TUTORIAL TEST 4 - CLOSING

SOLUTION

1. Prepare journal entries to record the transactions for May (20 marks)

May 2 Cash...............................................................................101 30,000

Buildings .......................................................................173 150,000
W. Plume, Capital ................................................301 180,000
The owner invested in the business.

3 Rent Expense ................................................................640 2,000

Cash......................................................................101 2,000
Paid one month’s rent.

5 Office Supplies..............................................................124 2,400

Cash......................................................................101 2,400
Acquired office supplies.

10 Prepaid Insurance ..........................................................128 7,200

Cash......................................................................101 7,200
Paid insurance in advance.

14 Salaries Expense ...........................................................622 1,000

Cash......................................................................101 1,000
Paid two weeks’ salary.

24 Cash...............................................................................101 9,800
Storage Revenue ..................................................403 9,800
Collected storage revenue.

28 Salaries Expense ...........................................................622 1,000

Cash......................................................................101 1,000
Paid two weeks’ salary.

29 Repairs Expense ............................................................684 950

Cash......................................................................101 950
Repaired buildings.

30 Telephone Expense .......................................................688 400

Cash......................................................................101 400
Paid telephone bill.

31 W. Plume, Withdrawals ................................................302 2,000

Cash......................................................................101 2,000
Owner withdrew cash.
 2. Adjusting entries (May 31). (10 marks)

a) Insurance Expense ...................................................................637 400

Prepaid Insurance ..........................................................128 400
Expired insurance.
(2/3 x $7,200/12 per month)
* (Explain NO mark: Insurance coverage began on 11 May,
which means it covered around 20 remaining days in May)

b) Office Supplies Expense .........................................................650 875

Office Supplies..............................................................124 875
Cost of consumed supplies.
($2,400 - $1,525)

c) Depreciation Expense—Buildings ..........................................606 1,500

Accum. Depreciation—Buildings .................................174 1,500
Record depreciation.

d) Salaries Expense ......................................................................622 100

Salaries Payable ............................................................209 100
Accrued salaries.

e) Accounts Receivable ...............................................................106 1,150

Storage Revenue ...........................................................403 1,150
Accrued storage revenue.

3. Closing entries (May 31). (10 marks)

May 31(2p) Storage Revenue ........................................................403 10,950

Income Summary .................................................901 10,950
Close revenue account.
31(4p) Income Summary .......................................................901 8,225
Depreciation Exp—Buildings ..............................606 1,500
Salaries Expense ..................................................622 2,100
Insurance Expense... ............................................637 400
Rent Expense .......................................................640 2,000
Office Supplies Expense ......................................650 875
Repairs Expense ...................................................684 950
Telephone Expense ..............................................688 400
Close expense accounts.
31(2p) Income Summary .......................................................901 2,725
W. Plume, Capital ................................................301 2,725
Close Income Summary.
 31(2p) W. Plume, Capital ......................................................301 2,000
W. Plume, Withdrawals .......................................302 2,000
Close withdrawals account.

4. Ledger accounts (25 marks)

Ledger as of May 31

Cash (4 points) Acct. No. 101

Date Explanation PR Debit Credit Balance
May 2 30,000 30,000
3 2,000 28,000
5 2,400 25,600
10 7,200 18,400
14 1,000 17,400
24 9,800 27,200
28 1,000 26,200
29 950 25,250
30 400 24,850
31 2,000 22,850

Accounts Receivable (1 point) Acct. No. 106

Date Explanation PR Debit Credit Balance
May 31 Adjusting 1,150 1,150

Office Supplies (1.25 points) Acct. No. 124

Date Explanation PR Debit Credit Balance
May 5 2,400 2,400
31 Adjusting 875 1,525

Prepaid Insurance (1.25 points) Acct. No. 128

Date Explanation PR Debit Credit Balance
May 10 7,200 7,200
31 Adjusting 400 6,800

Buildings (1 point) Acct. No. 173

Date Explanation PR Debit Credit Balance
May 2 150,000 150,000
 Accumulated Depreciation—Buildings (1 point) Acct. No. 174
Date Explanation PR Debit Credit Balance
May 31 Adjusting 1,500 1,500

Salaries Payable (1 point) Acct. No. 209

Date Explanation PR Debit Credit Balance
May 31 Adjusting 100 100

W. Plume, Capital (1.5 points) Acct. No. 301

Date Explanation PR Debit Credit Balance
May 2 180,000 180,000
31 Closing 2,725 182,725
31 Closing 2,000 180,725

W. Plume, Withdrawals (1.25 points) Acct. No. 302

Date Explanation PR Debit Credit Balance
May 31 2,000 2,000
31 Closing 2,000 0

Storage Revenue (1.5 points) Acct. No. 403

Date Explanation PR Debit Credit Balance
May 24 9,800 9,800
31 Adjusting 1,150 10,950
31 Closing 10,950 0

Depreciation Expense—Buildings (1.25 points) Acct. No. 606

Date Explanation PR Debit Credit Balance
May 31 Adjusting 1,500 1,500
31 Closing 1,500 0

Salaries Expense (1.5 points) Acct. No. 622

Date Explanation PR Debit Credit Balance
May 14 1,000 1,000
28 1,000 2,000
31 Adjusting 100 2,100
31 Closing 2,100 0
 Insurance Expense (1.25 points) Acct. No. 637
Date Explanation PR Debit Credit Balance
May 31 Adjusting 400 400
31 Closing 400 0

Rent Expense (1.25 points) Acct. No. 640

Date Explanation PR Debit Credit Balance
May 3 2,000 2,000
31 Closing 2,000 0

Office Supplies Expense (1.25 points) Acct. No. 650

Date Explanation PR Debit Credit Balance
May 31 Adjusting 875 875
31 Closing 875 0

Repairs Expense (1.25 points) Acct. No. 684

Date Explanation PR Debit Credit Balance
May 29 950 950
31 Closing 950 0

Telephone Expense (1.25 points) Acct. No. 688

Date Explanation PR Debit Credit Balance
May 30 400 400
31 Closing 400 0

Income Summary (1.5 points) Acct. No. 901

Date Explanation PR Debit Credit Balance
May 31 Closing 10,950 10,950
31 Closing 8,225 2,725
31 Closing 2,725 0

5. Adjusted Trial Balance (15 marks)

COLD STORAGE CO.

Adjusted Trial Balance

 May 31

No. Account Title Debit

Credit
101 Cash...................................................................................... $ 22,850
106 Accounts receivable ............................................................. 1,150
124 Office supplies ..................................................................... 1,525
128 Prepaid insurance ................................................................. 6,800
173 Buildings .............................................................................. 150,000
174 Accumulated depreciation–Buildings .................................. $ 1,500
209 Salaries payable ................................................................... 100
301 W. Plume, Capital ................................................................ 180,000
302 W. Plume, Withdrawals ....................................................... 2,000
403 Storage revenue .................................................................... 10,950
606 Depreciation expense–Buildings ......................................... 1,500
622 Salaries expense ................................................................... 2,100
637 Insurance expense ................................................................ 400
640 Rent expense ........................................................................ 2,000
650 Office supplies expense ....................................................... 875
684 Repairs expense ................................................................... 950
688 Telephone expense ............................................................... 400
Totals ................................................................................... $192,550 $192,550

6. Balance Sheet (10 marks, including 1 point of the Capital calculation)

COLD STORAGE CO.

Balance Sheet

May 31

Assets
 Cash............................................................................ $ 22,850
Accounts receivable ................................................... 1,150
Office supplies ........................................................... 1,525
Prepaid insurance ....................................................... 6,800
Buildings .................................................................... $150,000
Accumulated depreciation—Buildings ...................... (1,500) 148,500
Total assets................................................................ $180,825

Liabilities
Salaries payable ......................................................... $ 100
Equity
W. Plume, Capital (**) .............................................. 180,725
Total liabilities and equity ....................................... $180,825

(**) W. Plume, Capital = 180,000 – 2,000 + [ 10,950 – (1,500 + 2,100 + 400 + 2,000 + 875 +
950 + 400) ] = 180,725 (1 p)

or W. Plume, Capital = 180,000 – 2,000 + 2,725 (calculated from the ledger in Required 4)

7. Post-closing Trial Balance (10 marks)

COLD STORAGE CO.

Post-Closing Trial Balance

May 31

Debit Credit

Cash............................................................................ $ 22,850
Accounts receivable ................................................... 1,150
Office supplies ........................................................... 1,525
Prepaid insurance ....................................................... 6,800
Buildings .................................................................... 150,000
Accumulated depreciation–Buildings ........................ $ 1,500
Salaries payable ......................................................... 100
W. Plume, Capital ...................................................... 180,725
Totals ......................................................................... $182,325 $182,325