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Chapter 3: E3-13_a (page 134)

E3-13 (Lo5,6) (Closing Entries) The adjusted trial balance of Lopez Company shows the following data pertaining to sales at the end of its fiscal year, October 31, 2017: Sales Revenue \(800,000, Delivery Expenses \)12,000, Sales Returns and Allowances \(24,000 and Sales Discounts \)15,000.

Instructions:

(a) Prepare the revenues section of the income statement.

Short Answer

Expert verified

The amount of net income is $761,000.

Step by step solution

01

Meaning of Income Statement

An income statement is a financial report showing a company’s performance over some time bysubtracting expenses from revenue to obtain net income. It is also called a Profit and loss statement or Earning report.

02

Revenue section of the income statement:

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Most popular questions from this chapter

The following trial balance of Watteau Co. does not balance:

WATTEAU CO.

TRIAL BALANCE

JUNE 30, 2017

Debit \(

Credit \)

Cash

\(2,870

Accounts receivable

\)3,231

Supplies

800

Equipment

3,800

Account payable

2,666

Unearned service revenue

1,200

Common stock

6,000

Retained earnings

3,000

Service revenue

2,380

Salaries and wages expenses

3,400

Office expenses

940

\(13,371

\)16,916

Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors.

  1. Cash received from the customer on account was debited for \(570, and accounts receivable was credited for the same amount. The actual collection was for \)750.
  2. The purchase of a computer printer on account for \(500 was recorded as a debit to Supplies for \)500 and a credit to Accounts Payable for \(500.
  3. Services were performed on account for a client for \)890. Accounts receivable was debited for \(890 and service revenue was credited for \)89.
  4. A payment of \(65 for telephone charges was recorded as a debit to Office Expense for \)65 and a debit to Cash for \(65.
  5. When the unearned service revenue account was reviewed, it was found that service revenue amounting to \)325 was performed prior to June 30 (related to unearned service revenue).
  6. A debit posting to salaries and wages expenses of \(670 was omitted.
  7. A payment on account for \)206 was credited to cash for \(206 and credit to account payable for \)260.
  8. A dividend of \(575 was debited to salaries and wages expenses for \)575 and credit to cash for $575.

Instruction

Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)

The financial statements of (M&S) are presented in Appendix E. The company's complete annual report, including the notes to the financial statements, is available online.

Instructions

Refer to M&S’s financial statements and the accompanying notes to answer the following questions.

(a) What were M&S’s total assets at 28 March 2015? At 29 March 2014?

(b) How much cash (and cash equivalents) did M&S have on 28 March 2015?

(c) What were M&S’s selling and marketing expenses in 2015? In 2014?

(d) What were M&S’s revenues in 2015? In 2014?

(e) Using M&S’s fi nancial statements and related notes, identify items that may result in adjusting entries for prepaymentsand accruals.

(f) What were the amounts of M&S’s depreciation and amortization expense in 2014 and 2015?

Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2018. What is the date of Becker’s opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker’sfirst IFRS financial statements?

Vedula Advertising was founded by MuraliVedula in January 2015. On the next page are both the adjusted and unadjusted trial balances as of December 31, 2017.

VEDULA ADVERTISING

TRIAL BALANCE

DECEMBER 31, 2017


Unadjusted
Adjusted

Dr.

Cr.

Dr.

Cr.

Cash

\( 11,000

\) 11,000

Accounts Receivable

16,000

19,500

Prepaid Insurance

9,400

6,500

Supplies

3,350

1,790

Equipment

60,000

60,000

Accumulated Depreciation—Equipment

\( 25,000

\) 30,000

Notes Payable

8,000

8,000

Accounts Payable

2,000

2,000

Interest Payable

0

560

Unearned Service Revenue

5,000

3,100

Salaries and Wages Payable

0

820

Common Stock

20,000

20,000

Retained Earnings

5,500

5,500

Dividends

10,000

10,000

Service Revenue

57,600

63,000

Salaries and Wages Expense

9,000

9,820

Insurance Expense

1,560

Interest Expense

560

Depreciation Expense

5,000

Supplies Expense

2,900

Rent Expense

4,350

4,350

\(123,100

\)123,100

\(132,980

\)132,980

Instructions

  1. Journalize the annual adjusting entries that were made.
  2. Prepare an income statement and a retained earnings statement for the year ended December 31, and a classified balance sheet at December 31.
  3. Identify which accounts should be closed on December 31.
  4. If the note has been outstanding 10 months, what is the annual interest rate on that note?
  5. If the company paid $10,500 in salaries and wages in 2017, what was the balance in Salaries and Wages Payable on December 31, 2016?

BE3-5 (L02,3) Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.
See all solutions

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