Chapter 4: Q4TI_3 (page 201)
For each account listed, identify whether the account would appear on the post-closing trial balance. Indicate either yes or no.
18. Cash
Yes
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What does liquidity mean?
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.
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?
Answer the following questions: Requirements 1. What type of normal balance does the Retained Earnings account have—debit or credit? 2. Which type of income statement account has the same type of balance as the Retained Earnings account? 3. Which type of income statement account has the opposite type of balance as the Retained Earnings account? 4. What do we call the difference between total debits and total credits on the income statement section of the worksheet?
For each account listed, identify the category in which it would appear on a classified balance sheet.
5. Unearned Revenue
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