The following unadjusted trial balance is for Adams Construction Co. as of the e

Question

The following unadjusted trial balance is for Adams Construction Co. as of the end of its 2005 fiscal

year. The June 30, 2004, credit balance of the owner%u2019s capital account was $52,660, and the owner

invested $25,000 cash in the company during the 2005 fiscal year.

and including adjustments based on these additional facts:

a. The supplies available at the end of fiscal year 2005 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%u2019s 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.

h. The long-term note payable bears interest at 1% per month. The unadjusted Interest Expense

account equals the amount paid for the first 11 months of the 2005 fiscal year. The $240 accrued

interest for June has not yet been paid or recorded. (Note that the company is required

to make a $5,000 payment toward the note payable during the 2006 fiscal year.)

2. Use the work sheet to enter the adjusting and closing entries; then journalize them.

3. Prepare the income statement and the statement of owner%u2019s equity for the year ended June 30 and

the classified balance sheet at June 30, 2005.

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 for $3,200 and

a debit for $3,200 to Supplies Expense.

b. When the adjusted trial balance in the work sheet is completed, the $17,500 Cash balance is

incorrectly entered in the Credit column.

Explanation / Answer

a. The supplies available at the end of fiscal year 2005 had a cost of $3,200. ==============================================================================================================================Dr Supplies Expense 5,700 ============================================================================================================================== crSupplies 5,700 ==============================================================================================================================b. The cost of expired insurance for the fiscal year is $3,900. ==============================================================================================================================Dr Insurance Expense 3,900 ==============================================================================================================================Cr Prepaid Insurance 3,900 ==============================================================================================================================c. Annual depreciation on equipment is $8,500. ==============================================================================================================================Dr Depreciation Expense, Equipment 8,500 ==============================================================================================================================Cr accumulated depreciation8,500 ==============================================================================================================================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. Dr Utilities Expense 550 Cr Accounts Payable 550 ============================================================================================================================================================================================================================================================e. The company

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