Overview

Students will analyze and record transactions, perform closing entries, and construct financial statements $($income statement and balance sheet$).$

Case Study

Congratulations on your new accounting position at the Stanley Consulting Corporation.$$ It appears that your predecessor may have forgotten to close the books in the previous month.$$ No worries, you will be able to pick up where she left off and close the books on December $31$st$.$ Good Luck!

On November $30,2023,$ the general ledger accounts of the Stanley Consulting Corporation had the following balances:$$

Cash$$162,000$Accounts Receivable$$191,000$Office Supplies Inventory$$42,500$Prepaid Insurance$$56,000$Office Equipment$$450,000$Wages Payable$$80,000$Accounts Payable$$31,000$Common Stock$$100,000$Retained Earnings$$413,300$Service Revenue$$787,500$Rent Revenue$$47,000$Interest Revenue$$2,400$Rent Expense$$110,000$Delivery Expense$$2,900$Advertising Expense$$14,500$Office Supplies Expense$$62,000$Office Utilities Expense$$20,800$Wages Expense$$349,500$

Closing the Books Tasks

A$)$ Record the November $30$th account balances in $"$T$"$ accounts. Key the November $30$th balances with a check mark $().$

B$)$ The transactions for the month of December are listed below. Record these transactions directly in the $"$T$"$ accounts.$$ Label each transaction, as you record it$,$ by listing the number identifying the transaction at the left of each debit and the right of each credit. $$

Cash was collected on accounts receivable, $$104,000$

Office supplies were purchased on account, $$13,000$

An account payable was settled by giving a note payable, $$22,500$

Wages previously accrued were paid in the amount of $$69,000$

The rent was paid for the months of December $2023$ and January $2024,$ totaling $$20,000$

Delivery expenses paid in cash, $$1,450$

The month's advertising bill was received $($but not paid$),$ $$2,350$

Rent revenue for December was received from a sub$-$tenant, $$3,100$

A dividend was declared and paid on December $30$ in the amount of $$30,000$

A past due account was collected, $$950,$ plus interest of $$25$

Insurance remaining unexpired at the end of December, $$17,000$

A summary of transactions for the month: service sales on account, $$74,000$; cash sales, $$52,000$; cash received on accounts receivable, $$126,000$

Wages accrued since last payday, $$41,000$

Gas and electricity bills for the office for December were received but not paid, $$3,720$

Supplies inventory as of December $31$ was $$14,500$

Office Equipment was purchased on January $1,2023.$ It was expected to last $9$ years and have no residual value. Depreciation is recorded for the year $2023.$

Taxes for the current year totaling $$31,000$ will be paid on March $15$th$,2024.$

C$)$ Close all temporary accounts. Key closing entries with letters C$1,$ C$2,$ C$3,$ etc.

D$)$ Prepare a balance sheet as of December $31,2023$ and an income statement for the year $2023.$