Chapter-4: Completing the Accounting Cycle

Exercise list: E4.1, E4.2 P4.1A,P4.2A

E4.1

The trial balance columns of the worksheet for Dixon Company at June 30, 2020, are as
follows.
Trial Balance
June 30, 2020
Accounts Title Debit (Tk.) Credit(Tk.)
Cash 2,320
Accounts Receivable 2,440
Supplies 1,880
Accounts payable 1,120
Unearned Service Revenue 240
Capital 3,600
Service Revenue 2,400
Salaries and Wages expenses 560
Miscellaneous expense 160
Total 7,360 7,360
Adjusting data:
i) A physical count reveals Tk.500 of supplies on hand
ii) Tk.100 of the unearned revenue is still unearned at month-end.
iii) Accrued salaries are Tk.210.
Required:
a) Enter the trial balance on a work sheet and prepare a ten column worksheet.
Solution: Worksheet
Account Titles Trial Balance Adjustments Adjusted T.B Income Statement Balance Sheet
Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.)
Cash 2,320 2,320 2,320
Accounts 2,440 2,440 2,440
Receivable
Supplies 1,880 1,380 500 500
Accounts 1,120 1,120 1,120
payable
Unearned 240 140 100 100
Service Revenue
Capital 3,600 3,600 3,600
Service Revenue 2,400 140 2,540 2,540
Salaries and 560 210 770 770
Wages expenses
Miscellaneous 160 160 160
expense
Totals 7,360 7,360
Supplies 1,380 1,380 1,380
expenses
Salaries and 210 210 210
Wages payable
Totals 1,730 1,730 7,570 7,570
Net Income 230 230
Totals 2,540 2,540 5,260 5,260
E4.2

The adjusted trial balance columns of the worksheet for Auburn Company are as follows.
Auburn Company
Worksheet (partial)
For the month ended April 30, 2020
Account Titles Adjusted T.B Income Statement Balance Sheet
Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.)
Cash 10,000
Accounts Receivable 7,840
Prepaid rent 2,280
Equipment 23,050
Accu. Dep.-Equipment 4,900
Notes payable 5,700
Accounts payable 4,920
Owner’s capital 27,960
Owner’s drawings 3,650
Service revenue 15,590
Salaries and Wages exp. 10,840
Rent expenses 760
Depreciation exp. 650
Interest exp. 57
Interest payable 57
Totals 59,127 59,127
Instructions: Complete the worksheet.

Solution: Auburn Company

Worksheet (partial)
For the month ended April 30, 2020
Account Titles Adjusted T.B Income Statement Balance Sheet
Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.)
Cash 10,000 10,000
Accounts Receivable 7,840 7,840
Prepaid rent 2,280 2,280
Equipment 23,050 23,050
Accu. Dep.-Equipment 4,900 4,900
Notes payable 5,700 5,700
Accounts payable 4,920 4,920
Owner’s capital 27,960 27,960
Owner’s drawings 3,650 3,650
Service revenue 15,590 15,590
Salaries and Wages exp. 10,840 10,840
Rent expenses 760 760
Depreciation exp. 650 650
Interest exp. 57 57
Interest payable 57 57
Totals 59,127 59,127
Net Income 3,283 3,283
Totals 15,590 15,590 46,820 46,820
P4.1

The trial balance columns of the worksheet for Warren Roofing at March 31, 2020, are as
follows.

Warren Roofing
Trial Balance
March 31, 2020
Accounts Title Debit ($) Credit($)
Cash 4,500
Accounts Receivable 3,200
Supplies 2,000
Equipment 11,000
Accumulated depreciation-Equipment 1,250
Accounts payable 2,500
Unearned Service Revenue 550
Owner’s Capital 12,900
Owner’s Drawings 1,100
Service Revenue 6,300
Salaries and Wages expenses 1,300
Miscellaneous expense 400
Total 23,500 23,500

Adjusting data:
i) A physical count reveals $480 of supplies on hand
ii) $260 of the unearned revenue is still unearned at March 31.
iii) Accrued salaries are $700.
iv) Depreciation for March is $250
Required:
a. Enter the trial balance on a work sheet and prepare a ten column worksheet.
b. Prepare an income statement and owner’s equity statement for the month of March and a
classified statement of financial position at March 31. T. Warren made an additional
investment in the business of $10,000 in March.
c. Journalize the adjusting entries from the adjustments columns of the worksheet.
d. Journalize the closing entries from the financial statement columns of the worksheet.

Solution:
 Req.a)
Worksheet
Account Titles Trial Balance Adjustments Adjusted T.B Income Statement Balance Sheet
Dr.($) Cr.($) Dr.($) Cr.($) Dr.($) Cr.($) Dr.($) Cr.($) Dr.($) Cr.($)
Cash 4,500 4,500 4,500
Accounts 3,200 3,200 3,200
Receivable
Supplies 2,000 1,520 480 480
Equipment 11,000 11,000 11,000
Accumulated 1,250 250 1,500 1,500
depreciation-
Equipment
Accounts 2,500 2,500 2,500
payable
Unearned 550 290 260 260
Service Revenue
Owner’s Capital 12,900 12,900 12,900
Owner’s 1,100 1,100 1,100
Drawings
Service Revenue 6,300 290 6,590 6,590
Salaries and 1,300 700 2,000 2,000
Wages expenses
Miscellaneous 400 400 400
expense
23,500 23,500
Supplies 1,520 1,520 1,520
expenses
Salaries and 700 700 700
Wages payable
Depreciation 250 250 250
exp.
Totals 2,760 2,760 24,450 24,450
Net Income 2,420 2,420
Totals 6,590 6,590 20,280 20,280

Req. b)

Income Statement
For the month ended March, 31, 2020
Particulars $ $
Revenue:
Service Revenue 6,590
Expenses:
Salaries and Wages expenses 2,000
Supplies expenses 1,520
Depreciation exp. 250
Miscellaneous expense 400
Total expenses 4,170
Net Income 2,420

Owner’s Equity Statement

 For the month ended March, 31, 2020
$
Owner’s capital, March 1, 2020 12,900
Add: Additional capital 10,000
Add: Net income 2,420
25,320
Less: Owner’s drawings 1,100
Owner’s capital, March 31, 2020 24,220
Balance Sheet
As at March 31, 2020
$ $
Assets:
Current assets:
Cash (4500+10,000) 14,500
Accounts Receivable 3,200
Supplies 480
Total current assets 18,180
Fixed assets:
Equipment 11,000
Less: Accumulated depreciation-equipment 1,500 9,500
Total assets 27,680
Liabilities and Owner’s equity:
Current Liabilities:
Accounts payable 2,500
Unearned service revenue 260
Salaries and wages payable 700
Total current liabilities 3,460
Owner’s equity 24,220
Total Liabilities and Owner’s equity 27,680

Req.c)

Adjusting Entries
As at March 31, 2020
Date Particulars Ref. Dr.($.) Cr.($)
March-31 Supplies expenses 1,520
Supplies (2,000-480) 1,520
March-31 Depreciation expenses 250
Accumulated depreciation-equipment 250
March-31 Unearned service revenue 290
Service revenue (550-260) 290
March-31 Salaries and wages expenses 700
Salaries and wages payable 700

Req.d)

Closing Entries
 As at March 31, 2020
Date Particulars Ref. Dr.($) Cr.($)
March-31 Service revenue 6,590
Income Summary 6,590
March-31 Income Summary 4,170
Salaries and Wages expenses 2,000
Supplies expenses 1,520
Depreciation exp. 250
Miscellaneous expense 400
March-31 Income Summary 2,420
Owner’s capital 2,420
March-31 Owner’s capital 1,100
Owner’s drawings 1,100

P4.2

The adjusted trial balance columns of the worksheet for Nguyen Company at the year ended
December 31, 2020, are as follows (amounts in thousands):

Trial Balance
December 31, 2020
Acc. No. Accounts Title Debit (Tk.) Credit(Tk.)
101 Cash 5,300
112 Accounts Receivable 10,800
126 Supplies 1,500
130 Prepaid insurance 2,000
157 Equipment 27,000
158 Accumulated depreciation- 5,600
Equipment
200 Notes payable 15,000
201 Accounts payable 6,100
212 Salaries and Wages payable 3,600
230 Interest payable 600
301 Owner’s Capital 13,000
306 Owner’s Drawings 7.600
400 Service Revenue 61,000
610 Advertising expenses 9,000
631 Supplies expense 4,000
711 Depreciation expense 5,600
722 Insurance expense 3,500
726 Salaries and Wages expenses 28,000
905 Interest expense 600
Total 1,04,900 1,04,900

Required:

a. Enter the trial balance on a work sheet and prepare a ten column worksheet.
b. Prepare an income statement and owner’s equity statement for the month of March and a
classified statement of financial position at December 31. Nguyen did not make any
additional investment in the business during the year.
c. Journalize the closing entries from the financial statement columns of the worksheet.
d. Post the closing entries. Use three column form of account. Income summary No.350.
e. Prepare a post-closing trial balance.
Solution:
Req.a)
Nguyen Company
Worksheet
Account Titles Adjusted T.B Income Statement Balance Sheet
Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.) Dr.(Tk.) Cr.(Tk.)
Cash 5,300 5,300
Accounts Receivable 10,800 10,800
Supplies 1,500 1,500
Prepaid insurance 2,000 2,000
Equipment 27,000 27,000
Accumulated 5,600 5,600
depreciation-Equipment
Notes payable 15,000 15,000
Accounts payable 6,100 6,100
Salaries and Wages 3,600 3,600
payable
Interest payable 600 600
Owner’s Capital 13,000 13,000
Owner’s Drawings 7.600 7.600
Service Revenue 61,000 61,000
Advertising expenses 9,000 9,000
Supplies expense 4,000 4,000
Depreciation expense 5,600 5,600
Insurance expense 3,500 3,500
Salaries and Wages 28,000 28,000
expenses
Interest expense 600 600
Total 1,04,900 1,04,900
Net Income 10,300 10,300
Totals 61,000 61,000 54,200
Req. b)

Nguyen Company
Income Statement
For the year ended December, 31, 2020
Particulars Tk. Tk.
Revenue:
Service Revenue 61,000
Expenses:
Advertising expenses 9,000
Supplies expense 4,000
Depreciation expense 5,600
Insurance expense 3,500
Salaries and Wages expenses 28,000
Interest expense 600
Total expenses 50,700
Net Income 10,300

Nguyen Company
Owner’s Equity Statement
 For the year ended December, 31, 2020
Tk.
Owner’s capital, January 1, 2020 13,000
Add: Net income 10,300
23,300
Less: Owner’s drawings 7,600
Owner’s capital, December 31, 2020 15,700

Nguyen Company
Balance Sheet
As at December 31, 2020
Tk. Tk.
Assets:
Current assets:
Cash 5,300
Accounts Receivable 10,800
Supplies 1,500
Prepaid insurance 2,000
Total current assets 19,600
Fixed assets:
Equipment 27,000
Less: Accumulated depreciation-equipment 5,600 21,400
Total assets 41,000
Liabilities and Owner’s equity:
Current Liabilities:
Notes payable (15,000-11,000) 4,000
Accounts payable 6,100
Interest payable 600
Salaries and wages payable 3,600
Total current liabilities 14,300
Long-Term Liabilities:
Notes Payable 11,000
Owner’s equity 15,700
Total Liabilities and Owner’s equity 41,000

Req.c)
Nguyen Company
Closing Entries
As at March 31, 2020
Date Particulars Ref. Dr.(Tk.) Cr.(Tk.)
Dec-31 Service revenue 61,000
Income Summary 61,000
Dec-31 Income Summary 50,700
Advertising expenses 9,000
Supplies expense 4,000
Depreciation expense 5,600
Insurance expense 3,500
Salaries and Wages expenses 28,000
Interest expense 600
Dec-31 Income Summary 10,300
Owner’s capital 10,300
Dec-31 Owner’s capital 7,600
Owner’s drawings 7,600
Req. d)
Nguyen Company
Ledger Accounts (Three-Column Form)
Income Summary
Date Explanation Ref. Debit Credit Balance
Dec-31 Service revenue 61,000 61,000
Dec-31 Closing all expenses 50,700 10,300
Dec-31 Owner’s capital 10,300 0

Owner’s Capital
Date Explanation Ref. Debit Credit Balance
Dec-31 Balance b/d √ 13,000
Dec-31 Income summary 10,300 23,300
Dec-31 Owner’s Drawings 7,600 15,700

Req. e)
Nguyen Company
Post-closing trial balance
December 31, 2020
Account Accounts Title Ref. Debit Credit
No. (Tk.) (Tk.)
101 Cash 5,300
112 Accounts Receivable 10,800
126 Supplies 1,500
130 Prepaid insurance 2,000
157 Equipment 27,000
158 Accumulated depreciation-Equipment 5,600
200 Notes payable 15,000
201 Accounts payable 6,100
212 Salaries and Wages payable 3,600
230 Interest payable 600
301 Owner’s capital 15,700
46,600 46,600