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  • 1. Chapter 4 Adjusting Entries and the Work Sheet
  • 2. Accounting at Activision
    • At Activision, property and equipment consists of buildings, computer equipment, leasehold improvements, office furniture, and other miscellaneous equipment.
    • Consider how Activision records wear and tear on these assets.
    © Royalty-Free/Corbis
  • 3. Performance Objectives
    • Define f iscal period and fiscal year .
    • List the classifications of the accounts that occupy each column of a ten-column work sheet.
    • Complete a work sheet for a service enterprise, involving adjustments for expired insurance, depreciation, and accrued wages.
  • 4. Performance Objectives (cont’d)
    • Prepare an income statement, a statement of owner’s equity, and a balance sheet for a service business directly from the work sheet.
    • Journalize and post adjusting entries.
  • 5. Performance Objectives (cont’d)
    • Prepare
      • an income statement involving more than one revenue account and a net loss,
      • a statement of owner’s equity with an additional investment and either a net income or a net loss,
      • a balance sheet for a business having more than one accumulated depreciation account, and
      • a balance sheet containing the statement of owner’s equity information.
  • 6. Performance Objective 1
    • Define f iscal period and fiscal year .
    © Royalty Free C Squared Studios/ Getty Images
  • 7. Fiscal Period
    • Any period of time covering a complete accounting cycle
    • The period could be:
      • One month
      • One quarter
      • One year
  • 8. Fiscal Year
    • A fiscal period consisting of twelve consecutive months
    • Does not have to coincide with the calendar year
  • 9. Accounting Cycle
    • The sequence of steps in the accounting process completed during the fiscal period
    © Royalty Free C Squared Studios/ Getty Images
  • 10. Steps in the Accounting Cycle Chapter 3
    • Analyze source documents and record business transactions in a journal.
    • Post journal entries to the ledger accounts.
    • Prepare a trial balance.
    Chapter 4
    • Gather adjustment data and record adjustments in the work sheet.
    • Complete the work sheet.
    • Prepare financial statements from data in work sheet.
    • Journalize and post the adjusting entries.
    Chapter 5
    • Journalize and post the closing entries.
    • Prepare a post-closing trial balance.
  • 11.  
  • 12. Work Sheet
    • A working paper used by accountants to record necessary adjustments and provide up-to-date account balances needed to prepare the financial statements
    • A tool used by accountants to bring all the account information together to prepare financial statements
  • 13. Work Sheet (cont’d)
  • 14. Performance Objective 2
    • List the classifications of the accounts that occupy each column of a ten-column work sheet.
    © Royalty Free C Squared Studios/ Getty Images
  • 15. Classifications of Accounts in a Column Work Sheet
    • What are the classifications of accounts that appear in the Trial Balance, Income Statement, and Balance Sheet columns?
    • Remember your T accounts:
  • 16. Fundamental Accounting Equation and Normal Balances of Accounts
  • 17. Income Statement Columns: Revenue Minus Expenses
  • 18. Balance Sheet Columns: Assets Equal Liabilities Plus Owner’s Equity
  • 19. Classifications of Accounts in Each Column of a Work Sheet
  • 20. Classifications of Accounts in Each Column of a Work Sheet (cont’d)
  • 21. Classifications of Accounts in Each Column of a Work Sheet (cont’d)
  • 22. Performance Objective 3
    • Complete a work sheet for a service enterprise, involving adjustments for expired insurance, depreciation, and accrued wages.
    © Royalty Free PhotoDisc Blue/ Getty Images
  • 23. Adjustments
  • 24. Adjustments (cont’d)
    • Internal transactions that bring ledger accounts up to date as a planned part of the accounting procedure
    • First recorded in the Adjustments columns of the work sheet
    • Directly affect accounts on the
      • Income statement
      • Balance sheet
    • Make financial statements more accurate
  • 25. Adjustment for Prepaid Insurance
    • When a company pays for insurance in advance, it is debited to Prepaid Insurance.
    • The expired portion is credited to Prepaid Insurance and debited to Insurance Expense.
  • 26. Recording the Adjustment on the Work Sheet
    • Label the debit and credit amounts of the adjustment with (a) in the Adjustment columns.
    • Extend the new amount in the Prepaid Insurance account to the Balance Sheet debit column.
    • Extend the new amount for the Insurance Expense account to the Income Statement debit column.
  • 27. Adjustment for Prepaid Insurance Recorded in Work Sheet
  • 28. Depreciation
    • Depreciation is an expense based on the expectation that an asset will gradually decline in usefulness due to time, wear and tear, or obsolescence; the cost of the asset is therefore spread out over its estimated useful life.
    • A portion of depreciation expense is allotted to each fiscal period.
  • 29. Depreciation (cont’d)
    • Systematically spreads out the cost of these assets over their useful lives
    • Matches the expenses for one period to the revenue generated for that same period
  • 30. Straight-line Depreciation
    • A means of calculating depreciation in which the cost of an asset, less any trade-in value, is allocated evenly over the useful life of the asset
    • (Cost - Trade-in Value)/(Useful Life in Years)
    Cost of Equipment $83,720.00 Salvage $13,160.00 Useful Life in Years 7 Cline’s Computer Clinic
  • 31. Calculating Straight-line Depreciation
    • Subtract the trade-in value from the cost to get the depreciable amount.
    • $83,720 - $13,160 = $70,560
  • 32. Calculating Straight-line Depreciation (cont’d)
    • Divide the depreciable amount by the number of years of useful life.
    • $70,560  7 years = $10,080 per year
  • 33. Calculating Straight-line Depreciation (cont’d)
    • Divide the depreciation for one year by 12.
    • $10,080  12 months = $840 per month
  • 34. Adjustment for Depreciation of Equipment
    • Now that we have calculated the depreciation expense, what is the adjustment?
    Depreciation Expense, Equipment 840 Accumulated Depreciation, Equipment 840 Why don’t we credit the Equipment account for this depreciation? The Equipment account must remain at the original cost. Debit Credit
  • 35. Contra Accounts
    • Contra account
      • An account that is contrary to, or a deduction from, another account
    • Contra asset account
      • An account that is contrary to or a deduction from its companion asset account
    • Accumulated Depreciation, Equipment is a contra account.
  • 36. Accumulated Depreciation
    • Contra asset account:
      • A contra asset account is “connected” to the related asset account.
      • Debits and credits are the same.
      • Plus and minus signs are reversed because the contra asset account is subtracted from the related asset account.
    • Depreciation is recorded in the contra asset account.
    • Depreciation is never subtracted directly from the related asset.
  • 37. Accumulated Depreciation (cont’d)
  • 38. Book Value or Carrying Value
    • The cost of an asset minus its accumulated depreciation
    • Listed on the balance sheet
  • 39. Adjustment for Depreciation Recorded in Work Sheet
  • 40. Adjustment for Wages Expense
    • Why is this adjustment necessary?
      • The end of the pay period rarely falls on the same day as the end of the fiscal period.
    • Accrued wages
      • The amount of unpaid wages owed to employees for the time between the end of the last pay period and the end of the fiscal period
    • Accounts used:
      • Wages Expense (DR)
      • Wages Payable (CR)
  • 41. Adjustment for Wages Expense (cont’d)
  • 42. Adjustment for Wages Expense (cont’d)
  • 43. Adjustment for Wages Expense (cont’d)
  • 44. Adjustment for Wages Expense for Cline’s Computer Clinic
  • 45. Adjustment for Wages Expense Recorded in Work Sheet
  • 46. Placement of Accounts in the Work Sheet
    • Pay special attention to the Capital and Drawing accounts.
    • The normal balance of the Capital account is a credit.
    • The normal balance of the Drawing account is a debit.
    R.P. Cline, Capital R.P. Cline, Drawing - + + - Debit Credit Balance Debit Balance Credit
  • 47. Placement of Accounts in the Work Sheet (cont’d)
    • Pay special attention to the normal balances of the Equipment and Accumulated Depreciation, Equipment accounts.
  • 48. Placement of Accounts in the Work Sheet (cont’d)
    • Enter adjustments.
    • Extend amounts to Income Statement and Balance Sheet columns.
    • Calculate net income.
  • 49. Calculating Net Income E R
  • 50. Complete a Work Sheet for a Service Enterprise
  • 51. Steps to Complete Work Sheet
    • Complete Trial Balance columns, total, and rule (DR = CR).
    • Complete Adjustments columns, total, and rule (DR = CR).
      • Label entries with letter references: (a), (b), etc.
    • Complete Adjusted Trial Balance columns, total, and rule (DR = CR).
    • Record balances in Income Statement and Balance Sheet columns and total each column (DR ≠ CR).
  • 52. Steps to Complete Work Sheet (cont’d)
    • Record net income or net loss.
      • Subtract the smaller of the Income Statement columns from the larger; add the difference to the smaller side, total, and rule (DR = CR).
      • If there is a net income, the credit side of the columns will be larger and you will place net income on the debit side.
      • If there is a net loss, the debit side of the columns will be larger and you will place net loss on the credit side.
  • 53. Steps to Complete Work Sheet (cont’d)
    • Record net income or net loss in the Balance Sheet columns.
      • Subtract the smaller side from the larger side; add the difference to the smaller side, total, and rule (DR = CR).
      • The amount should equal the difference between the Income Statement columns.
  • 54. Work Sheets with Two Pages
    • Totals at the bottom of the first page of the work sheet may not be equal.
    • DR must equal CR at the bottom of the second or last page.
  • 55. Finding Errors in Income Statement and Balance Sheet Columns
    • Are the totals across the Adjusted Trial Balance columns correct?
    • Are the Adjusted Trial Balance amounts moved to the correct column?
      • Revenues and expenses to Income Statement columns?
      • Everything else to Balance Sheet columns?
    • Is the addition for totals and footings correct?
    • Is net income or net loss placed in the correct columns?
  • 56. Performance Objective 4
    • Prepare an income statement, a statement of owner’s equity, and a balance sheet for a service business directly from the work sheet.
    © Royalty Free PhotoDisc Blue/ Getty Images
  • 57. Income Statement
    • Copy all revenue and expenses from the Income Statement columns to the income statement.
  • 58. Statement of Owner’s Equity
    • Always check the beginning balance of the Capital account.
    • Were there any additional investments?
    • Record net income or net loss.
    • Were there any withdrawals?
    • Remember:
      • Since we list the Capital account twice, the appropriate date must be included alongside the account title.
  • 59. Statement of Owner’s Equity (cont’d)
  • 60. Balance Sheet
    • Copy all assets, contra asset accounts, and liabilities to the balance sheet.
    • Use the ending Capital account balance from the statement of owner’s equity.
    • The date for the statement is the end of the period date (just one day).
  • 61. Balance Sheet (cont’d)
  • 62. Performance Objective 5
    • Journalize and post the adjusting entries.
    © Royalty Free PhotoDisc Blue/ Getty Images
  • 63. Why Journalize and Post?
    • Adjustments are only on the work sheet, not officially in the books.
    • Adjusting entries are necessary to bring the books up to date at the end of the fiscal period.
    • First journalize the adjustments in the general journal.
    • Then post the adjustments to the appropriate ledger account.
  • 64. Ethics Discussion
    • The bookkeeper for Casual Wear Inc. decides not to record the adjustment for depreciation this month. She says that she’ll catch up on the adjustments next month when she has more time. What is the ethical problem with her decision?
    If investors or managers rely on this month’s financial statements for decision making, the income statement will overstate income by the amount of unrecorded depreciation.
  • 65. Journal Entries Be sure to write “Adjusting Entries” before you begin the entries.
  • 66. Post the Journal Entries Be sure to write “Adjusting” in the Item column.
  • 67. Performance Objective 6
    • Prepare
      • an income statement involving more than one revenue account and a net loss,
      • a statement of owner’s equity with an additional investment and either a net income or a net loss,
      • a balance sheet for a business having more than one accumulated depreciation account, and
      • a balance sheet containing the statement of owner’s equity information.
  • 68. An Income Statement Involving More Than One Revenue Account and a Net Loss
  • 69. A Statement of Owner’s Equity with an Additional Investment and Net Income
  • 70. A Statement of Owner’s Equity with an Additional Investment and a Net Loss
  • 71. An Income Statement with More Than One Depreciation Expense Account
  • 72. A Balance Sheet with More Than One Accumulated Depreciation Account
  • 73. Internet Research
    • Locate the most recent annual balance sheet for NCI Building Systems, Inc.
    • Review the Notes to the Financial Statements for information about the company’s property, plant, and equipment for which depreciation is recorded.
    • What kinds of assets does the company depreciate?
    The company depreciates buildings and improvements; machinery, equipment, and furniture; transportation equipment; and computer software and equipment. http://www.ncilp.com/nci/investor_relations.htm
  • 74. A Balance Sheet Containing Statement of Owner’s Equity Information
  • 75. Review Question
    • What is the difference between a fiscal period and a fiscal year?
    A. fiscal period is any period of time covering a complete accounting cycle. A fiscal year is always twelve months, but does not have to coincide with the calendar year.
  • 76. Review Question
    • What are the classifications at the top of each column of a ten-column work sheet?
    A. Trial Balance, Adjustments, Adjusted Trial Balance, Income Statement, and Balance Sheet
  • 77. Review Question
    • What two accounts are affected by an adjustment to record depreciation?
    A. Depreciation Expense and Accumulated Depreciation
  • 78. Review Question
    • What is an accrual?
    A. Recognition of an expense or a revenue that has been incurred (expense) or earned (revenue) but has not yet been recorded
  • 79. Demonstration Problem
    • The account balances of Colfeld Company as of June 30, 2007, the end of the fiscal year, are shown on the following slide.
    • We will complete the following tasks:
      • Complete the work sheet.
      • Prepare an income statement.
      • Prepare a statement of owner’s equity.
      • Prepare a balance sheet.
      • Journalize the adjusting entries.
  • 80. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 Prepaid Auto Insurance 1,138.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR DR
  • 81. Adjustment Data
  • 82. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 a) 200.00 Prepaid Auto Insurance 1,138.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 Income Statement Account Name CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance
  • 83. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 a) 200.00 Prepaid Auto Insurance 1,138.00 b) 100.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 Auto Insurance Expense b) 100.00 Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR DR
  • 84. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 a) 200.00 Prepaid Auto Insurance 1,138.00 b) 100.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 Auto Insurance Expense b) 100.00 Depreciation Expense, Equipment c) 500.00 DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR
  • 85. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 a) 200.00 Prepaid Auto Insurance 1,138.00 b) 100.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 d) 400.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 Auto Insurance Expense b) 100.00 Depreciation Expense, Equipment c) 500.00 Salaries Payable d) 400.00 1,200.00 1,200.00 CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name
  • 86. Extend the amounts in the Trial Balance columns and the Adjustments columns to the Adjusted Trial Balance columns.
  • 87. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 Equipment 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 Accounts Payable 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 Advertising Expense 887.00 887.00 Utilities Expense 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 Salaries Payable d) 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 Account Name CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement
  • 88. Carry the appropriate amounts to either the Income Statement columns or the Balance Sheet columns. Then calculate net income or net loss.
  • 89. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 Equipment 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 Accounts Payable 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 16,400.00 Advertising Expense 887.00 887.00 887.00 Utilities Expense 685.00 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 500.00 Salaries Payable d) 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 18,772.00 38,331.00 Income Statement Account Name CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance
  • 90. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 1,038.00 Equipment 5,713.00 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 2,987.00 Accounts Payable 997.00 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 16,400.00 Advertising Expense 887.00 887.00 887.00 Utilities Expense 685.00 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 500.00 Salaries Payable d) 400.00 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 18,772.00 38,331.00 29,907.00 10,348.00 Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR DR
  • 91. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 1,038.00 Equipment 5,713.00 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 2,987.00 Accounts Payable 997.00 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 16,400.00 Advertising Expense 887.00 887.00 887.00 Utilities Expense 685.00 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 500.00 Salaries Payable d) 400.00 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 18,772.00 38,331.00 29,907.00 10,348.00 Net Income 19,559.00 38,331.00 38,331.00 DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR
  • 92. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 1,038.00 Equipment 5,713.00 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 2,987.00 Accounts Payable 997.00 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 16,400.00 Advertising Expense 887.00 887.00 887.00 Utilities Expense 685.00 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 500.00 Salaries Payable d) 400.00 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 18,772.00 38,331.00 29,907.00 10,348.00 Net Income 19,559.00 19,559.00 38,331.00 38,331.00 29,907.00 29,907.00 CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name
  • 93. Prepare an Income Statement Revenue: Professional Fees $38,331.00 Expenses: Salary Expense $16,400.00 Advertising Expense 887.00 Utilities Expense 685.00 Property Insurance Expense 200.00 Auto Insurance Expense 100.00 Depreciation Expense, Equipment 500.00 Total Expenses 18,772.00 Net Income $19,559.00 For Year Ended June 30, 2007 Colfeld Company Income Statement
  • 94. Prepare a Statement of Owner’s Equity S. Colfeld, Capital, July 1, 2006 $5,964.00 Net Income for the Year $19,559.00 Less Withdrawals 18,000.00 Increase in Capital 1,559.00 S. Colfeld, Capital, June 30, 2007 $7,523.00 Colfeld Company Statement of Owner's Equity For Year Ended June 30, 2007
  • 95. Prepare a Balance Sheet Assets Cash $4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 197.00 Prepaid Auto Insurance 1,038.00 Equipment $5,713.00 Accumulated Depreciation, Equipment 2,987.00 2,726.00 Total Assets $8,920.00 Liabilities Accounts Payable $997.00 Salaries Payable 400.00 Total Liabilities $1,397.00 Owner's Equity S. Colfeld, Capital 7,523.00 Total Liabilities & Owner's Equity $8,920.00 Colfeld Company Balance Sheet June 30, 2007
  • 96. Journalize the Adjusting Entries Description Post. Ref. Debit Credit 1 Adjusting Entries 2 2007 3 June 30 Property Insurance Expense 200.00 4 Prepaid Property Insurance 200.00 5 6 7 8 9 10 11 12 13 14 General Journal Date Page 43 Line #
  • 97. Journalize the Adjusting Entries (cont’d) Description Post. Ref. Debit Credit 1 Adjusting Entries 2 2007 3 June 30 Property Insurance Expense 200.00 4 Prepaid Property Insurance 200.00 5 6 30 Auto Insurance Expense 100.00 7 Prepaid Auto Insurance 100.00 8 9 10 11 12 13 14 General Journal Date Page 43 Line #
  • 98. Journalize the Adjusting Entries (cont’d) Description Post. Ref. Debit Credit 1 Adjusting Entries 2 2007 3 June 30 Property Insurance Expense 200.00 4 Prepaid Property Insurance 200.00 5 6 30 Auto Insurance Expense 100.00 7 Prepaid Auto Insurance 100.00 8 9 30 Depreciation Expense, Equipment 500.00 10 Accumulated Depreciation, Equipment 500.00 11 12 13 14 General Journal Date Page 43 Line #
  • 99. Journalize the Adjusting Entries (cont’d) Description Post. Ref. Debit Credit 1 Adjusting Entries 2 2007 3 June 30 Property Insurance Expense 200.00 4 Prepaid Property Insurance 200.00 5 6 30 Auto Insurance Expense 100.00 7 Prepaid Auto Insurance 100.00 8 9 30 Depreciation Expense, Equipment 500.00 10 Accumulated Depreciation, Equipment 500.00 11 12 30 Salary Expense 400.00 13 Salaries Payable 400.00 14 General Journal Date Page 43 Line #
  • 100. Chapter Review
    • Define fiscal period and fiscal year.
    • List the classifications of the accounts that occupy each column of a ten-column work sheet.
    • Complete a work sheet for a service enterprise, involving adjustments for expired insurance, depreciation, and accrued wages.
  • 101. Chapter Review (cont’d)
    • Prepare an income statement, a statement of owner’s equity, and a balance sheet for a service business directly from the work sheet.
    • Journalize and post adjusting entries.
  • 102. Chapter Review (cont’d)
    • Prepare
      • an income statement involving more than one revenue account and a net loss,
      • a statement of owner’s equity with an additional investment and either a net income or a net loss,
      • a balance sheet for a business having more than one accumulated depreciation account, and
      • a balance sheet containing the statement of owner’s equity information.