PR 4-1A Financial statements and closing entries

Watchdog Company maintains and repairs warning lights, such as those found on radio towers and lighthouses. Watchdog Company prepared the end-of-period spreadsheet shown below at July 31, 2014, the end of the current fiscal year:


























Instructions

1. Prepare an income statement for the year ended July 31.

2. Prepare a statement of owner’s equity for the year ended July 31. No additional investments were made during the year.

3. Prepare a balance sheet as of July 31.

4. Based upon the end-of-period spreadsheet, journalize the closing entries.

5. Prepare a post-closing trial balance.


Answer:



1. WATCHDOG COMPANY
Income Statement
For the Year Ended July 31, 2014
Fees earned $368,100
Rent revenue 1,000
Total revenues $369,100
Expenses:
Salaries and wages expense $164,900
Advertising expense 21,700
Utilities expense 11,400
Repairs expense 8,850
Depreciation expense—equipment 4,200
Insurance expense 2,500
Supplies expense 1,830
Depreciation expense—building 1,600
Miscellaneous expense 4,320
Total expenses 221,300
Net income $147,800
2. WATCHDOG COMPANY
Statement of Owner’s Equity
For the Year Ended July 31, 2014
Ted Hickman, capital, August 1, 2013 $203,100
Net income for the year $147,800
Less withdrawals 10,000
Increase in owner’s equity 137,800
Ted Hickman, capital, July 31, 2014 $340,900
3. WATCHDOG COMPANY
Balance Sheet
July 31, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $ 10,800 Accounts payable $15,700
Accounts receivable 43,300 Salaries and wages payable 1,800
Prepaid insurance 1,700 Unearned rent 1,100
Supplies 900 Total liabilities $ 18,600
Total current assets $ 56,700
Property, plant, and equipment:
Land $ 98,000
Building $400,000 Owner’s Equity
Less accumulated depreciation 206,900 193,100 Ted Hickman, capital 340,900
Equipment $101,000
Less accumulated depreciation 89,300 11,700
Total property, plant, and
equipment 302,800 Total liabilities and owner’s
Total assets $359,500 equity $359,500
4.
 2014 Closing Entries
July 31 Fees Earned 368,100
Rent Revenue 1,000
Income Summary 369,100
31 Income Summary 221,300
Salaries and Wages Expense 164,900
Advertising Expense 21,700
Utilities Expense 11,400
Repairs Expense 8,850
Depreciation Expense—Equipment 4,200
Insurance Expense 2,500
Supplies Expense 1,830
Depreciation Expense—Building 1,600
Miscellaneous Expense 4,320
31 Income Summary 147,800
Ted Hickman, Capital 147,800
31 Ted Hickman, Capital 10,000
Ted Hickman, Drawing 10,000
5.
 WATCHDOG COMPANY
Post-Closing Trial Balance
July 31, 2014
Debit
Balances
Credit
Balances
Cash 10,800
Accounts Receivable 43,300
Prepaid Insurance 1,700
Supplies 900
Land 98,000
Building 400,000
Accumulated Depreciation—Building 206,900
Equipment 101,000
Accumulated Depreciation—Equipment 89,300
Accounts Payable 15,700
Salaries and Wages Payable 1,800
Unearned Rent 1,100
Ted Hickman, Capital 340,900
655,700 655,700

Cash
Accounts Receivable
Prepaid Insurance
Supplies
Land
Building
Accum. Depr.—Building
Equipment
Accum. Depr.—Equipment
Accounts Payable
Salaries & Wages Payable
Unearned Rent
Ted Hickman, Capital
Ted Hickman, Drawing
Fees Earned
Rent Revenue
Salaries & Wages Expense
Advertising Expense
Utilities Expense
Repairs Expense
Depr. Exp.—Equipment
Insurance Expense
Supplies Expense
Depr. Exp.—Building
Misc. Expense
Watchdog Company
End-of-Period Spreadsheet
For the Year Ended July 31, 2014
Unadjusted
Trial Balance Adjustments Trial Balance
Account Title Dr. Cr. Dr. Cr. Dr. Cr.
Adjusted
10,800
38,900
4,200
2,730
98,000
400,000
101,000
10,000
163,100
21,700
1
1,400
8,850
4,320
205,300
85,100
15,700
2,100
203,100
363,700
(a) 4,400
(g) 1,000
(f) 1,800
(e) 4,200
(b) 2,500
(c) 1,830
(d) 1,600
 17,330
(b) 2,500
(c) 1,830
(d) 1,600
(e) 4,200
(f) 1,800
(a) 4,400
(g) 1,000
 17,330
10,800
43,300
1,700
900
98,000
400,000
101,000
10,000
164,900
21,700
11,400
8,850
4,200
2,500
1,830
1,600
4,320
887,000
206,900
89,300
15,700
1,800
1,100
203,100
368,100
1,000
887,000