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E4-16 Recording Four Adjusting Entries, Completing a Trial Balance, Preparing Financial Statements, and Recording Closing Entries LO4-1, 4-2, 4-4 Cayuga Ltd. prepared the following trial balance at the end of its first year of operations ended December 31. To simplify the case, the amounts given are in thousands of dollars. Other data not yet recorded at December 31 are as follows: Unadjusted Debit Credit $ 40 11 8 120 $ 12 11 Account Titles Cash Accounts receivable Prepaid insurance Machinery (20-year life, no residual value) Accumulated depreciation Accounts payable Wages payable Income taxes payable Contributed capital (6,000 shares) Retained earnings (deficit) Revenues (not detailed) Expenses (not detailed) Totals 102 6 94 34 $ 219 $ 219 $ 219 a. Insurance expired during the year, $6. b. Depreciation expense for the year, $6. C. Wages payable, $10. d. Income tax expense, $11. Required: 1. Prepare the adjusting entries for the year. (Enter your answers in thousands of dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is complete and correct. No Transaction General Journal Debit Credit 1 a. Insurance expense 6 Prepaid insurance 6 2 b. 6 Depreciation expense Accumulated depreciation, machinery 6 3 c. 10 Wages expense Wages payable 10 4 d. 11 Income tax expense Income tax payable 11 2. Show the effects of the adjusting entries on net earnings and cash. (Enter your answers in thousands of dollars. Select "None" if there is no effect.) Answer is complete and correct. Transaction Effect on Cash a. 6 None Effect on Net Earnings Decrease by $ Decrease by $ Decrease by $ b. 6 None C. 10 None d. Decrease by $ 11 None 3. Complete the trial balance adjustments and adjusted columns. (For revenues and expenses enter the total amount of adjustments in the adjustment column. Enter your answers in thousands of dollars.) Answer is complete and correct. CAYUGA LTD. Trial Balance As at December 31 (in thousands of dollars) Unadjusted Adjustments Debit Credit Debit Credit Account Titles Cash $ 40 Adjusted Debit Credit $ 40 11 2 120 11 8 6 120 $ 12 6 $ 11 Accounts receivable Prepaid insurance Machinery Accumulated depreciation Accounts payable Wages payable Income taxes payable Contributed capital Retained earnings (deficit) Revenues (not detailed) Expenses (not detailed) Totals 18 11 10 11 10 11 102 102 6 94 94 34 33 33 67 $ 246 $ 219 $ 219 33 $ 246 4-a. Using the adjusted balances, prepare a statement of earnings. (Enter your answers in thousands of dollars. Round "Earnings per share" to 2 decimal places.) X Answer is not complete. CAYUGA LTD. Statement of Earnings For the Year Ended December 31 (In thousands of dollars, except for Earnings per Share) Revenues $ 94 Expenses (67) X 27 Net earnings Earnings per share Alle 4.50 4-b. Using the adjusted balances, prepare a statement of changes in equity. (Enter your answers in thousands of dollars. Negative answers should be indicated by minus sign.) Answer is complete but not entirely correct. CAYUGA LTD. Statement of Retained Earnings For the Year Ended December 31 (in thousands of dollars) Balance, January 1 Net earnings $ 0 27 Dividends declared 0 Balance, December 31 $ 27 Answer is complete but not entirely correct. CAYUGA LTD. Statement of Financial Position As at December 31 (In thousands of dollars) Assets $ 40 11 Cash Accounts receivable Prepaid insurance Machinery, at cost Accumulated depreciation 2 $ 120 (18) 102 Total assets $ 155 Liabilities $ 11 Accounts payable Wages payable Income taxes payable 10 11 32 Total liabilities Shareholders' Equity Contributed capital Retained earnings $ 102 0 102 Total liabilities and shareholders' equity $ 134 5. This part of the question is not part of your Connect assignment. 6. Using the adjusted balances, prepare the closing entries for the year. (Enter your answers in thousands of dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) X Answer is not complete. No Transaction General Journal Debit Credit 1 a. Revenues 94 Income summary 94 2 b. Income summary 67 Expenses 0 x 3 C. 27 Income summary Retained earnings 27