Hello my friend

I need your help with a discussion post.

I am enclosing the information.

Thank you!!

4-1 4 Completing the Accounting Cycle Learning Objectives 1 2 Prepare closing entries and a post-closing trial balance. 3 Explain the steps in the accounting cycle and how to prepare correcting entries. 4 4-2 Prepare a worksheet. Identify the sections of a classified balance sheet. LEARNING OBJECTIVE 1 Prepare a worksheet. Worksheet Multiple-column form used in preparing financial statements. Not a permanent accounting record. May be a computerized worksheet using an electronic spreadsheet program such as Excel. 4-3 Prepared using a five step process. Use of worksheet is optional. LO 1 Steps in Preparing a Worksheet Illustration 4-1 4-4 Steps in Preparing a Worksheet Illustration 4-2 STEP 1: PREPARE A TRIAL BALANCE ON THE WORKSHEET Cash Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Unearned Revenue Owner's Capital Owner's Drawings Service Revenue Trial Balance Cr. Dr. 15,200 2,500 600 5,000 5,000 2,500 1,200 10,000 500 10,000 Salaries and Wages Exp. Rent Exp. Totals 4,000 900 28,700 Account Titles Adjustments Dr. Cr. Adjusted Trial Balance Cr. Dr. Income Statement Cr. Dr. Balance Sheet Dr. Cr. 28,700 Trial balance amounts come directly from ledger accounts. Include all accounts with balances. 4-5 LO 1 Steps in Preparing a Worksheet Illustration 3-23 General journal showing adjusting entries Adjusting Journal Entries (Chapter 3) 4-6 LO 1 Steps in Preparing a Worksheet Illustration 4-3 STEP 2: ENTER THE ADJUSTMENTS IN THE ADJUSTMENTS COLUMNS Account Titles Cash Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Unearned Revenue Owner's Capital Owner's Drawings Service Revenue Salaries and Wages Exp. Rent Exp. Totals Supplies Expense Insurance Expense Accumulated Depreciation Depreciation Expense Accounts Receivable Interest Expense Interest Payable Salaries and Wages Payable Totals Trial Balance Adjustments Dr. Cr. Dr. Cr. 15,200 (a) 1,500 2,500 (b) 600 50 5,000 5,000 2,500 1,200 (d) 400 10,000 500 (d) 400 10,000 (e) 200 (g)1,200 4,000 900 28,700 28,700 (a)1,500 (b) 50 (c) 40 (c) 40 (e) 200 (f) 50 (f) 50 (g) 1,200 3,440 3,440 Add additional accounts as needed. 4-7 Adjusted Trial Balance Dr. Cr. Income Statement Dr. Cr. Balance Sheet Dr. Cr. Adjustments Key: (a) Supplies Used. (b) Insurance Expired. (c) Depreciation Expensed. (d) Service Revenue Recognized. (e) Service Revenue Accrued. (f) Interest Accrued. (g) Salaries Accrued. Enter adjustment amounts, total adjustments columns, and check for equality. LO 1 Steps in Preparing a Worksheet Illustration 4-4 STEP 3: COMPLETE THE ADJUSTED TRIAL BALANCE COLUMNS Account Titles Cash Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Unearned Revenue Owner's Capital Owner's Drawings Service Revenue Salaries and Wages Exp. Rent Exp. Totals Supplies Expense Insurance Expense Accumulated Depreciation Depreciation Expense Accounts Receivable Interest Expense Interest Payable Salaries and Wages Payable Totals Net Income Totals Total 4-8 Trial Balance Adjustments Dr. Cr. Dr. Cr. 15,200 (a) 1,500 2,500 (b) 600 50 5,000 5,000 2,500 1,200 (d) 400 10,000 500 (d) 400 10,000 (e) 200 (g)1,200 4,000 900 28,700 28,700 (a)1,500 (b) 50 (c) 40 (c) 40 (e) 200 (f) 50 (f) 50 (g) 1,200 3,440 3,440 the adjusted trial balance columns and check for equality. Adjusted Trial Balance Dr. Cr. 15,200 1,000 550 5,000 5,000 2,500 800 10,000 500 10,600 Income Statement Dr. Cr. Balance Sheet Dr. Cr. 5,200 900 1,500 50 40 40 200 50 30,190 50 1,200 30,190 LO 1 Steps in Preparing a Worksheet Illustration 4-5 STEP 4: EXTEND AMOUNTS TO FINANCIAL STATEMENT COLUMNS Account Titles Cash Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Unearned Revenue Owner's Capital Owner's Drawings Service Revenue Trial Balance Adjustments Dr. Cr. Dr. Cr. 15,200 (a) 1,500 2,500 (b) 600 50 5,000 5,000 2,500 1,200 (d) 400 10,000 500 (d) 400 10,000 (e) 200 (g)1,200 4,000 900 28,700 28,700 (a)1,500 (b) 50 (c) 40 (c) 40 (e) 200 (f) 50 (f) 50 (g) 1,200 3,440 3,440 Salaries and Wages Exp. Rent Exp. Totals Supplies Expense Insurance Expense Accumulated Depreciation Depreciation Expense Accounts Receivable Interest Expense Interest Payable Salaries and Wages Payable Totals Net Income Totals Extend 4-9 Adjusted Trial Balance Dr. Cr. 15,200 1,000 550 5,000 5,000 2,500 800 10,000 500 10,600 Income Statement Dr. Cr. Balance Sheet Dr. Cr. 15,200 1,000 550 5,000 5,000 2,500 800 10,000 500 10,600 5,200 900 5,200 900 1,500 50 1,500 50 40 40 200 50 30,190 adjusted trial balance amounts to appropriate financial statement columns. 40 40 200 50 50 1,200 30,190 7,740 10,600 22,450 50 1,200 19,590 LO 1 Steps in Preparing a Worksheet Illustration 4-6 STEP 5: TOTAL COLUMNS, COMPUTE NET INCOME (LOSS) Account Titles Cash Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Unearned Revenue Owner's Capital Owner's Drawings Service Revenue Salaries and Wages Exp. Rent Exp. Totals Supplies Expense Insurance Expense Accumulated Depreciation Depreciation Expense Accounts Receivable Interest Expense Interest Payable Salaries and Wages Payable Totals Net Income Totals 4-10 Trial Balance Adjustments Dr. Cr. Dr. Cr. 15,200 (a) 1,500 2,500 (b) 600 50 5,000 5,000 2,500 1,200 (d) 400 10,000 500 (d) 400 10,000 (e) 200 (g)1,200 4,000 900 28,700 28,700 (a)1,500 (b) 50 (c) 40 (c) 40 (e) 200 (f) 50 (f) 50 (g) 1,200 3,440 3,440 Adjusted Trial Balance Dr. Cr. 15,200 1,000 550 5,000 5,000 2,500 800 10,000 500 10,600 Income Statement Dr. Cr. Balance Sheet Dr. Cr. 15,200 1,000 550 5,000 5,000 2,500 800 10,000 500 10,600 5,200 900 5,200 900 1,500 50 1,500 50 40 40 200 50 30,190 Compute Net Income or Net Loss. 40 40 200 50 50 1,200 30,190 7,740 2,860 10,600 10,600 22,450 10,600 22,450 50 1,200 19,590 2,860 22,450 LO 1 Steps in Preparing a Worksheet Question Net income is shown on a worksheet in the: a. income statement debit column only. b. balance sheet debit column only. c. income statement credit column and balance sheet debit column. d. income statement debit column and balance sheet credit column. 4-11 LO 1 Preparing Financial Statements from a Worksheet Balance sheet and owner's equity statement are prepared from the balance sheet columns. 4-12 Income statement is prepared from the income statement columns. Companies can prepare financial statements before they journalize and post adjusting entries. LO 1 Preparing Statements from a Worksheet Illustration 4-7 Financial statements from a worksheet 4-13 LO 1 Preparing Statements from a Worksheet Illustration 4-7 Financial statements from a worksheet 4-14 LO 1 Illustration 4-7 4-15 LO 1 Preparing Adjusting Entries from a Worksheet 4-16 Adjusting entries are prepared from the adjustments columns of the worksheet. Journalizing and posting of adjusting entries follows the preparation of financial statements when a worksheet is used. LO 1 DO IT! 1 Worksheet Susan Elbe is preparing a worksheet. Explain to Susan how she should extend the following adjusted trial balance accounts to the financial statement columns of the worksheet. Cash Accumulated Depreciation Balance Sheet (credit column) Accounts Payable Balance Sheet (credit column) Owner's Drawings Balance sheet (debit column) Service Revenue Income statement (credit column) Salaries and Wages Expense 4-17 Balance sheet (debit column) Income statement (debit column) LO 1 LEARNING OBJECTIVE 2 Prepare closing entries and a post-closing trial balance. At the end of the accounting period, the company makes the accounts ready for the next period. Illustration 4-8 Temporary versus permanent accounts 4-18 LO 2 Preparing Closing Entries Closing entries formally recognize in the ledger the transfer of net income (or net loss) and owner's drawings to owner's capital. Companies generally journalize and post closing entries only at the end of the annual accounting period. Closing entries produce a zero balance in each temporary account. 4-19 LO 2 Preparing Closing Entries Illustration 4-9 Diagram of closing processproprietorship Owner's Capital is a permanent account. All other accounts are temporary accounts. 4-20 LO 2 Preparing Closing Entries CLOSING ENTRIES ILLUSTRATED 4-21 Illustration 4-10 Closing entries journalized Posting Closing Entries Illustration 4-11 4-22 LO 2 4-23 LO 2 Preparing a Post-Closing Trial Balance Purpose is to prove the equality of the permanent account balances carried forward into the next accounting period. Illustration 4-12 Post-closing trial balance 4-24 LO 2 DO IT! 2 Closing Entries The worksheet for Hancock Company shows the following in the financial statement columns: Owner's Drawings $15,000 Owner's Capital $42,000 Net income $18,000 Prepare the closing entries at December 31 that affect owner's capital. Income Summary 18,000 Owner's Capital Owner's Capital Owner's Drawings 4-25 18,000 15,000 15,000 LO 2 LEARNING OBJECTIVE 3 Explain the steps in the accounting cycle and how to prepare correcting entries. 1. Analyze business transactions Illustration 4-15 9. Prepare a post-closing trial balance 8. Journalize and post closing entries 3. Post to ledger accounts 7. Prepare financial statements 4. Prepare a trial balance 6. Prepare an adjusted trial balance 4-26 2. Journalize the transactions 5. Journalize and post adjusting entries LO 3 Correcting EntriesAn Avoidable Step Unnecessary if accounting records are free of errors. Made whenever an error is discovered. Must be posted before closing entries. Instead of preparing a correcting entry, it is possible to reverse the incorrect entry and then prepare the correct entry. 4-27 LO 3 Correcting EntriesAn Avoidable Step CASE 1: On May 10, Mercato Co. journalized and posted a $50 cash collection on account from a customer as a debit to Cash $50 and a credit to Service Revenue $50. The company discovered the error on May 20, when the customer paid the remaining balance in full. Incorrect entry Cash Correct entry Cash Correcting entry 4-28 50 Service Revenue 50 50 Accounts Receivable Service Revenue Accounts Receivable 50 50 50 LO 3 Correcting EntriesAn Avoidable Step CASE 2: On May 18, Mercato purchased on account equipment costing $450. The transaction was journalized and posted as a debit to Equipment $45 and a credit to Accounts Payable $45. The error was discovered on June 3. Incorrect entry Equipment Correct entry Equipment Correcting entry Equipment 4-29 45 Accounts Payable 45 450 Accounts Payable Accounts Payable 450 405 405 LO 3 4-30 LO 3 DO IT! 3 Correcting Entries Sanchez Company discovered the following errors made in January 2017 . 1. A payment of Salaries and Wages Expense of $600 was debited to Supplies and credited to Cash, both for $600. 2. A collection of $3,000 from a client on account was debited to Cash $200 and credited to Service Revenue $200. 3. The purchase of supplies on account for $860 was debited to Supplies $680 and credited to Accounts Payable $680. Correct the errors without reversing the incorrect entry. 4-31 LO 3 DO IT! 3 Correcting Entries Sanchez Company discovered the following errors made in January 2017 . 1. A payment of Salaries and Wages Expense of $600 was debited to Supplies and credited to Cash, both for $600. Correct the error without reversing the incorrect entry. Salaries and Wages Expense Supplies 4-32 600 600 LO 3 DO IT! 3 Correcting Entries Sanchez Company discovered the following errors made in January 2017 . 2. A collection of $3,000 from a client on account was debited to Cash $200 and credited to Service Revenue $200. Correct the error without reversing the incorrect entry. Service Revenue Cash Accounts Receivable 4-33 200 2,800 3,000 LO 3 DO IT! 3 Correcting Entries Sanchez Company discovered the following errors made in January 2017 . 3. The purchase of supplies on account for $860 was debited to Supplies $680 and credited to Accounts Payable $680. Correct the error without reversing the incorrect entry. Supplies ($860 - $680) Accounts Payable 4-34 180 180 LO 3 LEARNING OBJECTIVE 4 Identify the sections of a classified balance sheet. Presents a snapshot at a point in time. To improve understanding, companies group similar assets and similar liabilities together. Standard Classifications Illustration 4-20 Assets Liabilities and Owner's Equity Current assets Long-term investments Property, plant, and equipment Intangible assets Current liabilities Long-term liabilities Owner's (Stockholders') equity 4-35 LO 4 The Classified Balance Sheet Illustration 4-21 4-36 LO 4 The Classified Balance Sheet Illustration 4-21 4-37 LO 4 Current Assets Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer. Operating cycle is the average time that it takes to purchase inventory, sell it on account, and then collect cash from customers. 4-38 LO 4 Current Assets Illustration 4-22 Usually listed in the order they expect to convert them into cash. 4-39 LO 4 Current Assets Question The correct order of presentation in a classified balance sheet for the following current assets is: a. accounts receivable, cash, prepaid insurance, inventory. b. cash, inventory, accounts receivable, prepaid insurance. c. cash, accounts receivable, inventory, prepaid insurance. d. inventory, cash, accounts receivable, prepaid insurance. 4-40 LO 4 Long-Term Investments Investments in stocks and bonds of other companies. Investments in long-term assets such as land or buildings that is not currently being used in operating activities. Long-term notes receivable. Illustration 4-23 4-41 LO 4 Property, Plant, and Equipment Currently used in operations. Depreciation - allocating the cost of assets to a number of years. 4-42 Long useful lives. Accumulated depreciation - total amount of depreciation expensed thus far in the asset's life. LO 4 Property, Plant, and Equipment Illustration 4-24 4-43 LO 4 Intangible Assets Long-lived assets that do not have physical substance. Illustration 4-25 4-44 LO 4 The Classified Balance Sheet Question Patents and copyrights are a. Current assets. b. Intangible assets. c. Long-term investments. d. Property, plant, and equipment. 4-45 LO 4 4-46 LO 4 Current Liabilities Obligations the company is to pay within the coming year or its operating cycle, whichever is longer. Usually list notes payable first, followed by accounts payable. Other items follow in order of magnitude. Common examples are accounts payable, salaries and wages payable, notes payable, interest payable, income taxes payable current maturities of long-term obligations. Liquidity - ability to pay obligations expected to be due within the next year. 4-47 LO 4 Current Liabilities Illustration 4-26 4-48 LO 4 4-49 LO 4 Long-Term Liabilities Obligations a company expects to pay after one year. Illustration 4-27 4-50 LO 4 The Classified Balance Sheet Question Which of the following is not a long-term liability? a. Bonds payable b. Current maturities of long-term obligations c. Long-term notes payable d. Mortgages payable 4-51 LO 4 Owner's Equity Proprietorship - one capital account. Partnership - capital account for each partner. Corporation - Common Stock and Retained Earnings. Illustration 4-28 4-52 LO 4 DO IT! 4 Balance Sheet Classifications The following accounts were taken from the financial statements of Callahan Company. Match each of the following accounts to its proper balance sheet classification, shown below. If the item would not appear on a balance sheet, use \"NA.\" Current assets (CA) Long-term investments (LTI) Property, plant, and equipment (PPE) Intangible assets (IA) 4-53 Current liabilities (CL) Long-term liabilities (LTL) Owner's equity (OE) LO 4 LEARNING OBJECTIVE 5 APPENDIX 4A: Prepare reversing entries. Reversing Entries Companies make a reversing entry at the beginning of the next accounting period. Each reversing entry is the exact opposite of the adjusting entry made in the previous period. 4-54 It is often helpful to reverse some of the adjusting entries before recording the regular transactions of the next period. The use of reversing entries does not change the amounts reported in the financial statements. LO 5 Reversing Entries Example Illustration: To illustrate the optional use of reversing entries for accrued expenses, we will use the salaries expense transactions for Pioneer Advertising. 1. October 26 (initial salary entry): Pioneer pays $4,000 of salaries and wages earned between October 15 and October 26. 2. October 31 (adjusting entry): Salaries and wages earned between October 29 and October 31 are $1,200. The company will pay these in the November 9 payroll. 3. November 9 (subsequent salary entry): Salaries and wages paid are $4,000. Of this amount, $1,200 applied to accrued salaries and wages payable and $2,800 was earned between November 1 and November 9. 4-55 LO 5 Reversing Entries Example Illustration 4A-1 With Reversing Entries (per appendix) Oct. 26 Initial Salary Entry Same entry Adjusting Entry Oct. 31 Same entry Oct. 31 Closing Entry Same entry Reversing Entry Nov. 1 Salaries and Wages Payable 1,200 Salaries and Wages Expense 1,200 Subsequent Salary Entry Nov. 9 4-56 Salaries and Wages Expense Cash 4,000 4,000 LO 5 Reversing Entries Example Illustration 4A-2 Postings with reversing entries 4-57 LO 5 A Look at IFRS LEARNING OBJECTIVE 6 Compare the procedures for the closing process under GAAP and IFRS. Key Points Similarities IFRS generally requires a classified statement of financial position similar to the classified balance sheet under GAAP. 4-58 The procedures of the closing process are applicable to all companies, whether they are using IFRS or GAAP. IFRS follows the same guidelines as this textbook for distinguishing between current and noncurrent assets and liabilities. LO 6 A Look at IFRS Key Points Differences IFRS recommends but does not require the use of the title \"statement of financial position\" rather than balance sheet. The format of statement of financial position information is often presented differently under IFRS. Although no specific format is required, many companies that follow IFRS present statement of financial position information in this order: Non-current assets Current assets Equity 4-59 Non-current liabilities Current liabilities LO 6 A Look at IFRS Key Points Differences 4-60 Under IFRS, current assets are usually listed in the reverse order of liquidity. For example, under GAAP cash is listed first, but under IFRS it is listed last. Both GAAP and IFRS are increasing the use of fair value to report assets. However, at this point IFRS has adopted it more broadly. As examples, under IFRS, companies can apply fair value to property, plant, and equipment, and in some cases intangible assets. LO 6 A Look at IFRS Looking to the Future The IASB and the FASB are working on a project to converge their standards related to financial statement presentation. A key feature of the proposed framework is that each of the statements will be organized in the same format, to separate an entity's financing activities from its operating and investing activities and, further, to separate financing activities into transactions with owners and creditors. Thus, the same classifications used in the statement of financial position would also be used in the income statement and the statement of cash flows. The project has three phases. You can follow the joint financial presentation project at the following link: http://www.fasb.org/project/ financial_statement_presentation.shtml . 4-61 LO 6 A Look at IFRS IFRS Self-Test Questions Companies that use IFRS: a) may report all their assets on the statement of financial position at fair value. b) may offset assets against liabilities and show net assets and net liabilities on their statements of financial position, rather than the underlying detailed line items. c) may report non-current assets before current assets on the statement of financial position. d) do not have any guidelines as to what should be reported on the statement of financial position. 4-62 LO 6 A Look at IFRS IFRS Self-Test Questions A company has purchased a tract of land and expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. Under IFRS, the land should be reported as: a) b) property, plant, and equipment. c) an intangible asset. d) 4-63 land expense. a long-term investment. LO 6 A Look at IFRS IFRS Self-Test Questions Current assets under IFRS are listed generally: a) b) in the reverse order of their expected conversion to cash. c) by longevity. d) 4-64 by importance. alphabetically. LO 6 Copyright \"Copyright 2015 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.\" 4-65 Unit 6: Unit 6: Completing the Accounting Cycle Discussion Throughout this course, many discussion opportunities come up where you need to respond to other people's opinions and comments. Respond to your Discussion topic after you have completed your reading. Usage of Financial Statements in Business Decisions Assume that you recently accepted a position with Stockman National Bank as an assistant loan officer. As one of your first duties, you have the responsibility of evaluating a loan request for $90,000 from Goldworks.com, a small proprietorship. In support of the loan application, Yolanda Tovar, owner, submitted a trial balance for the first year of operations ended March 31, 2010. Use the trial balance to answer the questions. Explain to Yolanda Tovar why a set of financial statements (income statement, statement of owner's equity, and balance sheet) would be useful to you in evaluating the loan request. In discussing the Trial Balance with Yolanda Tovar, you discovered that the accounts had not been adjusted at March 31. Analyze the Trial Balance and indicate possible adjusting entries that might be necessary before an accurate set of financial statements could be prepared. Assuming that an accurate set of financial statements will be submitted by Yolanda Tovar in a few days, what other considerations or information would be required before making a decision on a loan request? See if these websites give you some guidance (http://contentbus.kaplan.edu/AC114_1405C/topics/ac11406d01 reference.html). You noted that Goldworks.com's trial balance is prepared through March 31, 2010. Why would the business close out its year on this date? What factors could influence this selection? Responses