Accounting
SHARP CONSTRUCTION Adjusted Trial Balance
December 31, 2011
No. Account Title Debit Credit
101 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000
104 Short-term investments . . . . . . . . . . . . . . . . . . . . . 22,000
126 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100
128 Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
167 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,000
168 Accumulated depreciation—Equipment . . . . . . . . $ 20,000
173 Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,000
174 Accumulated depreciation—Building . . . . . . . . . . 55,000
183 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
201 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 15,500
203 Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
208 Rent payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
210 Wages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
213 Property taxes payable . . . . . . . . . . . . . . . . . . . . . . 800
233 Unearned professional fees . . . . . . . . . . . . . . . . . . 6,500
251 Long-term notes payable . . . . . . . . . . . . . . . . . . . . 66,000
301 J. Sharp, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,700
302 J. Sharp, Withdrawals . . . . . . . . . . . . . . . . . . . . . . . 12,000
401 Professional fees earned . . . . . . . . . . . . . . . . . . . . 96,000
406 Rent earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000
407 Dividends earned . . . . . . . . . . . . . . . . . . . . . . . . . . 1,900
409 Interest earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
606 Depreciation expense—Building . . . . . . . . . . . . . . 10,000
612 Depreciation expense—Equipment . . . . . . . . . . . . 5,000
623 Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,000
633 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,100
637 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
640 Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,400
652 Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400
682 Postage expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200
683 Property taxes expense . . . . . . . . . . . . . . . . . . . . . 4,000
684 Repairs expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,900
688 Telephone expense . . . . . . . . . . . . . . . . . . . . . . . . 2,200
690 Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $363,900 $363,900
The adjusted trial balance for Sharp Construction as of December 31, 2011, follows.
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J. Sharp invested $50,000 cash in the business during year 2011 (the December 31, 2010, credit balance of the J. Sharp, Capital account was $32,700). Sharp Construction is required to make a $6,600 payment on its long-term notes payable during 2012.
Required
1. Prepare the income statement and the statement of owner’s equity for the calendar year 2011 and the classified balance sheet at December 31, 2011.
2. Prepare the necessary closing entries at December 31, 2011. 3. Use the information in the financial statements to compute these ratios: (a) return on assets (total
assets at December 31, 2010, was $200,000), (b) debt ratio, (c) profit margin ratio (use total revenues as the denominator), and (d ) current ratio.
Required
1. Prepare a 10-column work sheet for fiscal year 2011, starting with the unadjusted trial balance and including adjustments based on these additional facts. a. The supplies available at the end of fiscal year 2011 had a cost of $3,200. b. The cost of expired insurance for the fiscal year is $3,900. c. Annual depreciation on equipment is $8,500. d. The June utilities expense of $550 is not included in the unadjusted trial balance because the bill
arrived after the trial balance was prepared. The $550 amount owed needs to be recorded. e. The company’s employees have earned $1,600 of accrued wages at fiscal year-end. f. The rent expense incurred and not yet paid or recorded at fiscal year-end is $200. g. Additional property taxes of $900 have been assessed for this fiscal year but have not been paid or
recorded in the accounts.
$ 17,500 8,900 6,200
131,000
30,000
0 45,860 2,640
0 13,200
0 4,600 2,810 4,000
$266,710
$ 25,250 5,800
0 0 0 0
24,000 77,660
134,000
$266,710
101 126 128 167 168 201 203 208 210 213 251 301 302 401 612 623 633 637 640 652 683 684 690
Cash Supplies Prepaid insurance Equipment Accumulated depreciation—Equipment Accounts payable Interest payable Rent payable Wages payable Property taxes payable Long-term notes payable S. Adams, Capital S. Adams, Withdrawals Construction fees earned Depreciation expense—Equipment Wages expense Interest expense Insurance expense Rent expense Supplies expense Property taxes expense Repairs expense Utilities expense Totals
Account Title Debit CreditNo.
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
1 2 3 4 5 6 7
A B C D
ADAMS CONSTRUCTION CO. Unadjusted Trial Balance
June 30, 2011
The following unadjusted trial balance is for Adams Construction Co. as of the end of its 2011 fiscal year. The June 30, 2010, credit balance of the owner’s capital account was $52,660, and the owner invested $25,000 cash in the company during the 2011 fiscal year.
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h. The long-term note payable bears interest at 12% per year. The unadjusted Interest Expense account equals the amount paid for the first 11 months of the 2011 fiscal year. The $240 accrued interest for June has not yet been paid or recorded. (The company is required to make a $5,000 payment toward the note payable during the 2012 fiscal year.)
2. Enter adjusting and closing information in the work sheet; then journalize the adjusting and closing entries.
3. Prepare the income statement and the statement of owner’s equity for the year ended June 30 and the classified balance sheet at June 30, 2011.
Analysis Component
4. Analyze the following separate errors and describe how each would affect the 10-column work sheet. Explain whether the error is likely to be discovered in completing the work sheet and, if not, the effect of the error on the financial statements. a. Assume that the adjustment for supplies used consisted of a credit to Supplies and a debit to
Supplies Expense for $3,200, when the correct amount was $5,700. b. When the adjusted trial balance in the work sheet is completed, assume that the $17,500 Cash bal-
ance is incorrectly entered in the Credit column.
The following six-column table for Bullseye Ranges includes the unadjusted trial balance as of December 31, 2011.
$ 13,000 0
5,500 130,000
20,000
0 28,000 3,750
0 $200,250
$ 25,000 0 0
14,000 50,000 58,250
53,000
$200,250
Account Title
Unadjusted Trial Balance
Adjusted Trial Balance
Dr. Adjustments
Cr. Dr. Cr.Dr. Cr.
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
1 2 3 4 5 6 7
A B C D E F G
BULLSEYE RANGES December 31, 2011
Cash Accounts receivable Supplies Equipment Accumulated depreciation—Equipment Interest payable Salaries payable Unearned member fees Notes payable T. Allen, Capital T. Allen, Withdrawals Member fees earned Depreciation expense—Equipment Salaries expense Interest expense Supplies expense Totals
Required
1. Complete the six-column table by entering adjustments that reflect the following information. a. As of December 31, 2011, employees had earned $900 of unpaid and unrecorded salaries. The next
payday is January 4, at which time $1,600 of salaries will be paid. b. The cost of supplies still available at December 31, 2011, is $2,700. c. The notes payable requires an interest payment to be made every three months. The amount of
unrecorded accrued interest at December 31, 2011, is $1,250. The next interest payment, at an amount of $1,500, is due on January 15, 2012.
d. Analysis of the unearned member fees account shows $5,600 remaining unearned at December 31, 2011.
e. In addition to the member fees included in the revenue account balance, the company has earned another $9,100 in unrecorded fees that will be collected on January 31, 2012. The company is also expected to collect $8,000 on that same day for new fees earned in January 2012.
f. Depreciation expense for the year is $12,500.
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2. Prepare journal entries for the adjustments entered in the six-column table for part 1. 3. Prepare journal entries to reverse the effects of the adjusting entries that involve accruals. 4. Prepare journal entries to record the cash payments and cash collections described for January.