Q26E - Horngren'S Financial And Managerial Accounting

Question

Houston Veterinary Hospital completed the following worksheet as of December 31, 2018.

Requirements 

1. Complete the worksheet for Houston Veterinary Hospital. 

2. Prepare the closing entries. 

3. Prepare a post-closing trial balance. 

Step-by-Step Solution

Answer

(1) Worksheet is mentioned in Step 1. 

(2) Closing entries are mentioned in Step 2.  

(3) Post-closing trial balance is mentioned in Step 3.

Step 1: Worksheet

(1) Worksheet is shown as follows:

Step 2: Closing entries

(2) Closing entries are as follows:

Date	Accounts and Explanation	Debit	Credit
Dec. 31	Service Revenue	$37,700
	Income Summary		$37,700
	To close revenue.
Dec. 31	Income Summary	$49,850
	Salaries Expense		$13,075
	Rent Expense		$23,600
	Depreciation Expense—Equipment		$1,900
	Supplies Expense		$275
	Utilities Expense		$11,000
	To close expenses.
Dec. 31	Retained Earnings	$12,150
	Income Summary		$12,150
	To close Income Summary
Dec. 31	Retained Earnings	$28,000
	Dividends		$28,000
	To close Dividends

Step 3: Post-closing trial balance

(3) Post-closing trial balance is shown as follows: 

HOUSTON VETERINARY HOSPITAL
Post-Closing Trial Balance
December 31, 2018
	Balance
Account Title	Debit	Credit
Cash	$31,200
Accounts Receivable	10,100
Office Supplies	1,225
Prepaid Rent	5,400
Equipment	27,000
Accumulated Depreciation—Equipment		1,900
Accounts Payable		3,400
Utilities Payable		310
Salaries Payable		1,075
Unearned Revenue		11,700
Common Stock		41,000
Retained Earnings		15,540
Total	$74,925	$74,925

Step 4: Calculation of ending balance of retained earnings

Ending balance of retained earnings  is calculated as follows:

$\begin{array}{rcl}\mathbf{EndingBalance}& \mathbf{=}& \mathbf{BeginningBalance}-\mathbf{NetLoss}-\mathbf{Dividends}\\ & \mathbf{=}& \mathbf{\$}\mathbf{55}\mathbf{,}\mathbf{690}-\mathbf{\$}\mathbf{12}\mathbf{,}\mathbf{150}-\mathbf{\$}\mathbf{28}\mathbf{,}\mathbf{000}\\ & \mathbf{=}& \mathbf{\$}\mathbf{15}\mathbf{,}\mathbf{540}\end{array}$