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Chapter 4: Q14RQ (page 216)
What are permanent accounts? Are permanent accounts closed in the closing process?
Permanent accounts are the accounts which are not closed at the end of the year. No, it is not closed.
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Winters Landscape Services accrued \(4,000 of Salaries Expense at December 31. Winters paid the next payroll at January 10 of
\)6,000. This payment included the accrued amount at December 31, plus $2,000 for the first few days of January.
23A. Record the adjusting entry to accrue Salaries Expense
Kathy Wintz formed a lawn service business as a summer job. To start the corporationon May 1, 2018, she deposited \(1,000 in a new bank account in the name of the business. The \)1,000 consisted of a \(600 loan from Bank One to her company, Wintz Lawn Service, and \)400 of her own money. The company issued \(400 of common stock to Wintz. Wintz rented lawn equipment, purchased supplies, and hired other students to mow and trim customers’ lawns.
At the end of each month, Wintz mailed bills to the customers. On August 31, she was ready to dissolve the corporation and return to college. Because she was so busy, she kept few records other than the checkbook and a list of receivables from customers.
At August 31, the business’s checkbook shows a balance of \)2,000, and customers still owe \(750. During the summer, the business collected \)5,500 from customers. The business checkbook lists payments for supplies totaling \(400, and it still has gasoline, weed trimmer cord, and other supplies that cost a total of \)50.
The business paid employees \(1,800 and still owes them \)300 for the final week of the summer. Wintz rented some equipment from Ludwig’s Machine Shop. On May 1, the business signed a six-month rental agreement on mowers and paid \(600 for the full rental period in advance. Ludwig’s will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Wintz has kept the mowers in excellent condition. In fact, the business had to pay \)300 to repair a mower.To transport employees and equipment to jobs, Wintz used a trailer that the business bought for \(300. The business estimates that the summer’s work used up one-third of the trailer’s service potential. The business checkbook lists a payment of \)500 for cash dividends paid during the summer. The business paid the loan back during August. (For simplicity, ignore any interest expense associated with the loan.)
Requirements
1. As a team, prepare the income statement and the statement of retained earnings of Wintz Lawn Service for the four months May 1 through August 31, 2018.
2. Prepare the classified balance sheet (report form) of Wintz Lawn Service at August 31, 2018.
3. Was Wintz’s summer work successful? Give your team’s reason for your answer.
Refer to the Practice Set data provided in Chapters 2 and 3 for Crystal Clear Cleaning.
Requirements
1. Prepare a worksheet (optional) at November 30, 2018. Use the unadjusted trial balance from Chapter 2 and the adjusting entries from Chapter 3.
2. Prepare an income statement and statement of retained earnings for the month ended November 30, 2018. Also prepare a classified balance sheet at November 30, 2018, using the report format. Assume the Notes Payable is long-term. Use the worksheet prepared in Requirement 1 or the adjusted trial balance from Chapter 3.
3. Prepare closing entries at November 30, 2018, and post to the accounts. Open T-accounts for Income Summary and Retained earnings. Determine the ending balance in each account. Denote each closing amount as Clos. and each account balance as Balance.
4. Prepare a post-closing trial balance at November 30, 2018.
For each account listed, identify whether the account would appear in either the income statement section or the balance sheet section of the worksheet. Assuming normal balances, identify if the account would be recorded in the debit (DR) or credit (CR) column.
13. Accumulated Depreciation—Building
The adjusted trial balance for Green Advertising Services is presented below: Account Title Office Supplies Cash Debit Credit Accounts Receivable Building Accumulated Depreciation—Building Furniture Accumulated Depreciation—Furniture Land Salaries Payable Accounts Payable Unearned Revenue Common Stock Retained Earnings Dividends Service Revenue Salaries Expense Supplies Expense Depreciation Expense—Building Balance \( 14,000 \) 195,200 \( 195,200 18,400 14,100 \) 36,100 19,600 7,200 10,600 30,000 31,400 16,000 18,300 49,800 8,400 28,600 2,900 1,300 13,500 15,800 6,500 47,900 Depreciation Expense—Furniture Advertising Expense Total GREEN ADVERTISING SERVICES Adjusted Trial Balance December 31, 2018 Requirements 1. Prepare the income statement for the year ending December 31, 2018. 2. Prepare the statement of retained earnings for the year ending December 31, 2018. 3. Prepare the classified balance sheet as of December 31, 2018. Use the report form
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