Problem 4-3B Preparing a work sheet, adjusting and closing entries, and financia

Question

Problem 4-3B
Preparing a work sheet, adjusting and closing entries, and financial statementsC3P1P2
The following unadjusted trial balance is for Power Demolition Company as of the end of its April 30, 2013, fiscal year. The April 30, 2012, credit balance of the owner’s capital account was $46,900, and the owner invested $40,000 cash in the company during the 2013 fiscal year.

Required

1.Prepare and complete a 10-column work sheet for fiscal year 2013, starting with the unadjusted trial balance and including adjustments based on these additional facts.
a.The supplies available at the end of fiscal year 2013 had a cost of $7,900.
b.The cost of expired insurance for the fiscal year is $10,600.
c.Annual depreciation on equipment is $7,000.
d.The April utilities expense of $800 is not included in the unadjusted trial balance because the bill arrived after the trial balance was prepared. The $800 amount owed needs to be recorded.
e.The company’s employees have earned $2,000 of accrued wages at fiscal year-end.
f.The rent expense incurred and not yet paid or recorded at fiscal year-end is $3,000.
g.Additional property taxes of $550 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 12% per year. The unadjusted Interest Expense account equals the amount paid for the first 11 months of the 2013 fiscal year. The $300 accrued interest for April has not yet been paid or recorded. (Note that the company is required to make a $10,000 payment toward the note payable during the 2014 fiscal year.)
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2.Using information from the completed 10-column work sheet in part 1, journalize the adjusting entries and the closing entries.
3.Prepare the income statement and the statement of owner’s equity for the year ended April 30 and the classified balance sheet at April 30, 2013.
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 the adjusting entry to reflect expiration of insurance coverage for the period was recorded with a $2,000 credit to Prepaid Insurance and a $2,000 debit to Insurance Expense. The adjustment should have been for $10,600.
b.When the adjusted trial balance in the work sheet was completed, assume that the $4,700 Repairs Expense account balance is extended to the Debit column of the balance sheet columns.

Check(3) Total assets, $195,900; current liabilities, $23,450; Net income, $77,550

                          unadjusted trial balance 30-Apr-13 Account Debit Credit cash 7000 supplies 16000 perpaid insurance 12600 Equipment 200000 Accumulated depreciation-Equipment 14000 Accounts payable 6800 Interest payble 0 rent payable 0 wages payable 0 Property taxes payable 0 long-term notes payable 30000 J.Bonn,Capital 86900 J.Bonn,Withdrawals 12000 Demolition fees earned 187000 Depreciation expense-Equipment 0 Wages expense 41400 insurance 0 Interest expense 3300 Rent expense 13200 Supplies expense 0 Property taxes expense 9700 Repairs expenses 4700 Utilities exp. 4800 Totals 3,24,700 3,24,700

Explanation / Answer

Adjusting Entries:

Date Account Title Debit Credit xxx Supplies Expenses 8,100 Supplies 8,100 (Recording of supplies expenses) xxx Insurance Expenses 10,600 Prepaid Insurance 10,600 (Recording of insurance) xxx Depreciation Expenses 7,000 Accumulated Depreciation 7,000 (Recording of Depreciation) xxx Utilities Expenses 800 Cash 800 (Recording of utilities) xxx Wages 2,000 Accrued Wages 2,000 (Recording of accrued wages) xxx Rent Expenses 3,000 Rent Payable 3,000 (Recording of unpaid rent) xxx Property Tax Expenses 550 Property Tax Payable 550 (Recording of unpaid property tax) xxx Interest Expenses 300 Interest Payable 300 (Recording of Interest expenses)

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