Cayuga Ltd. prepared the following trial balance at the end of its first year of operations ending December 31, 2015. To simplify the case, the amounts given are in thousands of dollars. Other data not yet recorded at December 31, 2015, are as follows:

a. Insurance expired during 2015, $ 4.

b. Depreciation expense for 2015, $ 4.

c. Wages payable, $ 8.

d. Income tax expense, $ 9.

Required:
1. Prepare the adjusting entries for 2015.
2. Show the effects (direction and amount) of the adjusting entries on net earnings and cash.
3. Complete the trial balance Adjustments and Adjusted columns.
4. Using the adjusted balances, prepare a statement of earnings, a statement of changes in equity, and a statement of financial position.
5. What is the purpose of €œclosing the books€ at the end of the accounting period?
6. Using the adjusted balances, prepare the closing entries for 2015.

Transcribed Image Text:

Unadjusted Adjustments Debit CreditDebit Credit Debit Credit Adjusted Account Title Cash Trade receivables Prepaid insurance Machinery (20-year life, no residual value) Accumulated depreciation Trade payables Wages payable Income taxes payable Contributed capital (4,000 shares) Retained earnings (deficit) Revenues (not detailed) Expenses (not detailed) 38 80 68 84 32 Totals 169 169