La Mesa Laundry
Unadjusted Trial Balance
August 31, 2014
Debit
Balances
Credit
Balances
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,800
Laundry Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Laundry Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,800
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,200
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,800
Bobbi Downey, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000
Bobbi Downey, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
Laundry Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248,000
Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,800
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,200
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
400,000 400,000
The data needed to determine year-end adjustments are as follows:
a. Wages accrued but not paid at August 31 are $2,200.
b. Depreciation of equipment during the year is $8,150.
c. Laundry supplies on hand at August 31 are $2,000.
d. Insurance premiums expired during the year are $5,300.
Instructions
1. For each account listed in the unadjusted trial balance, enter the balance in a T account. Identify the balance as “Aug. 31 Bal.” In addition, add T accounts for Wages Payable, Depreciation Expense, Laundry Supplies Expense, Insurance Expense, and Income Summary.
2. (Optional.) Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet) and complete the spreadsheet. Add the accounts listed in part (1) as needed.
3. Journalize and post the adjusting entries. Identify the adjustments by “Adj.” and the new balances as “Adj. Bal.”
4. Prepare an adjusted trial balance.
5. Prepare an income statement, a statement of owner’s equity (no additional investments were made during the year), and a balance sheet.
6. Journalize and post the closing entries. Identify the closing entries by “Clos.”
7. Prepare a post-closing trial balance.
Answer:
1., 3., and 6.
Cash
Aug. 31 Bal. 3,800
Laundry Supplies
Aug. 31 Bal. 9,000 Aug. 31 Adj.
31 Adj. Bal. 2,000
Prepaid Insurance
Aug. 31 Bal. 6,000 Aug. 31 Adj.
31 Adj. Bal. 700
Laundry Equipment
Aug. 31 Bal. 180,800
7,000
5,300
Accumulated Depreciation
Aug. 31 Bal. 49,200
31 Adj. 8,150
31 Adj. Bal. 57,350
Accounts Payable
Aug. 31 Bal. 7,800
Wages Payable
Aug. 31 Adj. 2,200
Bobbi Downey, Capital
Aug. 31 Clos. 2,400 Aug. 31 Bal. 95,000
31 Clos. 27,350
31 Bal. 119,950
Bobbi Downey, Drawing
Aug. 31 Bal. 2,400 Aug. 31 Clos. 2,400
Income Summary
Aug. 31 Clos. 220,650 Aug. 31 Clos. 248,000
Clos. 27,350
Laundry Revenue
248,000
Wages Expense
Rent Expense Utilities
Expense Depreciation
Expense
138,000
43,200
16,000
8,150
Laundry Supplies Expense
Aug. 31 Adj. 7,000 Aug. 31 Clos. 7,000
Insurance Expense
Aug. 31 Adj. 5,300 Aug. 31 Clos. 5,300
Miscellaneous Expense
Aug. 31 Bal. 3,000 Aug. 31 Clos. 3,000
2. Optional (Appendix)
LA MESA LAUNDRY
End-of-Period Spreadsheet (Work Sheet)
For the Year Ended August 31, 2014
Account Title
Unadjusted
Trial Balance Adjustments
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 3,800 3,800 3,800
Laundry Supplies 9,000 (c) 7,000 2,000 2,000
Prepaid Insurance 6,000 (d) 5,300 700 700
Laundry Equipment 180,800 180,800 180,800
Accum. Depreciation 49,200 (b) 8,150 57,350 57,350
Accounts Payable 7,800 7,800 7,800
Wages Payable (a) 2,200 2,200 2,200
Bobbi Downey, Capital 95,000 95,000 95,000
Bobbi Downey, Drawing 2,400 2,400 2,400
Laundry Revenue 248,000 248,000 248,000
Wages Expense 135,800 (a) 2,200 138,000 138,000
Rent Expense 43,200 43,200 43,200
Utilities Expense 16,000 16,000 16,000
Depreciation Expense (b) 8,150 8,150 8,150
Laundry Supplies Exp. (c) 7,000 7,000 7,000
Insurance Expense (b) 5,300 5,300 5,300
Miscellaneous Expense 3,000 3,000 3,000
400,000 400,000 22,650 22,650 410,350 410,350 220,650 248,000 189,700 162,350
Net income 27,350 27,350
248,000 248,000 189,700 189,700
Adjusting Entries
2014
Aug. 31 Wages Expense 2,200
Wages Payable 2,200
Accrued wages.
31 Depreciation Expense 8,150
Accumulated Depreciation 8,150
Equipment depreciation.
31 Laundry Supplies Expense 7,000
Laundry Supplies 7,000
Supplies used ($9,000 – $2,000).
31 Insurance Expense 5,300
Prepaid Insurance 5,300
Insurance expired.
LA MESA LAUNDRY
Adjusted Trial Balance
August 31, 2014
Debit
Balances
Credit
Balances
Cash 3,800
Laundry Supplies 2,000
Prepaid Insurance 700
Laundry Equipment 180,800
Accumulated Depreciation 57,350
Accounts Payable 7,800
Wages Payable 2,200
Bobbi Downey, Capital 95,000
Bobbi Downey, Drawing 2,400
Laundry Revenue 248,000
Wages Expense 138,000
Rent Expense 43,200
Utilities Expense 16,000
Depreciation Expense 8,150
Laundry Supplies Expense 7,000
Insurance Expense 5,300
Miscellaneous Expense 3,000
410,350 410,350
LA MESA LAUNDRY
Income Statement
For the Year Ended August 31, 2014
Laundry revenue $248,000
Expenses:
Wages expense $138,000
Rent expense 43,200
Utilities expense 16,000
Depreciation expense 8,150
Laundry supplies expense 7,000
Insurance expense 5,300
Miscellaneous expense 3,000
Total expenses 220,650
Net income $ 27,350
5.
LA MESA LAUNDRY
Statement of Owner’s Equity
For the Year Ended August 31, 2014
Bobbi Downey, capital, September 1, 2013 $ 95,000
Net income for the year $27,350
Less withdrawals 2,400
Increase in owner’s equity 24,950
Bobbi Downey, capital, August 31, 2014 $119,950
LA MESA LAUNDRY
Balance Sheet
August 31, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $ 3,800 Accounts payable $7,800
Laundry supplies 2,000 Wages payable 2,200
Prepaid insurance 700 Total liabilities $ 10,000
Total current assets $ 6,500
Property, plant, and equipment:
Laundry equipment $180,800
Less accum. depreciation 57,350 Owner’s Equity
Total property, plant, and Bobbi Downey, capital 119,950
equipment 123,450 Total liabilities and owner’s
Total assets $129,950 equity $129,950
Closing Entries
2014
Aug. 31 Laundry Revenue 248,000
Income Summary 248,000
31 Income Summary 220,650
Wages Expense 138,000
Rent Expense 43,200
Utilities Expense 16,000
Depreciation Expense 8,150
Laundry Supplies Expense 7,000
Insurance Expense 5,300
Miscellaneous Expense 3,000
31 Income Summary 27,350
Bobbi Downey, Capital 27,350
31 Bobbi Downey, Capital 2,400
Bobbi Downey, Drawing 2,400
LA MESA LAUNDRY
Post-Closing Trial Balance
August 31, 2014
Debit
Balances
Credit
Balances
Cash 3,800
Laundry Supplies 2,000
Prepaid Insurance 700
Laundry Equipment 180,800
Accumulated Depreciation 57,350
Accounts Payable 7,800
Wages Payable 2,200
Bobbi Downey, Capital 119,950
187,300 187,300