Work Together Problem 14.1-14.6Problem Number Work Together 14.2.docx

Work Together Problem 14.1-14.6Problem Number: Work
Together 14.2 - 14.6Student's Name:Coastal Aquatics Work
SheetFor Year Ended December 31, 2020Work Together 14-
2Work Together 14-3 to 14-6Trial BalanceAdjustmentsIncome
StatementBalance SheetAccount
TitleDebitCreditDebitCreditDebitCreditDebitCreditCash18,485.
000.00[F]Petty Cash300.000.00[F]Accounts
Receivable[F]Allow. for Uncoll.
Accounts0.00524.84[F]Merchandise
Inventory248,752.250.00[F]Supplies--
Office5,485.25(a)0.00[F]Supplies--Store4,578.360.00[F]Prepaid
Insurance6,200.000.00[F]Office
Equipment35,487.250.00[F]Acc. Depr.--Office
Equipment0.0012,485.25[F]Store
Equipment40,849.500.00[F]Acc. Depr.--Store
Equipment0.0015,483.25[F]Accounts Payable[F]Federal Income
Tax Payable0.000.00[F]Emp. Income Tax Pay.--
Fed.0.00998.00[F]Social Security Tax
Payable0.00774.07[F]Medicare Tax Payable0.00181.03[F]Sales
Tax Payable0.001,848.35[F]Unemp. Tax Pay.--
Federal0.0024.00[F]Unemp. Tax Pay.--
State0.00162.00[F]Health Ins. Premiums Pay.0.00950.00[F]U.S.
Savings Bonds Payable0.0080.00[F]United Way Donations
Pay.0.0075.00[F]Dividends Payable0.0010,000.00[F]Capital
Stock 0.00175,000.00[F]Retained
Earnings0.0012,577.45[F]Dividends21,000.000.00[F]Income
Summary0.000.00[F]Sales[F]Sales Discount648.250.00[F]Sales
Returns and Allow.8,157.270.00[F]Purchases[F]Purchases
Discount0.004,615.25[F]Purch. Returns and
Allow.0.009,497.00[F]Advertising
Expense15,280.000.00[F]Cash Short and
Over12.850.00[F]Credit Card Fee Expense6,482.270.00[F]Depr.
Exp.--Office Equipment0.000.00[F]Depr. Exp.--Store
Equipment0.000.00[F]Insurance

Expense0.000.00[F]Miscellaneous
Expense4,568.970.00[F]Payroll Taxes
Expense16,184.250.00[F]Rent Expense24,000.000.00[F]Salary
Expense204,180.85[F]Supplies Expense--
Office0.000.00(a)0.00[F]Supplies Expense--
Store0.000.00[F]Uncollectible Accounts
Exp.0.000.00[F]Utilities Expense4,264.280.00[F]Fed. Income
Tax Expense40,000.000.00[F][F][F][F][F][F][F][F][F]Net Inc.
after Fed. Income Tax[F][F][F][F][F][F]Column
Verification[L][L][L][L]Work Together 14-6Before Federal
Income TaxFederal Income TaxRateTotal of Income Statement
Credit[F]First $50,00015%[F]Total of Income Statement
Debit[F]Next $25,00025%[F]Net Income Before Federal
Taxes[F]Next $25,00034%[F][F]-100,000.00 =[F]39%[F]Total
Federal Income Tax[F]
&A &P of © 2009 South-Western, Cengage Learning
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage
Learning
Chapter 14
I can understand how to
begin an 8-Column Work
Sheet for a
Merchandising Business
by completing
adjustments.
Learning

2
LESSON 14-2
RECORDING A TRIAL BALANCE ON A
WORK SHEET page 410
1
3
21. Account
title2. Account balance
3. Total, prove, and
rule the debit and
credit columns
I will understand how to begin an 8-Column Work Sheet for a
Merchandising Business by completing adjustments.
Learning
3
LESSON 14-2
ANALYZING AND RECORDING SUPPLIES
ADJUSTMENTS page 411
Adj. (a) 2,730.00
Supplies Expense—Office

Dec. 31 Bal. 3,480.00 Adj. (a) 2,730.00
(Adj Bal. 750.00)
Supplies—Office
Adj. (b) 2,910.00
Supplies Expense—Store
Dec. 31 Bal. 3,944.00 Adj. (b) 2,910.00
(Adj Bal. 1,034.00)
Supplies—Store
Supplies on
hand during
the year
Supply amount after
all were counted
difference
Supply amount after
all were counted
Supplies on
hand during
the year difference

Learning
4
LESSON 14-2
RECORDING SUPPLIES ADJUSTMENTS
ON A WORK SHEET page 412
2
1
1. Write the debit amounts in the Adjustments Debit column.
2. Write the credit amounts in the Adjustments Credit column.
3. Label the two parts of the Supplies—Office adjustment with
small
letter a and small letter b in parentheses.
3
3
Learning
5
LESSON 14-2

ANALYZING AND RECORDING A PREPAID
INSURANCE ADJUSTMENT
1
2
3
3
page 413
1. Enter the amount of insurance
used in the Adjustments Credit
column.2. Enter the same amount in the
Adjustments Debit column.
3. Label the two parts of the
adjustment with a small letter c in
parentheses.
Learning
Chapter 14 – 2
Work Together
6
LESSON 14-1

Learning
Chapter 14 – 2
Work Together
7
LESSON 14-1
How to start:
Open the worksheet (on classroom – prefilled)
Read the directions on the first tab; switch to the second tab for
the worksheet
Enter in the missing account amounts (I prefilled the account
titles)
Total the Trial Balance (debit & credit columns)– since we are
using a digital
worksheet, you can easily find the totals with a formula
Begin adjustments – find the total of adjustment by using the
equation (you must find
the number it is NOT given), enter in the appropriate debit and
credit column next to
the appropriate account title
**You MUST have a debit and a credit for each adjustment
**When you finish this section you will have 3 debits and 3

credits
Learning
Chapter 14 – 2
Work Together
8
LESSON 14-1
How to start:
If you see [F] – you MUST have a total or number in this cell
NO EXCEPTION! That is a hint!
You can use formulas in cells when possible.
Ie. = sum(A:A15) - this will give you the total of all those cells
if they have #s
Learning
Here is some help!
Enter your name
9
LESSON 14-2

Learning
Here is some help!
Enter missing totals – there are 4
10
LESSON 14-2
Learning
Here is some help!
Enter missing totals – there are 4
11
LESSON 14-2
Learning
Here is some help!
Total the Debit & Credit column for Trial Balance
12
LESSON 14-2

Learning
Here is some help!
Find the adjustments for the Supplies- Office
Do not forget to enter the little letter (a)
13
LESSON 14-2
Learning
Here is some help!
Find the adjustments for the Supplies- Store
Do not forget to enter the little letter (b)
14
LESSON 14-2
Learning
Here is some help!
Find the adjustments for the Prepaid Insurance

Do not forget to enter the little letter (c)
15
LESSON 14-2
Instructions © 2009 South-Western, Cengage Learning
TITLE F14-2 Beginning an 8-column work sheet for a
merchandising business
F14-3 Analyzing and recording a merchandise inventory
adjustment on a worksheet
STEPS 1. Read all of the steps before completing the
spreadsheet.
2. Click the Work Together Problem tab to view the blank data
file.
3. Key your name in cell B2.
4. Key, For Month Ended December 31, 20-- (use the current
year), in cell C5.
5. Cells containing [F] require a formula. Create and key
formulas to total the Trial Balance columns.
6. Cells containing [L] require a logical formula. Use the
logical formula described on page 443 in your
textbook.
The IF function is another type of logical formula. IF
functions compare two values and produce one result if
the comparison is TRUE and an alternate result if the
comparison is FALSE.
Try using an IF function in step 6. The result should show

the amount of the variance if the column totals are
out of balance or OK if they are in balance. Consult Help if you
need assistance with IF functions.
7. Key in the missing account totals for--Accounts Receivable,
Account Payable, Sales, and Purchases on
the approriate line of the Trial Balance column. Use column B
for a debit amount and C for credit
amount.
8. Key the adjusting entries for Supplies--Office, Supplies--
Store, Prepaid Insurance and Merchandise
Inventory on the appropriate line of the Adjustments Debit or
Credit column. Use column E for a debit
amount and Column G for a credit amount.
9. Key the letter of the adjustment, in parenthesis, on the
appropriate line of column D for debit entry and
column F for a credit entry. [Hint: to avoid the © symbol when
keying "c", add an extra space in the (
c).]
This data file will also be used to complete Work Together 14-3
through 14-6.
STEPS 10. Key the adjusting entries for Merchandise Inventory
Account on the appropriate line of the Adjustments
Debit or Credit column. Use column E for a debit amount and
Column G for a credit amount.
11. Key the adjusting entries for Allowance for Uncollectible
Accounts and Depreciation on the appropriate
line of the Adjustments Debit or Credit column. Use column E
for a debit amount and Column G for a
credit amount.

Instructions © 2009 South-Western, Cengage Learning
12. Key the adjusting entries for Depreciation on the
appropriate line of the Adjustments Debit or Credit
column. Use column E for a debit amount and Column G for a
credit amount.
13. Create formulas to extend the amounts from the Trial
Balance and Adjustments columns to the Income
Statement (except Federal Income Tax Expense) and Balance
Sheet columns. Extend Federal Income
Tax Expense from cell J70.
11. Create formulas to subtotal the columns. Calculate Federal
Income Tax Expense using the ROUND
function.
12. Calculate the Federal Income Tax Expense adjustment and
extend the amounts to the Income
Statement columns.
13. Calculate Net Income After Federal Income Tax. Create
formulas to calculate the remaining column
totals. Extend the amount to the appropriate Balance Sheet
column.
14. Check to see that all sets of columns are in balance. Make
corrections as needed.
15. Save and Submit the spreadsheet.
402

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4. Begin a work sheet for a merchandising business.
5. Plan work sheet adjustments for merchandise
inventory, supplies, prepaid expenses, uncollect-
ible accounts, and depreciation.

6. Calculate federal income tax and plan the work
sheet adjustment for federal income tax.
7. Complete a work sheet for a merchandising
business.
After studying Chapter 14, you will be able to:
1. Define accounting terms related to distribut-
ing dividends and preparing a work sheet for a
merchandising business.
2. Identify accounting concepts and practices
related to distributing dividends and preparing a
work sheet for a merchandising business.
3. Journalize the declaration and payment of a
dividend.
C H A P T E R 1 4 Distributing Dividends
and Preparing a
Work Sheet for a
O B J E C T I V E S
K E Y T E R M S
• retained earnings
• dividends
• board of directors
• declaring a dividend
• merchandise inventory
• uncollectible accounts

• allowance method of
recording losses from
uncollectible accounts
• book value
• book value of accounts
receivable
• current assets
• plant assets
• depreciation expense
• estimated salvage value
• straight-line method of
depreciation
• accumulated
depreciation
• book value of a plant
asset
www.C21accounting.com
Point Your Browser( )
402
Copyright 2010 Cengage Learning. All Rights Reserved.
May not be copied, scanned, or duplicated, in whole or in part.
Due to electronic rights, some third party content may be
suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does
not materially affect the overall learning experience. Cengage
Learning reserves the right to remove additional content at any
time if subsequent rights restrictions require it.

Finding Stock Prices
Many company web sites give
a history of the stock prices
for the company’s stock. Go to
the homepage for a company
of your choice. Look under a
heading such as “About Us”
or “Investor Relations” to find
information about the price of
the company’s stock.
Instructions
1. Find the closing stock price
from the previous day’s
trading.
2. Find the highest price for
which the stock sold on
the previous day.

3. Find the lowest price for
which the stock sold on
the previous day.
A C C O U N T I N G I N T H E R E A L W O R L D
I N T E R N E T
A C T I V I T Y
403
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Lowe’s
Lowe’s—the Good Neighbor
Welcome to the neighborhood! That’s the reaction Lowe’s
wants when
it opens a store in your neighborhood. Lowe’s is working to
make home
improvement more convenient for its customers. By providing
the right

products at the right price, whether in local stores or at
Lowes.com, the com-
pany seeks to make it easy for its customers to improve the
quality and value
of their homes.
Lowe’s is also investing in its community. The company
provides relief
supplies to victims of natural disasters, financial support for
Habitat for
Humanity, and educational grants to K-12 public
education systems.
Community involvement is impor-
tant to the employees at Lowe’s.
The company encourages vol-
unteerism through Lowe’s
Heroes, a program focused
on home safety. Looking
out for your neighbor—
that’s what being a good
neighbor is all about.

Critical Thinking
1. Beyond having quality products at a fair price, how do
Lowe’s and
other home improvement companies assist customers to
improve
their homes?
2. How should Lowe’s account for a donation of lumber to a
Habitat for
Humanity house?
Source: www.lowes.com
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L E S S O N
14-1
Distributing Corporate
Earnings to Stockholders
Management decisions about future business operations
are often based on financial information. This informa-
tion shows whether a profit is being made or a loss is being
incurred. Profit or loss information helps an owner or
manager determine future changes. Financial information
is also needed to prepare required tax reports.

Hobby Shack uses a fiscal year that begins on January 1
and ends on December 31. Therefore, Hobby Shack sum-
marizes its financial information on December 31 of each
year.
F I N A N C I A L I N F O R M AT I O N
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A company that believes one of
its employees is stealing may
obtain the services of a Cer-
tified Fraud Examiner (CFE).
The CFE is trained to examine
accounting records and obtain
other evidence related to the
alleged theft. CFEs often serve
as expert witnesses in court. The
Code of Professional Ethics of the
Association of Certified Fraud Examin-
ers provides its members with guidance on
how to serve as an expert witness. The Code states that
the CFE should obtain evidence that provides a reason-
able basis for his or her opinion. However, the CFE should
never express an opinion on the guilt or innocence of any
person.
Instructions

Access the ACFE Code of Professional Ethics of the Associa-
tion of Certified Fraud Examiners at www.cfenet.com. Cit-
ing the section, what other advice does the Code provide
a CFE when serving as an expert witness?
He’s Gui l t y !
C H A R A C T E R C O U N T S
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404 Chapter 14 Distributing Dividends and Preparing a Work
Sheet for a Merchandising Business
A corporation’s ownership is divided into units. Each
unit of ownership in a corporation is known as a share of
stock. An owner of one or more shares of a corporation is
known as a stockholder. Each stockholder is an owner of a
corporation.
Owners’ equity accounts for a corporation normally
are listed under a major chart of accounts division titled
Stockholders’ Equity.

Most corporations have many stockholders. It is not
practical to have a separate owner’s equity account for each
stockholder. Instead, a single owners’ equity account, titled
Capital Stock, is used for the investment of all owners.
A second stockholders’ equity account is used to record
a corporation’s earnings. Net income increases a corpo-
ration’s total stockholders’ equity. Some income may be
retained by a corporation for business expansion. An
amount earned by a corporation and not yet distributed
to stockholders is called retained earnings. Retained Earn-
ings is the title of the account used to record a corpora-
tion’s earnings.
Some income may be given to stockholders as a return
on their investments. A third stockholders’ equity account
is used to record the distribution of a corporation’s earn-
ings to stockholders. Earnings distributed to stockholders
are called dividends. A corporation’s dividend account is
a temporary account similar to a proprietorship’s draw-
ing account. Each time a dividend is declared, an account
titled Dividends is debited. At the end of each fiscal period,
the balance in the dividends account is closed to Retained
Earnings.
S T O C K H O L D E R S ’ E Q U I T Y A C C O U N T S
U S E D B Y A C O R P O R AT I O N
(3000) STOCKHOLDERS’ EQUITY
3110 Capital Stock
3120 Retained Earnings
3130 Dividends
3140 Income Summary
R E M E M B E R

Dividends is a temporary
account that is closed to
Retained Earnings at the
end of the fiscal period.
PHOTOGRAPHER’S CHOICE RF/GETTY IMAGES
Distributing Corporate Earnings to Stockholders Lesson 14-1
405
D E C L A R I N G A D I V I D E N D
A group of persons elected by the stockholders to manage
a corporation is called a board of directors. Dividends
can be distributed to stockholders only by formal action
of a corporation’s board of directors. [CONCEPT: Busi-
ness Entity]
Action by a board of directors to distribute corporate
earnings to stockholders is called declaring a dividend.
Dividends normally are declared on one date and paid
on a later date. If a board of directors declares a dividend,
the corporation is then obligated to pay the dividend. The
dividend is a liability that must be recorded in the corpo-
ration’s accounts.

Hobby Shack declares dividends each March 15, June
15, September 15, and December 15. The dividends are
then paid on the 15th of the following month.
The stockholders’ equity account, Dividends, has a nor-
mal debit balance and is increased by a $5,000.00 debit.
Dividends Payable is credited for $5,000.00 to show the
increase in this liability account.
December 15. Hobby Shack’s board of directors
declared a quarterly dividend of $2.00 per
share; capital stock issued is 2,500 shares;
total dividend, $5,000.00. Date of payment
is January 15. Memorandum No. 79.
GENERAL JOURNAL PAGE 14
1
2
1
2
DATE ACCOUNT TITLE DEBIT CREDIT
Dec.
20--
15 Dividends
Dividends Payable
DOC.
NO.

POST.
REF.
50 0 0 00
50 0 0 00
M79
3. Memorandum Number2. Account Debited 4. Amount Debited
5. Account Credited 6. Amount Credited1. Date
1
2
3 4
5
6
Dividends
Dividends Payable
3/15 Decl.
6/15 Decl.
9/15 Decl.
12/15 Decl.
5,000.00
5,000.00
5,000.00
5,000.00
4/15 Paid
7/15 Paid

10/15 Paid
5,000.00
5,000.00
5,000.00
3/15 Decl.
6/15 Decl.
9/15 Decl.
12/15 Decl.
5,000.00
5,000.00
5,000.00
5,000.00
Number of Shares
Outstanding
2,500
Quarterly Dividend
per Share
$2.00
Total Quarterly
Dividend
$5,000.00
�
�
�

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1 Write the date, 20--, Dec. 15, in the Date column.
2 Write the title of the account debited, Dividends, in the
Account Title column.
3 Write the memorandum number, M79, in the Doc. No.
column.
4 Write the debit amount, $5,000.00, in the Debit column.
5 Write the title of the account credited, Dividends Payable, on
the next line of the Account Title column,
indented about 1 centimeter.
6 Write the credit amount, $5,000.00, in the Credit column.
S T E P S JOURNALIZING DECLARING A DIVIDEND
P AY I N G A D I V I D E N D

Hobby Shack issues one check for the amount of the
total dividend to be paid. This check is deposited in a
special dividend checking account. A separate check for
each stockholder is drawn on this special account. The
special account avoids a large number of cash payments
journal entries and also reserves cash specifically for pay-
ing dividends.
A check is often made payable to an agent, such as a
bank. The agent then handles the details of sending divi-
dend checks to individual stockholders.
January 15. Paid cash for quarterly dividend
declared December 15, $5,000.00. Check No. 379.
When this entry is posted, the dividends payable
account has a zero balance.
CASH PAYMENTS JOURNAL PAGE 25
1 2 3 4
1
2
1
2
DATE ACCOUNT TITLE
PURCHASES
DISCOUNT
CREDIT
CASH
CREDIT

Jan.
20--
15 Dividends Payable
CK.
NO.
POST.
REF.
GENERAL
DEBIT CREDIT
5 0 0 0 00 5 0 0 0 00
5
ACCOUNTS
PAYABLE
DEBIT
379
3. Check Number 4. Debit Dividends Payable
5. Credit Cash
2
3
4

2. Account Title
1. Date
1
5
Dividends Payable
Cash
4/15 Paid
7/15 Paid
10/15 Paid
1/15 Paid
5,000.00
5,000.00
5,000.00
5,000.00
3/15 Decl.
6/15 Decl.
9/15 Decl.
12/15 Decl.
5,000.00
5,000.00
5,000.00
5,000.00
1/15 Paid 5,000.00
1 Write the date, 20--, Jan. 15, in the Date column.
2 Write the account title, Dividends Payable, in the Account

Title column.
3 Write the check number, 379, in the Ck. No. column.
4 Write the debit amount, $5,000.00, in the General Debit
column.
5 Write the credit amount, $5,000.00, in the Cash Credit
column.
S T E P S JOURNALIZING THE PAYMENT OF DIVIDENDS
F O R YO U R I N F O R M AT I O N
F Y I
Dividends are declared on one
date and paid on a later date. Only
stockholders owning the stock
on the date of record specified by
the board of directors receive the
dividend. Stockholders owning the
stock on the date of record receive
the entire dividend, regardless of how
long they have owned the stock.
Distributing Corporate Earnings to Stockholders Lesson 14-1
407

E n d o f L e s s o n
REVIEW
A U D I T Y O U R U N D E R S T A N D I N G
1. Under what major chart of accounts division are the owners’
equity
accounts for a corporation normally listed?
2. How many accounts are kept for the investment of all owners
of a
corporation?
3. What account does a corporation use to record earnings not
yet distrib-
uted to stockholders?
4. What action is required before a corporation can distribute
income to its
stockholders?
Journalizing dividends
Journals are given in the Working Papers. Your instructor will
guide you through the following examples.
Coastal Aquatics completed the following transactions during

December of the current year and January of the next
year.
Transactions:
Dec. 15. The board of directors declared a dividend of $3.00
per share; capital stock issued is 1,750 shares. M162.
Jan. 15. Paid cash for dividend declared December 15. C687.
1. Use page 14 of a general journal. Journalize the dividend
declared on December 15.
2. Use page 21 of a cash payments journal. Journalize payment
of the dividend on January 15.
Journalizing dividends
Journals are given in the Working Papers. Work this problem
independently.
Sonoma Treasures completed the following transactions during
December of the current year and January of the
next year.
Transactions:
Dec. 15. The board of directors declared a dividend of $1.00
per share; capital stock issued is 21,000 shares.
M321.
Jan. 15. Paid cash for dividend declared December 15. C721.
1. Use page 22 of a general journal. Journalize the dividend
declared on December 15.
2. Use page 24 of a cash payments journal. Journalize payment

of the dividend.
retained earnings
dividends
board of directors
declaring a dividend
T E R M S R E V I E W
L E S S O N
14-2
Beginning an 8-Column
Work Sheet for a
A columnar accounting form on which the financial
information needed to prepare financial statements is

summarized is known as a work sheet. A work sheet is used
to plan adjustments and summarize the information nec-
essary to prepare financial statements. The steps used to
prepare a work sheet are similar for proprietorships and
corporations.
To prepare a work sheet, a trial balance is first entered in
the Trial Balance columns. All general ledger accounts and
balances are listed in the same order as they appear in the
general ledger. Trial Balance columns are totaled to prove
equality of debits and credits.
The worksheet for Hobby Shack is different from the
work sheet completed for TechKnow in Chapter 6. Unlike
E N T E R I N G A T R I A L B A L A N C E O N A W O R
K S H E E T
a service business, a merchandising business will have
an account for merchandise inventory. A corporation’s
accounts are similar to those of a proprietorship except for
the capital stock, retained earnings, dividends, and federal
income tax accounts.
Some general ledger accounts need to be brought up to
date before financial statements are prepared. Accounts
are brought up to date by planning and entering adjust-
ments on a work sheet. Adjustments are planned in the
Adjustments columns of a work sheet. Adjustments
recorded on a work sheet are for planning purposes only.
The general ledger account balances are not changed until
entries are journalized and posted. Journal entries made
to bring general ledger accounts up to date are known as
adjusting entries.
Hobby Shack’s adjustments for supplies and prepaid
insurance are the same as those for TechKnow described

in Chapter 6. Hobby Shack also makes adjustments to
these accounts: (1) Merchandise Inventory, (2) Uncollect-
ible Accounts Expense, (3) Depreciation Expense, and
(4) Federal Income Tax Expense.
P L A N N I N G A D J U S T M E N T S O N A W O R K S
H E E T
The adjustment for merchandise inventory is unique
to a merchandising business. Adjustments for uncollect-
ible accounts expense and depreciation expense could also
be made by a service business. The adjustment for federal
income tax is unique to corporations. This adjustment is
not made for a proprietorship because taxes are paid by
the owner, not the business.
S P O T L I G H T
Small businesses represent
approximately 99 percent of
employers, employ nearly 50 percent
of non-government employees,
and are responsible for about
two-thirds to three-quarters of
net new jobs, according to the
Office of Advocacy of the U.S.
Small Business Administration.
S M A L L B U S I N E S S
Beginning an 8-Column Work Sheet for a Merchandising
Business Lesson 14-2 409

R E C O R D I N G A T R I A L B A L A N C E O N A W O
R K S H E E T
TRIAL BALANCE
ACCOUNT TITLE DEBIT CREDIT
1 2
Hobby Shack, Inc.
Work Sheet
For Year Ended December 31, 20--
Cash
Petty Cash
Accounts Receivable
Allow. for Uncoll. Accts.
Merchandise Inventory
Supplies—Office

Supplies—Store
Prepaid Insurance
Office Equipment
Acc. Depr.—Office Equipment
Store Equipment
Acc. Depr.—Store Equipment
Accounts Payable
Federal Income Tax Payable
Insurance Expense
Miscellaneous Expense
Payroll Taxes Expense
Rent Expense
Salary Expense
Uncollectible Accounts Expense
Utilities Expense
Federal Income Tax Expense

1
2
3
4
5
6
7
8
9
10
11
12
13
14
40
41
42
43

44
45
46
47
48
49
50
29 0 8 0 28
3 0 0 00
14 6 9 8 40
140 4 8 0 00
3 4 8 0 00
3 9 4 4 00
5 8 0 0 00
35 8 6 4 50
40 8 4 9 50
2 5 6 4 90
9 1 0 5 00
18 0 0 0 00
104 5 2 5 00
3 8 2 0 00

18 0 0 0 00
670 8 6 1 59
1 2 7 52
6 4 9 7 00
5 0 6 9 00
11 5 8 3 03
670 8 6 1 59
ACCOUNT NO. 1110
DATE ITEM DEBIT CREDIT
BALANCE
Dec.
20--
1
31
31
Balance
POST.
REF.
37 1 8 0 80
36 3 6 0 52
DEBIT CREDIT
2 8 2 6 0 00

6 5 4 4 0 80
2 9 0 8 0 28
ACCOUNT Cash
�
CR12
CP24
1. Account Titles
1
2
3. Total, prove and rule
the debit and credit columns.
2. Account Balances
3
1 Write the title of each general ledger account in the work
sheet’s Account Title column in the same order they
appear in the general ledger. All accounts are listed regardless
of whether there is a balance or not. Listing all
accounts reduces the possibility of overlooking an account that
needs to be brought up to date.
2 Write the balance of each account in the appropriate work
sheet’s Trial Balance Debit or Credit column. The
amounts are taken from the general ledger accounts.
3 Total, prove, and rule the Trial Balance Debit and Credit
columns of the work sheet.

S T E P S RECORDING A TRIAL BALANCE ON A WORK
SHEET
A N A LY Z I N G A N D R E C O R D I N G S U P P L I E S
A D J U S T M E N T S
The balance of Supplies—Office in the trial balance,
$3,480.00, is the cost of office supplies on hand at the
beginning of the year plus the office supplies purchased
during the year. The supplies on hand on December 31
are counted and determined to be $750.00. The differ-
ence is the value of office supplies used during the year,
which is an expense.
Likewise, the balance of Supplies—Store in the trial
balance, $3,944.00, is the cost of store supplies on hand at
the beginning of the year plus the store supplies purchased
during the year. The value of store supplies on hand on
December 31 is determined to be $1,034.00.
Analyzing Supplies Adjustments
Four questions are asked to analyze the adjustments for
the supplies accounts.

1. What is the balance of the Supplies accounts?
Supplies—Office, $3,480.00
Supplies—Store, $3,944.00
2. What should the balance be for these accounts?
Supplies—Office, $750.00
3. What must be done to correct the account
balances?
Decrease Supplies—Office, $2,730.00 ($3,480.00 �
750.00)
Decrease Supplies—Store, $2,910.00 ($3,944.00 �
1,034.00)
4. What adjustment is made?
Debit:
Supplies Expense—Office, $2,730.00
Supplies Expense—Store, $2,910.00
Credit:
Supplies—Office, $2,730.00
The supplies adjustments are shown in the T accounts.
The December 31 balance shown in faded type is the bal-
ance before the adjustments.
Adj. (a) 2,730.00
Supplies—Office
Dec. 31 Bal. 3,480.00
(Adj. Bal. 750.00)

Adj. (a) 2,730.00
Adj. (b) 2,910.00
Supplies—Store
Dec. 31 Bal. 3,944.00
(Adj Bal. 1,034.00)
Adj. (b) 2,910.00
HOLA IM
AGES/GETTY IMAGES
R E C O R D I N G S U P P L I E S A D J U S T M E N T S O
N A W O R K S H E E T
6

7
45
46
ACCOUNT TITLE
TRIAL BALANCE
DEBIT CREDIT
ADJUSTMENTS
DEBIT CREDIT
Supplies—Office
Supplies—Store
1. Debits
2. Credits3. Labels
34 8 0 00
39 4 4 00
2 7 3 0 00
2 9 1 0 00
(a)
(b)

2 7 3 0 00
2 9 1 0 00
(a)
(b)
1 2 3 4
1
23
3
1 Write the debit amounts in the Adjustments Debit column on
the lines with the appropriate account titles:
$2,730.00 with Supplies Expense—Office and $2,910.00 with
Supplies Expense—Store.
2 Write the credit amounts in the Adjustments Credit column
on the lines with the appropriate account titles:
$2,730.00 with Supplies—Office and $2,910.00 with Supplies—
Store.
3 Label the two parts of the Supplies—Office adjustment with a
small letter a in parentheses, (a). Label the two
parts of the Supplies—Store adjustment with a small letter b in
parentheses, (b).
S T E P S RECORDING WORK SHEET ADJUSTMENTS FOR
SUPPLIES
DIG

ITAL VISION/GETTY IMAGES
A N A LY Z I N G A N D R E C O R D I N G A P R E P A I
D
I N S U R A N C E A D J U S T M E N T
Insurance premiums are debited to a prepaid insurance
account when paid. During the year, Hobby Shack paid
$5,800.00 of insurance premiums.
Analyzing a Prepaid Insurance Adjustment
Hobby Shack determined that the value of prepaid insur-
ance on December 31 is $2,630.00. Therefore, the value
of insurance used during the year is $3,170.00 ($5,800.00
� $2,630.00). This difference is the amount of insurance
expense for the year. Prepaid Insurance is credited and
Insurance Expense is debited at the end of the fiscal period
for the value of insurance used.
The prepaid insurance adjustment is shown in the T
accounts. The December 31 balance shown in faded type
is the balance before the adjustment.

1. What is the balance of Prepaid Insurance?
$5,800.00
2. What should the balance be for this account?
$2,630.00
3. What must be done to correct the account balance?
Decrease $3,170.00 ($5,800.00 � $2,630.00)
4. What adjustment is made?
Debit Insurance Expense, $3,170.00
Credit Prepaid Insurance, $3,170.00
Insurance Expense
Adj. (c) 3,170.00
Prepaid Insurance
Dec. 31 Bal. 5,800.00
(New Bal. 2,630.00)
Adj. (c) 3,170.00
Recording a Prepaid Insurance Adjustment
8
40
ACCOUNT TITLE
TRIAL BALANCE
DEBIT CREDIT

ADJUSTMENTS
DEBIT CREDIT
Prepaid Insurance
Insurance Expense
2. Debit
1. Credit
3. Labels
5 8 0 0 00
3 1 7 0 00(c)
3 1 7 0 00(c)
1 2 3 4
2
3
3 1
1 Enter the amount of insurance used, $3,170.00, in the
Adjustments Credit column on the Prepaid Insurance line of
the work sheet.
2 Enter the same amount, $3,170.00, in the Adjustments Debit
column on the Insurance Expense line of the work
sheet.
3 Label the two parts of the adjustment with a small letter c in

parentheses, (c).
S T E P S
RECORDING WORK SHEET ADJUSTMENTS
FOR PREPAID INSURANCE
E n d …

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