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EX 4-1

Flow of Accounts into Financial Statements

OBJ. 1, 2

The balances for the accounts that follow appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet. Indicate whether each account would flow into the income statement, statement of owner’s equity, or balance sheet.
1. Accounts Payable
2. Accounts Receivable
3. Cash
4. Eddy Rosewood, Drawing
5. Fees Earned
6. Supplies
7. Unearned Rent
8. Utilities Expense
9. Wages Expense
10. Wages Payable

EX 4-2

Classifying Accounts

OBJ. 1, 2

Balances for each of the following accounts appear in an adjusted trial balance. Identify each as (a) asset, (b) liability, (c) revenue, or (d) expense.
1. 1. Accounts Receivable
  2. Equipment
  3. Fees Earned
  4. Insurance Expense
  5. Land
  6. Prepaid Rent
  7. Rent Revenue
  8. Salary Expense
  9. Salary Payable
  10. Supplies
  11. Unearned Rent
  12. Wages Payable

EX 4-3

Financial Statements from the End-of-Period Spreadsheet

OBJ. 1, 2

Bamboo Consulting is a consulting firm owned and operated by Lisa Gooch. The following end-of-period spreadsheet was prepared for the year ended July 31, 20Y5:

Based on the preceding spreadsheet, prepare an income statement, statement of owner’s equity, and balance sheet for Bamboo Consulting.

EX 4-4

Financial Statements from the End-of-Period Spreadsheet

OBJ. 1, 2

Elliptical Consulting is a consulting firm owned and operated by Jayson Neese. The following end-of-period spreadsheet was prepared for the year ended June 30, 20Y6:

Based on the preceding spreadsheet, prepare an income statement, statement of owner’s equity, and balance sheet for Elliptical Consulting.

EX 4-5

Income Statement

OBJ. 2

The following account balances were taken from the adjusted trial balance for Capstone Messenger Service, a delivery service firm, for the fiscal year ended April 30, 20Y7:

Depreciation Expense	$ 6,700	Rent Expense	$ 46,500
Fees Earned	522,000	Salaries Expense	260,900
Insurance Expense	1,200	Supplies Expense	3,200
Miscellaneous Expense	2,800	Utilities Expense	31,900

Prepare an income statement.

Answer

Check Figure: Net income, $168,800

EX 4-6

Income Statement; Net Loss

OBJ. 2

The following revenue and expense account balances were taken from the ledger of Guardian Health Services Co. after the accounts had been adjusted on February 28, 20Y0, the end of the fiscal year:

Depreciation Expense	$ 6,800	Service Revenue	$407,900
Insurance Expense	2,700	Supplies Expense	2,500
Miscellaneous Expense	7,400	Utilities Expense	30,800
Rent Expense	49,100	Wages Expense	327,500

Prepare an income statement.

Answer

Check Figure: Net loss, $(18,900)

EX 4-7

Income Statement

OBJ. 2

FedEx Corporation had the following revenue and expense account balances (in millions) for a recent year ending May 31:

Depreciation Expense	$ 3,095	Purchased Transportation	$15,101
Fuel Expense	3,374	Rentals and Landing Fees	3,361
Maintenance and Repairs Expense	2,622	Revenues	65,450
Other Expense	10,337	Salaries and Employee Benefits	23,207
Provision for Income Taxes (Benefit)	(219)

Prepare an income statement.

Answer

Check Figure: Net income, $4,572

EX 4-8

Statement of Owner’s Equity

OBJ. 2

Serenity Systems Co. offers its services to residents in the Minneapolis area. Selected accounts from the ledger of Serenity Systems Co. for the fiscal year ended December 31, 20Y1, are as follows:

Farhan Wasti, Capital				Farhan Wasti, Drawing
Dec. 31	98,000	Jan. 1 (20Y1)	1,502,000	Mar. 31	24,500	Dec. 31	98,000
		Dec. 31	385,000	June 30	24,500
				Sept. 30	24,500
				Dec. 31	24,500

Prepare a statement of owner’s equity for the year.

Answer

Check Figure: Farhan Wasti, capital, Dec. 31, 20Y1: $1,789,000

EX 4-9

Statement of Owner’s Equity; Net Loss

OBJ. 2

Selected accounts from the ledger of Masterpiece Arts for the fiscal year ended April 30, 20Y2, are as follows:

Angelo Phelps, Capital				Angelo Phelps, Drawing
Apr. 30	35,200	May 1 (20Y1)	537,100	July 31	2,300	Apr. 30	9,200
30	9,200			Oct. 31	2,300
				Jan. 31	2,300
				Apr. 30	2,300

Prepare a statement of owner’s equity for the year.

Answer

Check Figure: Angelo Phelps, capital, April 30, 20Y2: $492,700

EX 4-10

Classifying Assets

OBJ. 2

Identify each of the following as (a) a current asset or (b) property, plant, and equipment:
1. 1. Accounts Receivable
  2. Building
  3. Cash
  4. Land
  5. Prepaid Insurance
1. Supplies

EX 4-11

Balance Sheet Classification

OBJ. 2

At the balance sheet date, a business owes a mortgage note payable of $375,000, the terms of which provide for monthly payments of $1,250.

Explain how the liability should be classified on the balance sheet.

EX 4-12

Balance Sheet

OBJ. 2

MaxFit Weight Loss Co. offers personal weight reduction consulting services to individuals. After all the accounts have been closed on November 30, 20Y4, the end of the fiscal year, the balances of selected accounts from the ledger of MaxFit Weight Loss Co. are as follows:

Accounts Payable	$ 44,800	Prepaid Insurance	$ 8,500
Accounts Receivable	138,600	Prepaid Rent	24,900
Accumulated Depreciation	221,300	Salaries Payable	10,700
Cash	?	Supplies	5,700
Equipment	563,000	Unearned Fees	21,400
Land	356,200	Vanessa Freeman, Capital	843,400

Prepare a classified balance sheet that includes the correct balance for Cash.

Answer

Check Figure: Total assets: $920,300

EX 4-13

Balance Sheet

OBJ. 2

List the errors you find in the following balance sheet. Prepare a corrected balance sheet.

Answer

Check Figure: Corrected balance sheet, total assets: $625,000

EX 4-14

Identifying Accounts to Be Closed

OBJ. 3

From the list that follows, identify the accounts that should be closed to the owner’s capital account at the end of the fiscal year:
1. Accounts Receivable
2. Accumulated Depreciation
3. Building
4. Depreciation Expense
5. Fees Earned
6. Jackie Lindsay, Capital
7. Jackie Lindsay, Drawing
8. Land
9. Supplies
10. Supplies Expense
11. Unearned Rent
12. Wages Expense

EX 4-15

Closing Entries

OBJ. 3

Prior to closing, total revenues were $8,315,000 and total expenses were $6,460,000. During the year, the owner made no additional investments and withdrew $408,000. After the closing entries, how much did the owner’s capital account change?

EX 4-16

Closing Entries with Net Income

OBJ. 3

Assume that the entry closing total revenues of $3,190,000 and total expenses of $2,350,000 has been made for the year. At the end of the fiscal year, Teresa Schafer, Capital has a credit balance of $1,885,000 and Teresa Schafer, Drawing has a balance of $770,000. (a) Journalize the entry required to close the Teresa Schafer, drawing account. (b) Determine the amount of Teresa Schafer, Capital at the end of the period. https://homeworkcrew.com/

EX 4-17

Closing Entries with Net Loss

OBJ. 3

Creative Images Co. offers its services to individuals desiring to improve their personal images. After the accounts have been adjusted at July 31, the end of the fiscal year, the following balances were taken from the ledger of Creative Images Co.:

Violet Lozano, Capital	$934,500	Rent Expense	$52,900
Violet Lozano, Drawing	66,000	Supplies Expense	17,200
Fees Earned	545,000	Miscellaneous Expense	5,400
Wages Expense	342,400

Journalize the two entries required to close the accounts.

EX 4-18

Identifying Permanent Accounts

OBJ. 3

Which of the following accounts will usually appear in the post-closing trial balance?
1. Accounts Receivable
2. Cash
3. Depreciation Expense
4. Fees Earned
5. Doug Woods, Capital
6. Doug Woods, Drawing
7. Equipment
8. Land
9. Salaries Payable
10. Unearned Rent
11. Wages Expense

EX 4-19

Post-Closing Trial Balance

OBJ. 3

An accountant prepared the following post-closing trial balance:

Prepare a corrected post-closing trial balance. Assume that all accounts have normal balances and that the amounts shown are correct.

Answer

Check Figure: Correct column totals, $300,000

EX 4-20

Steps in the Accounting Cycle

OBJ. 4

Rearrange the following steps in the accounting cycle in proper sequence:
1. Transactions are analyzed and recorded in the journal.
2. An unadjusted trial balance is prepared.
3. Transactions are posted to the ledger.
4. Adjustment data are assembled and analyzed.
5. An adjusted trial balance is prepared.
6. Adjusting entries are journalized and posted to the ledger.
7. An optional end-of-period spreadsheet is prepared.
8. A post-closing trial balance is prepared.
9. Financial statements are prepared.
10. Closing entries are journalized and posted to the ledger.

EX 4-21

Working Capital and Current Ratio

OBJ. 6

The following data (in thousands) were taken from recent financial statements of Under Armour, Inc.:

	December 31
	Year 2	Year 1
Current assets	$2,593,628	$2,337,679
Current liabilities	1,315,977	1,060,375

Compute the working capital and the current ratio as of December 31, Year 2 and Year 1. Round to two decimal places.
What conclusions concerning the company’s ability to meet its financial obligations can you draw from part (a)?

EX 4-22

Working Capital and Current Ratio

OBJ. 6

The following data (in thousands) were taken from recent financial statements of Starbucks Corporation:

	Year 2	Year 1
Current assets	$12,494,200	$5,283,400
Current liabilities	5,684,200	4,220,700

Compute the working capital and the current ratio for Year 2 and Year 1. Round to two decimal places.
What conclusions concerning the company’s ability to meet its financial obligations can you draw from part (a)?

Appendix 1 EX 4-23

Completing an End-of-Period Spreadsheet

List (a) through (j) in the order they would be performed in preparing and completing an end-of-period spreadsheet.
1. Add the Debit and Credit columns of the Unadjusted Trial Balance columns of the spreadsheet to verify that the totals are equal.
2. Add the Debit and Credit columns of the Balance Sheet and Income Statement columns of the spreadsheet to verify that the totals are equal.
3. Add or deduct adjusting entry data to trial balance amounts, and extend amounts to the Adjusted Trial Balance columns.
4. Add the Debit and Credit columns of the Adjustments columns of the spreadsheet to verify that the totals are equal.
5. Add the Debit and Credit columns of the Balance Sheet and Income Statement columns of the spreadsheet to determine the amount of net income or net loss for the period.
6. Add the Debit and Credit columns of the Adjusted Trial Balance columns of the spreadsheet to verify that the totals are equal.
7. Enter the adjusting entries into the spreadsheet, based on the adjustment data.https://homeworkcrew.com/
8. Enter the amount of net income or net loss for the period in the proper Income Statement column and Balance Sheet column.
9. Enter the unadjusted account balances from the general ledger into the Unadjusted Trial Balance columns of the spreadsheet.
10. Extend the adjusted trial balance amounts to the Income Statement columns and the Balance Sheet columns.

Appendix 1 EX 4-24

Adjustment Data On an End-of-Period Spreadsheet

Alert Security Services Co. offers security services to business clients. The trial balance for Alert Security Services Co. has been prepared on the following end-of-period spreadsheet for the year ended October 31, 20Y5:

The data for year-end adjustments are as follows:
1. Fees earned but not yet billed, $13.
2. Supplies on hand, $4.
3. Insurance premiums expired, $10.
4. Depreciation expense, $3.
5. Wages accrued but not paid, $1.
Enter the adjustment data and place the balances in the Adjusted Trial Balance columns.

Answer

Check Figure: Total debits of Adjustments column: $31

Appendix 1 EX 4-25

Completing An End-of-Period Spreadsheet

Alert Security Services Co. offers security services to business clients. Complete the following end-of-period spreadsheet for Alert Security Services Co.:

Answer

Check Figure: Net income: $65

Appendix 1 EX 4-26

Financial Statements from An End-of-Period Spreadsheet

Based on the data in Exercise 4-25, prepare an income statement, statement of owner’s equity, and balance sheet for Alert Security Services Co.

Answer

Check Figure: Brenda Schultz, capital, October 31, 20Y7: $317

Appendix 1 EX 4-27

Adjusting Entries from An End-of-Period Spreadsheet

Based on the data in Exercise 4-24, prepare the adjusting entries for Alert Security Services Co.

Appendix 1 EX 4-28

Closing Entries from An End-of-Period Spreadsheet

Based on the data in Exercise 4-25, prepare the two closing entries for Alert Security Services Co.

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