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Chapter 4: Q13SE (page 219)

Review the steps in the accounting cycle, and answer the following questions: 1. What is the first step? 2. Are any steps optional? 3. Which steps are completed throughout the period? 4. Which steps are completed only at the end of the period? 5. What is the last step in the accounting cycle?

Short Answer

Expert verified

(1)Start with the beginning account balances

(2) Enter the unadjusted trial balance on the worksheet and complete the worksheet

(3Journalizing transactions and posting to the accounts

(4)Adjusting the accounts, preparing the financial statements, and closing the accounts

(5) Prepare the post-closing trial balance.

Step by step solution

01

Explanation on First Step

In the first step of accounting cycle, beginning balance of each account is recorded in the account.

02

Explanation on Optional Step

The optional step in the accounting cycle is to enter the values in the unadjusted trial balance in the worksheet and complete it. This step can be avoided as preparing a worksheet is not mandatory.

03

Explanation on Steps Completed Through the Period

Recording and posting the journal entry into the accounts are the steps that are completed throughout the period. In simple words, steps 1 to 3 are completed during the period.

04

Explanation on Steps Completed at the End of Period

Recording and posting the adjusting entries, preparing the financial statements, and recording and closing entries are the steps that are completed at the end of the period.

05

Explanation on Last Step

The last step in the accounting cycle is related to preparing the post-closing trial balance of the business. It is prepared after recording and posting closing entries.

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Most popular questions from this chapter

The adjusted trial balance of Boston Irrigation System at December 31, 2018, follows BOSTON IRRIGATION SYSTEM Adjusted Trial Balance December 31, 2018 0 Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Building Accumulated Depreciation—Building Equipment Accumulated Depreciation—Equipment Accounts Payable Interest Payable Salaries Payable Unearned Revenue Notes Payable (long-term) Common Stock Dividends Retained Earnings Service Revenue Insurance Expense Salaries Expense Supplies Expense Balance \( 11,800 \) 211,900 \( 211,900 28,000 \) 25,000 63,000 32,100 2,600 2,200 2,100 12,000 21,000 46,000 29,500 6,300 7,700 32,700 2,200 74,500 1,100 16,400 1,100 2,200 2,500 1,800 Interest Expense Depreciation Expense—Equipment Depreciation Expense—Building Tota June 30, 2018. : Requirements 1. Prepare the company’s income statement for the year ended December 31, 2018. 2. Prepare the company’s statement of retained earnings for the year ended December 31, 2018. 3. Prepare the company’s classified balance sheet in report form at December 31, 2018. 4. Journalize the closing entries for Boston Irrigation System. 5. Compute the company’s current ratio at December 31, 2018. At December 31, 2017, the current ratio was 2.3. Did the company’s ability to pay current debts improve or deteriorate, or did it remain the same?

Refer to the data in Short Exercise S4-1. Prepare Dalton’s unclassified balance sheet at December 31, 2018. Use the account form.

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.

10. Cash

What is the current ratio, and how is it calculated?

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.
See all solutions

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