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Chapter 4: Q3TI-2 (page 199)

Benson Auto Repair had the following account balances after adjustments. Assume all accounts had normal balances.
Cash \( 4,000 Common Stock \) 20,000
Accounts Receivable 3,200 Retained Earnings, January 1 15,700
Prepaid Rent 1,900 Dividends 2,100
Office Supplies 3,000 Service Revenue 1,600
Equipment 34,800 Depreciation Expense—Equipment 300
Accumulated Depreciation—Equipment 1,600 Salaries Expense 800
Accounts Payable 5,400 Rent Expense 500
Notes Payable (long-term) 7,000 Utilities Expense 600
Supplies Expense 100
14. Prepare the closing entries for Benson at December 31.
15. What is the balance of Retained Earnings after closing entries have been recorded? (Use a T-account to determine the balance.)

Short Answer

Expert verified

The balance of retained earnings equals $12,900.

Step by step solution

01

Explanation on Retained Earnings

Ending balance of retained earnings is calculated by adding net income or subtracting net loss, and subtracting dividends from beginning balance of retained earnings.

02

Retained Earnings Account

Retained earnings account is shown as follows:

Retained Earnings
Close 4.	$2,100	$15,700	Adj. Bal,
Close 3.	$700
		$12,900	Bal.

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Most popular questions from this chapter

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.

The unadjusted trial balance and adjustment data of Martha’s Motors at December 31, 2018, follow: Adjustment data at December 31, 2018: a. Depreciation on equipment, \(2,100. b. Accrued Wages Expense, \)1,100. c. Office Supplies on hand, \(500. d. Prepaid Insurance expired during December, \)600. e. Unearned Revenue earned during December, \(4,800. f. Accrued Service Revenue, \)1,300. 2019 transactions: a. On January 4, Martha’s Motors paid wages of \(1,900. Of this, \)1,100 related to the accrued wages recorded on December 31. b. On January 10, Martha’s Motors received \(1,500 for Service Revenue. Of this, \)1,300 is related to the accrued Service Revenue recorded on December 31. Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Equipment Accumulated Depreciation—Equipment Accounts Payable Wages Payable Unearned Revenue Common Stock Dividends Service Revenue Depreciation Expense—Equipment Wages Expense Insurance Expense Utilities Expense Balance \( 4,200 \) 93,200 \( 93,200 15,000 \) 34,600 52,400 7,900 3,100 18,500 17,200 1,600 27,200 1,000 2,400 1,300 Supplies Expense Total Requirements 1. Journalize adjusting entries. 2. Journalize reversing entries for the appropriate adjusting entries. 3. Refer to the 2019 data. Journalize the cash payment and the cash receipt that occurred in 2019.

What is a classified balance sheet?

The adjusted trial balance of Rocket Real Estate Appraisal at June 30, 2018, follows: ROCKET REAL ESTATE APPRAISAL Adjusted Trial Balance June 30, 2018Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Building Accumulated Depreciation—Building Land 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 Interest Expense Balance \( 5,000 \) 178,100 \( 178,100 12,800 \) 25,200 71,000 8,000 1,000 2,100 37,000 25,800 5,500 1,600 1,700 18,700 5,000 33,000 48,100 4,100 32,000 600 8,000 2,900 7,100 Utilities Expense Depreciation Expense—Building Total . Requirements 1. Prepare the company’s income statement for the year ended June 30, 2018. 2. Prepare the company’s statement of retained earnings for the year ended June 30, 2018. 3. Prepare the company’s classified balance sheet in report form at June 30, 2018. 4. Journalize the closing entries. 5. Open the T-accounts using the balances from the adjusted trial balance, and post the closing entries to the T-accounts. 6. Prepare the company’s post-closing trial balance at June 30, 2018.

On December 1, Bob Waldo began an auto repair shop, Waldo’s Quality Automotive. The following transactions occurred during December: Dec. 1 Waldo contributed \(70,000 cash to the business in exchange for shares of common stock. 1 Purchased \)12,000 of equipment paying cash. 1 Paid \(1,750 for a five-month insurance policy starting on December 1. 9 Paid \)20,000 cash to purchase land to be used in operations. 10 Purchased office supplies on account, \(2,800. 19 Borrowed \)15,000 from the bank for business use. Waldo signed a note payable to the bank in the name of the corporation. The note is due in five years. 22 Paid \(1,300 for advertising expenses. 26 Paid \)900 on account. 28 The business received a bill for utilities to be paid in January, \(280. 31 Revenues earned during the month included \)16,000 cash and \(3,600 on account. 31 Paid employees’ salaries \)3,800 and building rent \(1,200. Record as a compound entry. 31 The business received \)1,440 for auto screening services to be performed next month. 31 Paid cash dividends of \(5,500 to stockholders. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Equipment; Accumulated Depreciation—Equipment; Accounts Payable; Utilities Payable; Interest Payable; Unearned Revenue; Notes Payable; Common Stock; Retained Earnings; Dividends; Income Summary; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense—Equipment. Adjustment data: a. Office Supplies used during the month, \)1,800. b. Depreciation for the month, \(200. c. One month insurance has expired. d. Accrued Interest Expense, \)75. Requirements 1. Prepare the journal entries, and post to the T-accounts. 2. Prepare an unadjusted trial balance. 3. Complete the worksheet for the month ended December 31, 2018 (optional). 4. Prepare the adjusting entries, and post to the T-accounts. 5. Prepare an adjusted trial balance.6. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form. 7. Prepare the closing entries, and post to the T-accounts. 8. Prepare a post-closing trial balance.

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