Company Name

Balance Sheet
As at December 31, 2020

Assets
Current Assets
Cash
Short-term Investments
Accounts receivable 30
Less allowance for doubtful accounts 4
Net realizable value
Inventory
Prepaid expenses
Supplies
Total current assets

Long-term Investments and Long-term Receivables

Notes Receivable
Long-term Investments
Total long-term investments and Long-term Receivables

Property, Plant & Equipment

Land
Building 200
Less accumulated depreciation 45
Equipment 100
Less accumulated depreciation 25
Total Property, Plant & Equipment
Intangible Assets
Tradename
Patent (net of accumulated amortization $4)
Total Intangible Assets
Total Assets

Liabilities
Current liabilities
Accounts Payable
Wages Payable
Unearned Revenue
Total current liabilities

Long-term liabilities
Bank Loan
Bonds Payable
Total long-term liabilities

Owners' Equity
J. Morgan, Captial
Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

Source: Clip art library

 5
10

26
40
4
2
87

20
35
55

100

155

75
330
 10
6
16
488

60
40
25
125

110
60
170

193
193

488
ACCT112 Chapter 4

Closing Entries

Service Revenue 18000

Income Summary 18000

Income Summary 10000

Rent Expense 2000
Wages Expense 7500
Supplies Expense 500

Income Summary 8000

D. Wong, Capital 8000

D. Wong, Capital 5000

D. Wong, Drawings 5000

Income Summary
10000 18000
8000 bal
8000
0 bal

Steps in the Accounting Cycle

1. Analyze business transactions
2. Journalize the transactions
3. Post to the ledger accounts
4. Prepare a trial balance
5. Journalize and post adjusting entries
6. Prepare an adjusted trial balance
7. Prepare financial statements
8. Journalize and post closing entries
9. Prepare a post-closing trial balance

Evaluating Liquidity

Working capital
Current assets - current liabilities

It is important as it shows a company's

ability to pay its short short-term debts

Current Ratio
Current assets/current liabilties

It tells how many dollars of current

assets the company has for every dollar
of current liabilties

Acid-test Ratio
(Cash + Short-term Investment + Receivables)
Current liabilties

This measures the company's immediate short-term liquidity

It tells how many dollars of highly liquid
current assets the company has for
every dollar of current liabilties
 Owner's Equity
Dr. Cr.
- +

Revenue
Dr. Cr.
- +

Expenses
Dr. Cr.
+ -

Drawings
Dr. Cr.
+ -

D. Wong Capital
42000 Bal
5000 8000
45000
bal
E4-15 Together

JPC Enterprises Dec 31 2024

Accounts payable $ 105,600

Accounts Receivable 197,000
Accumulated depreciation-
building 79,900

Building 306,300
Cash 16,500
Goodwill 36,000
Interest payable 16,500
J. Chrowder, capital (beg) 279,400

1. All accounts have normal balances

2. $17,250 of the mortgage payable will be paid before Dec 31, 2025
3. The notes payable are payable on May 17, 2025

a. Prepare a classified balance sheet

b. Calculate working capital, the current ratio and the acid-test ratio
c. Comment on the company's liquidity
b. Calculate the:

2021
Working capital

2021
Current ratio

2021
Acid-test ratio
 Land 105,600
Licenses 98,300

Long-term equity investments 45,800

Mortage payable 230,000

Notes payable 55,000
Prepaid expenses 6,900
Salaries payable 28,700
Supplies 10,100.00
Unearned revenue 27,400.00

l be paid before Dec 31, 2025

ay 17, 2025

t ratio and the acid-test ratio

E4-14 Group

Basten Company year end July 31, 2024

Salaries payable 2,080 Notes payable (long-t 1,800

Salaries expense 48,700 Cash 14,200
Utilities expense 22,600 Accounts Receivable 9,780
Accumulated
depreciation-
Equipment 34,400 equipment 6,000
Accounts payable 4,100 D. Basen, drawings 3,000
Service revenue 63,000 Depreciation expense 4,000
Rent revenue 8,500 D. Basen, capital (beg) 51,200

a. Prepare an income statement and a statement of owners' equity for

the year.
b. Prepare a classified balance sheet
BE4-14

Jones Co
Year 1 Year 2 Year 3
Current assets 95000 150000 200000
Current liabilities 65000 100000 95000

a. Calculate the working capital for the three years

Year 1 Year 2 Year 3

Working capital

b. Calculate the current ratio for the three years

Year 1 Year 2 Year 3

Current ratio

What is the trend?

BE4-15

Drew Co
2024 2023
Cash and A/R 22000 20430
Current assets 35100 33510
Current liabilities 24460 24800

a. Calculate the:

2024 2023
Working capital

2024 2023
Current ratio

2024 2023
Acid-test ratio

b. Is there an improvement or deterioration in liquidity in 2024

E4-5 together

Hercules Company
Adjusted Trial Balance
31-Aug-24
Cash 10900
A/R 6200
Equipment 10600
Accumulated depreciation 5400
A/P 2800
Unearned Revenue 1200
S. Strong, capital 31700
S. Strong, drawings 12000
Service revenue 42400
Rent revenue 6100
Depreciation expense 2700
Salaries expense 37100
Utilities expense 10100
89600 89600

a. Prepare the closing entries

Account Debit Credit
E4-6 Group

Victoria Lee Company

Adjusted Trial Balance
June 30, 2024
Cash 3712
A/R 3904
Supplies 480
A/P 1382
Unearned Revenue 160
Salaries payable 460
V. Lee, capital 5760
V. Lee, drawings 550
Service revenue 4300
Salaries expense 1260
Supplies expense 256
Miscellaneous expense 1900
12062 12062

a. Prepare the closing entries

Account Debit Credit
E4-10

Choi Company has an inexperienced accountant.

During the first two weeks on the job, the
accoutant made the following errors

1. A payment on account of $750 to a creditor

was debited $570 to Accounts Payable and
credited $570 to cash
2. The purchase of supplies on account for $560 was not recorded
3. A $500 withdrawal of cash for I.Choi's personal
use was debited $500 to Salaries Expense and
credited $500 to Cash
4. Received $700 cash from a customer on
account. Cash was debited $700 and Service
Revenue was credited $700

5. A customer was billed $350 for services

provided. Accounts Receivable was debited $350
and Unearned Revenue was credited $350

Prepare the correcting entries

Account Debit Credit

E4-11

The owner of D'Addario Company has been doing all the

company's bookkeeping. When the accountant arrived to do
the year-end adjusting entries she found the following items

1. A payment of salaries of $700 was debited to Equipment and

credited to Cash, both for $700
2. The investment of $2000 of cash by the owner. Toni
D'Addario was debited to Short-term investments and credited
to Cash, both for $2,000
3. The collection of an accounts receivable of $1,000 was
debited to Cash and credited to Accounts Receivable, both for
$1,000

4. The company had purchased $440 of supplies on account.

This entry was correctly recorded. When the account was paid.
Supplies was debited by $440 and Cash was credited $440
5. Equipment costing $3,500 was purchased on account.
Repairs expense was debited and Accounts Payable was
credited both for $3,500

Prepare the correcting entries if any are required

Account Debit
Credit