Resource:Ch. 4 ofFinancial Accounting

CompleteExercise BE4-1.

CompleteProblems P4-2A & P4-3A.

Brief Exercises BE41 Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example. Identify impact of transactions on cash and net income. (LO 2, 9), C Cash Net Income (a) Purchased $100 of supplies for cash. $ 0 Recorded an adjusting entry to record use of $20 of the above (b) supplies. (c) Made sales of $1,300, all on account. (d) Received $800 from customers in payment of their accounts. (e) Purchased equipment for cash, $2,500. Recorded depreciation of building for period used, $600. P42A Ken Lumas started his own consulting firm, Lumas Consulting, on June 1, 2014. The trial balance at June 30 is as follows. LUMAS CONSULTING Trial Balance June 30, 2014 Debit Credit Cash $ 6,850 Accounts Receivable 7,000 Supplies 2,000 Prepaid Insurance 2,880 Equipment 15,000 Accounts Payable $ 4,230 Unearned Service Revenue 5,200 Common Stock 22,000 Service Revenue 8,300 Salaries and Wages Expense 4,000 Rent Expense 2,000 $39,730 $39,730 In addition to those accounts listed on the trial balance, the chart of accounts for Lumas also contains the following accounts: Accumulated DepreciationEquipment, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense. Other data: 1.Supplies on hand at June 30 total $720. 2.A utility bill for $180 has not been recorded and will not be paid until next month. 3.The insurance policy is for a year. 4.Services were performed for $4,100 of unearned service revenue by the end of the month. 5.Salaries of $1,250 are accrued at June 30. 6.The equipment has a 5year life with no salvage value and is being depreciated at $250 per month for 60 months. 7.Invoices representing $3,900 of services performed during the month have not been recorded as of June 30. Instructions (a)Prepare the adjusting entries for the month of June. (b)Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. (Use Taccounts.) (b) Service rev. (c)Prepare an adjusted trial balance at June 30, 2014. (c) Tot. trial balance $16,300 $45,310 P43A The Solo Hotel opened for business on May 1, 2014. Here is its trial balance before adjustment on May 31. Prepare adjusting entries, adjusted trial balance, and financial statements. (LO 4, 5, 6, 7), AP Cash Supplies Prepaid Insurance Land Buildings Equipment Accounts Payable Unearned Rent Revenue Mortgage Payable SOLO HOTEL Trial Balance May 31, 2014 Debit $ 2,500 2,600 1,800 15,000 70,000 16,800 Credit $ 4,700 3,300 36,000 Common Stock Rent Revenue Salaries and Wages Expense Utilities Expense Advertising Expense 3,000 800 500 $113,000 60,000 9,000 $113,000 Other data: 1.Insurance expires at the rate of $450 per month. 2.A count of supplies shows $1,050 of unused supplies on May 31. 3.Annual depreciation is $3,600 on the building and $3,000 on equipment. 4.The mortgage interest rate is 6%. (The mortgage was taken out on May 1.) 5.Unearned rent of $2,500 has been earned. 6.Salaries of $900 are accrued and unpaid at May 31. Instructions (a)Journalize the adjusting entries on May 31. (b)Prepare a ledger using Taccounts. Enter the trial balance amounts and post the adjusting entries. (c)Prepare an adjusted trial balance on May 31. (c) Rent revenue $11,500 Tot. adj. trial balance $114,630 (d)Prepare an income statement and a retained earnings statement for the month of May and a classified balance sheet at May 31. (d) Net income (e)Identify which accounts should be closed on May 31. $3,570