CHAPTER 4 – COMPLETE THE ACCOUNTING CYCLE

PRACTICE EXERCISE SET B

The unadjusted trial balance of Watson Anvils at December 31, 2018, and the data for
the adjustments follow:

Adjustment data:
a. Unearned Revenue still unearned at December 31, $3,600.
b. Prepaid Rent still in force at December 31, $2,000.
c. Office Supplies used, $600.
d. Depreciation, $400.
e. Accrued Salaries Expense at December 31, $180.
Requirements
1. Open the T-accounts using the balances in the unadjusted trial balance.
2. Complete the worksheet for the year ended December 31, 2018 (worksheet below).
3. Prepare the adjusting entries, and post to the accounts.
4. Prepare an adjusted trial balance.
5. Prepare the income statement, the statement of owner’s equity, and the classified
balance sheet in report form. Assume that there were no contributions made by the
owner during the year.
6. Prepare the closing entries, and post to the accounts.
7. Prepare a post-closing trial balance.
 WATSON ANVILS
Worksheet
December 31,
2018

Unadjusted Trial Adjustments Adjusted Trial Balance Income Statement Balance Sheet
Account Names Balance
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash $ 13,560
Accounts Receivable 17,000
Prepaid Rent 2,140
Office Supplies 2,800
Equipment 30,000
Acc. Depreciation—Eq. $ 11,000
Accounts Payable 7,200
Salaries Payable
Unearned Revenue 5,600
Watson, Capital 29,600
Watson, Withdrawals 4,600
Service Revenue 19,000
Salaries Expense 2,300
Rent Expense
Deprn Expense—Eq.
Supplies Expense
Total $ 72,400 $ 72,400
Net Income
Total