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Chapter 3: Q7E_2 (page 147)

Question: Use the following adjusted trial balance of Wilson Trucking Company to prepare the (1) income statement
and (2) statement of retained earnings for the year ended December 31, 2017. The Retained Earnings account
balance is \(155,000 at December 31, 2016.
Account Title Debit Credit
Cash . \) 8,000
Accounts receivable 17,500
Office supplies . 3,000
Trucks . 172,000
Accumulated depreciation—Trucks \( 36,000
Land 85,000
Accounts payable 12,000
Interest payable . 4,000
Long-term notes payable 53,000
Common stock . 20,000
Retained earnings . 155,000
Dividends . 20,000
Trucking fees earned . 130,000
Depreciation expense—Trucks . 23,500
Salaries expense . 61,000
Office supplies expense 8,000
Repairs expense—Trucks 12,000
Totals \)410,000 $410,000

Short Answer

Expert verified

Retained earnings at December 31, 2016 is $160,500. Statement of retained earning shown in step 2.

Step by step solution

01

Definition of the income statement

An income statement is a statement that records all the revenues and expenses of the company.

02

Statement of retained earnings

Wilson Truck Company
Statement of Retained Earnings
For the year ended December 31, 2017
Retained earnings, December 31, 2016	$155,000
Add: Net Income	$25,500

Less: Dividends	$20,000

Retained earnings, December 31, 2017	$160,500

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Most popular questions from this chapter

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

3. Long-term investment in stock

Adjusting entries affect at least one balance sheet account and at least one income statement account.

For the entries below, identify the account to be debited and the account to be credited from the following

accounts: Cash; Accounts Receivable; Prepaid Insurance; Equipment; Accumulated

Depreciation; Wages Payable; Unearned Revenue; Revenue; Wages Expense; Insurance Expense;

Depreciation Expense. Indicate which of the accounts is the income statement account and which is

the balance sheet account.

a. Entry to record revenue earned that was previously received as cash in advance.

b. Entry to record wage expenses incurred but not yet paid (nor recorded).

c. Entry to record revenue earned but not yet billed (nor recorded).

d. Entry to record expiration of prepaid insurance.

e. Entry to record annual depreciation expense.

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets

B. Long-term investments

C. Plant assets

D. Intangible assets

E. Current liabilities

F. Long-term liabilities

G. Equity

7. Notes payable (due in 3 years)

Question:Prepare year-end adjusting journal entries for M&R Company as of December 31, 2017, for each of the

following separate cases. (Entries can draw from the following partial chart of accounts: Cash; Accounts

Receivable; Interest Receivable; Equipment; Wages Payable; Salary Payable; Interest Payable; Lawn

Services Payable; Unearned Revenue; Revenue; Interest Revenue; Wages Expense; Salary Expense;

Supplies Expense; Lawn Services Expense; Interest Expense.)

a. M&R Company provided \(2,000 in services to customers that are expected to pay the company sometime

in January following the company’s year-end.

b. Wage expenses of \)1,000 have been incurred but are not paid as of December 31.

c. M&R Company has a \(5,000 bank loan and has incurred (but not recorded) 8% interest expense of

\)400 for the year ended December 31. The company will pay the \(400 interest in cash on January 2

following the company’s year-end.

d. M&R Company hired a firm to provide lawn services at a monthly fee of \)500 with payment occurring

on the 15th of the following month. Payment for December services will occur on January 15

following the company’s year-end.

e. M&R Company has earned \(200 in interest revenue from investments for the year ended December

31. The interest revenue will be received on January 15 following the company’s year-end.

f. Salary expenses of \)900 have been earned by supervisors but not paid as of December 31.

Question: Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR),

accrued

expenses (AE), or accrued revenues (AR).

a. To record revenue earned that was previously received as cash in advance.

b. To record wages expense incurred but not yet paid (nor recorded).

c. To record revenue earned but not yet billed (nor recorded).

d. To record expiration of prepaid insurance.

e. To record annual depreciation expense.

See all solutions

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