CHAPTER 4

EXERCISES: SET B
E4-1B The trial balance columns of the worksheet for Lamar Company at June 30, 2017, Complete the worksheet.
are as follows. (LO 1)

LAMAR COMPANY
Worksheet
for the Month Ended June 30, 2017
Trial Balance
Account Titles Dr. Cr.
Cash $1,760
Accounts Receivable 2,100
Supplies 1,320
Accounts Payable $1,080
Unearned Service Revenue 360
Owner’s Capital 2,280
Service Revenue 2,100
Salaries and Wages Expense 500
Miscellaneous Expense 140
$5,820 $5,820

Other data:
1. A physical count reveals $250 of supplies on hand.
2. $120 of the unearned revenue is still unearned at month-end.
3. Accrued salaries are $250.

Instructions
Enter the trial balance on a worksheet and complete the worksheet.

E4-2B The adjusted trial balance columns of the worksheet for Gomez Company are as follows. Complete the worksheet.
(LO 1)
GOMEZ COMPANY
Worksheet (partial)
for the Month Ended April 30, 2017

Adjusted Trial Income

Balance Statement Balance Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
Cash 11,400
Accounts Receivable 7,000
Prepaid Rent 2,000
Equipment 20,000
Accumulated Depr.—Equip. 4,700
Notes Payable 5,000
Accounts Payable 4,950
Owner’s Capital 25,800
Owner’s Drawings 3,500
Service Revenue 14,000
Salaries and Wages Expense 9,450
Rent Expense 500
Depreciation Expense 600
Interest Expense 50
Interest Payable 50
Totals 54,500 54,500
2 4 Completing the Accounting Cycle

Instructions
Complete the worksheet.

Prepare financial statements E4-3B Worksheet data for Gomez Company are presented in E4-2B. The owner did not
from worksheet. make any additional investments in the business in April.
(LO 1, 4)
Instructions
Prepare an income statement, an owner’s equity statement, and a classified balance sheet.

Journalize and post closing E4-4B Worksheet data for Gomez Company are presented in E4-2B.
entries and prepare a
post-closing trial balance. Instructions
(LO 1, 2) (a) Journalize the closing entries at April 30.
(b) Post the closing entries to Income Summary and Owner’s Capital. Use T accounts.
(c) Prepare a post-closing trial balance at April 30.

Prepare adjusting entries E4-5B The adjustments columns of the worksheet for Rhodes Company are shown
from a worksheet, and below.
extend balances to worksheet
columns.
(LO 1) Adjustments
Account Titles Debit Credit
Accounts Receivable 1,100
Prepaid Insurance 500
Accumulated Depr.—Equip. 1,250
Salaries and Wages Payable 650
Service Revenue 1,100
Salaries and Wages Expense 650
Insurance Expense 500
Depreciation Expense 1,250
3,500 3,500

Instructions
(a) Prepare the adjusting entries.
(b) Assuming the adjusted trial balance amount for each account is normal, indicate the
financial statement column to which each balance should be extended.

Derive adjusting entries from E4-6B Selected worksheet data for Houser Company are presented below.
worksheet data.
(LO 1)
Adjusted
Account Titles Trial Balance Trial Balance
Dr. Cr. Dr. Cr.
Accounts Receivable ? 35,000
Prepaid Insurance 29,000 24,000
Supplies 8,000 ?
Accumulated Depr.—Equip. 24,000 ?
Salaries and Wages Payable ? 6,000
Service Revenue 80,000 95,000
Insurance Expense ?
Depreciation Expense 12,000
Supplies Expense 6,500
Salaries and Wages Expense ? 52,000

Instructions
(a) Fill in the missing amounts.
(b) Prepare the adjusting entries that were made.
 Exercises: Set B 3

E4-7B Pennington Company had the following adjusted trial balance. Prepare closing entries, and
prepare a post-closing trial
balance.
PENNINGTON COMPANY (LO 1, 2)
Adjusted Trial Balance
for the Month Ended June 30, 2017
Adjusted Trial Balance
Account Titles Debits Credits
Cash $ 4,650
Accounts Receivable 5,200
Supplies 640
Accounts Payable $ 2,500
Unearned Service Revenue 200
Owner’s Capital 7,280
Owner’s Drawings 400
Service Revenue 5,360
Salaries and Wages Expense 1,650
Miscellaneous Expense 350
Supplies Expense 3,050
Salaries and Wages Payable 600
$15,940 $15,940

Instructions
(a) Prepare closing entries at June 30, 2017.
(b) Prepare a post-closing trial balance.

E4-8B Wang Company ended its fiscal year on July 31, 2017. The company’s adjusted trial Journalize and post closing
balance as of the end of its fiscal year is as shown below. entries, and prepare a
post-closing trial balance.
(LO 1, 2)
WANG COMPANY
Adjusted Trial Balance
July 31, 2017

No. Account Titles Debits Credits

101 Cash $ 7,900
112 Accounts Receivable 6,200
157 Equipment 10,600
167 Accumulated Depr.—Equip. $ 4,400
201 Accounts Payable 2,800
208 Unearned Rent Revenue 1,200
301 Owner’s Capital 30,700
306 Owner’s Drawings 11,000
404 Service Revenue 42,400
429 Rent Revenue 6,100
711 Depreciation Expense 2,700
720 Salaries and Wages Expense 39,100
732 Utilities Expense 10,100
$87,600 $87,600

Instructions
(a) Prepare the closing entries using page J15.
(b) Post to Owner’s Capital and No. 350 Income Summary accounts. (Use the three-
column form.)
(c) Prepare a post-closing trial balance at July 31.
4 4 Completing the Accounting Cycle

Prepare financial statements. E4-9B The adjusted trial balance for Wang Company is presented in E4-8B.
(LO 4) Instructions
(a) Prepare an income statement and an owner’s equity statement for the year. Wang did
not make any capital investments during the year.
(b) Prepare a classified balance sheet at July 31.

Answer questions related to E4-10B Julie Ehrlich has prepared the following list of statements about the accounting
the accounting cycle. cycle.
(LO 3) 1. “Analyze business transactions” is the first step in the accounting cycle.
2. Adjusting entries are a required step in the accounting cycle.
3. Correcting entries are a required step in the accounting cycle.
4. If a worksheet is prepared, all the steps of the accounting cycle are incorporated into
the worksheet.
5. The accounting cycle begins with the analysis of business transactions and ends with
the preparation of a post-closing trial balance.
6. All steps of the accounting cycle occur daily during the accounting period.
7. The step of “post to the ledger accounts” occurs after the step of “journalize the transactions.”
8. Closing entries must be prepared before financial statements can be prepared.
Instructions
Identify each statement as true of false. If false, indicate how to correct the statement.

Prepare closing entries. E4-11B Selected accounts for Angie’s Salon are presented below. All June 30 postings are
(LO 1) from closing entries.

Salaries and Wages Expense Service Revenue Owner’s Capital

6/10 2,100 6/30 5,900 6/30 10,100 6/15 4,500 6/30 1,700 6/1 10,000
6/28 3,800 6/24 5,600 6/30 1,350
Bal. 9,650
Supplies Expense Rent Expense Owner’s Drawings
6/12 400 6/30 850 6/1 2,000 6/30 2,000 6/13 700 6/30 1,700
6/24 450 6/25 1,000

Instructions
(a) Prepare the closing entries that were made.
(b) Post the closing entries to Income Summary.

Prepare correcting entries. E4-12B Troy Company discovered the following errors made in January 2017.
(LO 3) 1. A payment of Salaries and Wages Expense of $700 was debited to Supplies and credited
to Cash, both for $700.
2. A collection of $4,000 from a client on account was debited to Cash $400 and credited
to Service Revenue $400.
3. The purchase of supplies on account for $860 was debited to Supplies $680 and cred-
ited to Accounts Payable $680.
Instructions
(a) Correct the errors by reversing the incorrect entry and preparing the correct entry.
(b) Correct the errors without reversing the incorrect entry.

Prepare correcting entries. E4-13B Ellis Company has an inexperienced accountant. During the first 2 weeks on the
(LO 3 ) job, the accountant made the following errors in journalizing transactions. All entries were
posted as made.
1. A payment on account of $720 to a creditor was debited to Accounts Payable $270 and
credited to Cash $270.
2. The purchase of supplies for $650 cash was debited to Inventory $65 and credited
to Cash $65.
3. A $500 withdrawal of cash for Ellis’ personal use was debited to Salaries and Wages
Expense $500 and credited to Cash $500.
Instructions
Prepare the correcting entries.
 Exercises: Set B 5

E4-14B The adjusted trial balance for Kever Miniature Golf at December 31, 2017, contains Prepare a classified balance
the following accounts. sheet.
(LO 4)
Debits Credits
Buildings $ 77,000 Owner’s Capital $ 67,000
Accounts Receivable 9,000 Accumulated Depreciation—Buildings 19,000
Prepaid Insurance 2,700 Accounts Payable 7,400
Cash 10,840 Notes Payable 60,000
Equipment 37,500 Accumulated Depreciation—Equipment 11,000
Land 38,000 Interest Payable 1,600
Insurance Expense 540 Service Revenues 15,580
Depreciation Expense 4,400 $181,580
Interest Expense 1,600
$181,580

Instructions
(a) Prepare a classified balance sheet; assume that $15,000 of the note payable will be paid
in 2018.
(b) Comment on the liquidity of the company.

E4-15B The following are the major balance sheet classifications. Classify accounts on balance
sheet.
Current assets (CA) Current liabilities (CL)
(LO 4)
Long-term investments (LTI) Long-term liabilities (LTL)
Property, plant, and equipment (PPE) Owner’s equity (OE)
Intangible assets (IA)
Instructions
Classify each of the following accounts taken from Garza Company’s balance sheet.
______ Accounts payable ______ Accumulated depreciation—equipment
______ Accounts receivable ______ Buildings.
______ Cash ______ Land
______ Owner’s capital ______ Notes payable (due in 3 years)
______ Salaries and wages payable ______ Supplies
______ Trademarks ______ Prepaid insurance
______ Stock Investments ______ Equipment
______ Inventory

E4-16B The following items were taken from the financial statements of Foyle Company. Prepare a classified balance
(All dollars are in thousands.) sheet.
(LO 4)
Long-term debt $1,560 Accumulated depr.—equipment $4,000
Prepaid insurance 620 Accounts payable 1,010
Equipment 8,100 Notes payable (due after 2018) 250
Stock investments (long-term) 185 Owner’s capital 8,925
Debt investments (short-term) 2,500 Accounts receivable 1,500
Notes payable (due in 2018) 340 Inventory 880
Cash 2,300

Instructions
Prepare a classified balance sheet in good form as of December 31, 2017.

E4-17B These financial statement items are for Herrera Company at year-end, July 31, Prepare financial statements.
2017. (LO 1, 4)
Salaries and wages payable $ 1,800 Notes payable (long-term) $ 2,000
Salaries and wages expense 39,000 Cash 13,300
Utilities expense 3,600 Accounts receivable 21,200
Equipment 26,500 Accumulated depr.—equip. 5,400
Accounts payable 3,600 Owner’s drawings 3,600
Service revenue 58,000 Depreciation expense 16,200
Rent revenue 7,600 Owner’s capital (beginning 45,000
of the year)
6 4 Completing the Accounting Cycle

Instructions
(a) Prepare an income statement and an owner’s equity statement for the year. The owner
did not make any new investments during the year.
(b) Prepare a classified balance sheet at July 31.

Use reversing entries. *E4-18B Kerr Company pays salaries of $25,000 every Monday for the preceding 5-day
(LO 5) week (Monday through Friday). Assume December 31 falls on a Wednesday, so Kerr’s
employees have worked 3 days without being paid.

Instructions
(a) Assume the company does not use reversing entries. Prepare the December 31 adjust-
ing entry and the entry on Monday, January 5, when Kerr pays the payroll.
(b) Assume the company does use reversing entries. Prepare the December 31 adjusting
entry, the January 1 reversing entry, and the entry on Monday, January 5, when Kerr pays
the payroll.

Prepare closing and reversing *E4-19B On December 31, the adjusted trial balance of Sele Employment Agency shows
entries. the following selected data.
(LO 1, 3, 5)
Accounts Receivable $35,000 Service Revenue $100,000
Interest Expense 11,000 Interest Payable 2,500

Analysis shows that adjusting entries were made to (1) accrue $6,000 of service revenue
and (2) accrue $2,500 interest expense.

Instructions
(a) Prepare the closing entries for the temporary accounts shown above at December 31.
(b) Prepare the reversing entries on January 1.
(c) Post the entries in (a) and (b) to the four accounts shown above. Rule and balance the
accounts. (Use T accounts.)
(d) Prepare the entries to record (1) the collection of the accrued revenue on January 10
and (2) the payment of all interest due ($3,000) on January 15.
(e) Post the entries in (d) to the temporary accounts shown above.