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Chapter 4: Q5RQ (page 216)
Why are financial statements prepared in a specific order? What is that order?
The balances of financial statement in sequence is transferred to another statement, which makes it mandatory. The sequence is income statement, statement of retained earnings and balance sheet.
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If a business had a net loss for the year, what would be the closing entry to close Income Summary and transfer the net loss to the Retained Earnings account?
For each account listed, identify whether the account would be included on a post-closing trial balance. Signify either Yes (Y) or No (N). a. Office Supplies b. Interest Expense c. Retained Earnings d. Dividends e. Service Revenue f. Accumulated Depreciation—Furniture g. Rent Expense h. Unearned Revenue i. Accounts Payable
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
Houston Veterinary Hospital completed the following worksheet as of December 31, 2018.
Requirements
1. Complete the worksheet for Houston Veterinary Hospital.
2. Prepare the closing entries.
3. Prepare a post-closing trial balance.
Grant Film Productions wishes to expand and has borrowed \(100,000. As a condition for making this loan, the bank requires that the business maintain a current ratio of at least 1.50. Business has been good but not great. Expansion costs have brought the current ratio down to 1.40 on December 15. Rita Grant, owner of the business, is considering what might happen if she reports a current ratio of 1.40 to the bank. One course of action for Grant is to record in December \)10,000 of revenue that the business will earn in January of next year. The contract for this job has been signed. Requirements 1. Journalize the revenue transaction, and indicate how recording this revenue in December would affect the current ratio. 2. Discuss whether it is ethical to record the revenue transaction in December. Identify the accounting principle relevant to this situation, and give the reasons underlying your conclusion.
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