
10 Laundry Expense 515 84.00 10
12 Utilities Expense 517 473.00 12
13 Insurance Expense 518 160.00 13
14 Depreciation Expense, Spa Equipment 519 64.88 14
15 Depreciation Expense, Office Equipment 520 10.00 15
17 17
18 30 Income Summary 313 6,776.62 18
19 A. Valli, Capital 311 6,776.62 19
20 20
21 30 A. Valli, Capital 311 1,850.00 21
22 A. Valli, Drawing 312 1,850.00 22
23 23
24 24
25 25
26 26
ALL ABOUT YOU SPA (continued)

GENERAL LEDGER
POST. BALANCE
20—
June 1 1 15,000.00 15,000.00
3 1 960.00 14,040.00
3 1 2,000.00 12,040.00
3 1 1,650.00 10,390.00
5 1 248.00 10,142.00
5 1 112.00 10,030.00
7 2 1,847.50 8,182.50
7 2 2,630.00 10,812.50
11 2 873.00 9,939.50
14 2 3,703.00 13,642.50
14 2 1,847.50 11,795.00
18 2 1,200.00 10,595.00
21 3 4,758.00 15,353.00
21 3 1,847.50 13,505.50
25 3 73.00 13,432.50
28 3 1,847.50 11,585.00
28 3 84.00 11,501.00
30 3 5,992.00 17,493.00
30 3 1,850.00 15,643.00
30 3 225.00 15,418.00
30 3 248.00 15,170.00
POST. BALANCE
20—
June 7 2 325.00 325.00
14 2 486.00 811.00
21 3 344.00 1,155.00
30 3 109.00 1,264.00
POST. BALANCE
20—
June 3 1 960.00 960.00
30 Adj. 4 160.00 800.00

ACCOUNT Spa Equipment ACCOUNT NO. 124
POST. BALANCE
20—
June 1 1 3,158.00 3,158.00
3 1 4,235.00 7,393.00
ACCOUNT Accumulated Depreciation, Spa Equipment ACCOUNT NO. 125
POST. BALANCE
20—
June 30 Adj. 4 64.88 64.88
POST. BALANCE
20—
June 5 1 318.00 318.00
5 2 832.00 1,150.00
POST. BALANCE
20—
June 30 Adj. 4 10.00 10.00
POST. BALANCE
20—
June 3 1 2,235.00 2,235.00
3 1 492.00 2,727.00
5 1 318.00 3,045.00
5 1 397.00 3,442.00
5 2 832.00 4,274.00
5 2 120.00 4,394.00
11 2 873.00 3,521.00
18 2 1,200.00 2,321.00
25 3 73.00 2,248.00

POST. BALANCE
20—
June 30 Adj. 4 369.50 369.50
ACCOUNT A. Valli, Capital ACCOUNT NO. 311
POST. BALANCE
20—
June 1 1 15,000.00 15,000.00
1 1 3,158.00 18,158.00
30 Closing 5 6,776.62 24,934.62
30 Closing 5 1,850.00 23,084.62
ACCOUNT A. Valli, Drawing ACCOUNT NO. 312
POST. BALANCE
20—
June 30 3 1,850.00 1,850.00
30 Closing 5 1,850.00 — —
POST. BALANCE
20—
June 30 Closing 5 18,347.00 18,347.00
30 Closing 5 11,570.38 6,776.62
30 Closing 5 6,776.62 — —
POST. BALANCE
20—
June 7 2 2,630.00 2,630.00
7 2 325.00 2,955.00
14 2 3,703.00 6,658.00
14 2 486.00 7,144.00
21 2 4,758.00 11,902.00
21 3 344.00 12,246.00
30 3 5,992.00 18,238.00
30 3 109.00 18,347.00
30 Closing 5 18,347.00 — —

POST. BALANCE
20—
June 7 2 1,847.50 1,847.50
14 2 1,847.50 3,695.00
21 3 1,847.50 5,542.50
28 3 1,847.50 7,390.00
30 Adj. 4 369.50 7,759.50
30 Closing 5 7,759.50 — —
POST. BALANCE
20—
June 30 1 1,650.00 1,650.00
30 Closing 5 1,650.00 — —
POST. BALANCE
20—
June 5 1 248.00 248.00
5 2 120.00 368.00
30 Closing 5 368.00 — —
ACCOUNT Spa Supplies Expense ACCOUNT NO. 514
POST. BALANCE
20—
June 3 1 492.00 492.00
30 Closing 5 492.00 — —
ACCOUNT Laundry Expense ACCOUNT NO. 515
POST. BALANCE
20—
June 28 3 84.00 84.00
30 Closing 5 84.00 — —

POST. BALANCE
20—
June 5 1 397.00 397.00
30 Closing 5 397.00 — —
POST. BALANCE
20—
June 30 3 225.00 225.00
30 3 248.00 473.00
30 Closing 5 473.00 — —
POST. BALANCE
20—
June 30 Adj. 4 160.00 160.00
30 Closing 5 160.00 — —
ACCOUNT Depreciation Expense, Spa Equipment ACCOUNT NO. 519
POST. BALANCE
20—
June 30 Adj. 4 64.88 64.88
30 Closing 5 64.88 — —
POST. BALANCE
20—
June 30 Adj. 4 10.00 10.00
30 Closing 5 10.00 — —
POST. BALANCE
20—
June 5 1 112.00 112.00
30 Closing 5 112.00 — —
ALL ABOUT YOU SPA (concluded)

All About You Spa
June 30, 20--
Cash 15,170
Accounts Receivable 1,264
Spa Equipment 7,393
Accumulated Depreciation, Spa Equipment 65
Wages Payable 370
A. Valli, Capital 23,085
25,777 25,777

2 Full 5-4a 5-4b

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CHAPTER 5 Closing Entries and the Post-Closing Trial Balance

1 20— Closing Entries 1

GENERAL JOURNAL PAGE

1 20— Closing Entries 1

b. With a net loss of $1,781.

GENERAL JOURNAL PAGE

1 20— Closing Entries 1

1 20-- Closing Entries 1

1 20-- Closing Entries 1

1 20-- Closing Entries 1

1 20-- Closing Entries 1

b. $42,380 ($63,410 – $9,030 – $12,000)

0. Example: The total liabilities of the business

a. The amount of the owner's Capital

b. The amount of depreciation expense

c. The amount of the company's net

d. The book value of the equipment. X

e. Total insurance expired during the

f. Total accounts receivable at the

g. Total withdrawals by the owner. X

h. The cost of utilities used during the

i. The amount of the owner's Capital

P. Lindal, Capital, January 1, 20-- $124,000

B. Lyon, Capital Commissions Earned Rent Expense

Problem 5-1A (concluded)

1 20-- Closing Entries 1

G. Ho, Capital Consulting Revenue Rent Expense

Problem 5-2A (concluded)

1 20-- Closing Entries 1

Problem 5-3A (continued)

ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET

Problem 5-3A (continued)

1 20-- Adjusting Entries 1

Problem 5-3A (continued)

ACCOUNT Office Equipment ACCOUNT NO. 124

ACCOUNT Accumulated Depreciation, Office Equipment ACCOUNT NO. 125

ACCOUNT Wages Payable ACCOUNT NO. 222

ACCOUNT M. Valerie, Capital ACCOUNT NO. 311

ACCOUNT M. Valerie, Drawing ACCOUNT NO. 312

Problem 5-3A (continued)

ACCOUNT Premiums Earned ACCOUNT NO. 411

ACCOUNT Wages Expense ACCOUNT NO. 511

ACCOUNT Rent Expense ACCOUNT NO. 512

ACCOUNT Office Supplies Expense ACCOUNT NO. 513

Problem 5-3A (concluded)

ACCOUNT Telephone Expense ACCOUNT NO. 515

ACCOUNT Advertising Expense ACCOUNT NO. 516

ACCOUNT Miscellaneous Expense ACCOUNT NO. 519

Valerie Insurance Agency

Problem 5-4A (continued)

ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET

Problem 5-4A (continued)

B. Bryan, Capital, July 1, 20-- $16,583

Problem 5-4A (continued)

Problem 5-4A (concluded)

1 20-- Adjusting Entries 1

M. Wally, Capital Commissions Earned Rent Expense

Problem 5-1B (concluded)

1 20-- Closing Entries 1

W. Emil, Capital Consulting Revenue Rent Expense

Problem 5-2B (concluded)

1 20-- Closing Entries 1

Problem 5-3B (continued)