Q31PSA - Horngren'S Financial And Managerial Accounting

Question

The unadjusted trial balance of Farish Investment Advisers at December 31, 2018, follows: Adjustment data at December 31, 2018: a. Unearned Revenue earned during the year, \(800. b. Office Supplies on hand, \)4,500. c. Depreciation for the year, \(4,500. d. Accrued Salaries Expense, \)5,000. e. Accrued Service Revenue, \(6,500. Requirements 1. Prepare a worksheet for Farish Investment Advisers at December 31, 2018. 2. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in account format. 3. Prepare closing entries. Account Title Office Supplies Cash Debit Credit Accounts Receivable Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Notes Payable (long-term) Dividends Service Revenue Insurance Expense Salaries Expense Supplies Expense Interest Expense Rent Expense Balance \) 30,000 \( 198,000 \) 198,000 5,500 $ 9,000 13,000 27,000 21,000 93,000 Retained Earnings 29,500 29,000 2,500 40,000 5,500 5,000 51,000 7,000 28,000 Depreciation Expense—Equipment Total FARISH INVESTMENT ADVISERS Unadjusted Trial Balance December 31, 2018

Step-by-Step Solution

Answer

(1) Worksheet is mentioned in Step 1. 

(2) Net income is $35,300, ending balance of retained earnings equals $35,800  and total assets and total liabilities & stockholders’ equity equals $106,500.

(3) Closing entries are mentioned in Step 3.

Step-by-Step-Solution Step 1: Worksheet

(1) Worksheet is shown as follows:

FARISH INVESTMENT ADVISERS
Worksheet
December 31, 2018
	Unadjusted Trial Balance		Adjustments		Adjusted Trial Balance	Income Statement	Balance Sheet
Account Names	Debit	Credit		Debit	Credit		Debit	Credit	Debit	Credit	Debit	Credit
Cash	$30,000						$30,000				$30,000
Accounts Receivable	51,000		(e)	$6,500			57,500				57,500
Office  Supplies	7,000				$2,500	(b)	4,500				4,500
Equipment	28,000						28,000				28,000
Accumulated Depreciation—Equipment		$9,000			4,500	(c)		13,500				13,500
Accounts Payable		13,000						13,000				13,000
Salaries Payable					5,000	(d)		5,000				5,000
Unearned Revenue		5,500	(a)	800				4,700				4,700
Notes Payable		21,000						21,000				21,000
Common Stock		27,000						27,000				27,000
Retained Earnings		29,500						29,500				29,500
Dividends	29,000						29,000				29,000
Service Revenue		93,000			7,300	(e,a)		100,300		100,300
Insurance Expense	2,500						2,500		2,500
Salaries Expense	40,000		(d)	5,000			45,000		45,000
Supplies Expense			(b)	2,500			2,500		2,500
Interest Expense	5,500						5,500		5,500
Rent Expense	5,000						5,000		5,000
Depreciation Expense—Equipment			(c)	4,500			4,500		4,500
Total	$198,000	$198,000		$19,300	$19,300		$214,000	$214,000	$65,000	$100,300	$149,000	$113,700
								Net Income	35,300			35,300
Total									$100,300	$100,300	$149,000	$149,000

Step 2: Income statement, Statement of retained earnings, and Classified balance sheet

Income statement is shown as follows: 

FARISH INVESTMENT ADVISERS
Income Statement
Year Ended  December 31, 2018
Revenues
Service Revenue		$100,300
Expenses
Insurance Expense	$2,500
Salaries Expense	45,000
Supplies Expense	2,500
Interest Expense	5,500
Rent Expense	5,000
Depreciation Expense—Equipment	4,500
Total Expenses		65,000
Net Income		$35,300

Statement of retained earnings is shown as follows: 

FARISH INVESTMENT ADVISERS
Statement of Retained Earnings
Year Ended  December 31, 2018
Retained Earnings, Beginning Balance	$29,500
Net Income for the year	35,300
	64,800
Dividends	(29,000)
Retained Earnings,  November 30, 2018	$35,800

Balance Sheet is shown as follows:

FARISH INVESTMENT ADVISERS
Balance Sheet
December 31, 2018
Assets
Current Assets:
Cash		$30,000
Accounts Receivable		57,500
Office Supplies		4,500
Total Current Assets			$92,000
Property, Plant, and Equipment:
Equipment	$28,000
Less: Accumulated Depreciation- Equipment	(13,500)	14,500
Total Property, Plant, and Equipment:			14,500
Total Assets			$106,500

Liabilities
Current Liabilities:
Accounts Payable		13,000
Salaries Payable		5,000
Unearned revenue		4,700
Total Current Liabilities:			$22,700
Long-term Liabilities
Notes Payable			21,000
Total Liabilities			43,700

Stockholders’ Equity
Common Stock			27,000
Retained Earnings			35,800
Total Stockholders’ Equity			62,800
Total Liabilities and Stockholders’ Equity			$106,500

Step 3: Closing entries

(3) Closing entries are as follows:

Date	Accounts and Explanation	Debit	Credit
Dec. 31	Service Revenue	$100,300
	Income Summary		$100,300
	To close revenue.
Dec. 31	Income Summary	$65,000
	Insurance Expense		$2,500
	Salaries Expense		$45,000
	Supplies Expense		$2,500
	Interest Expense		$5,500
	Rent Expense		$5,000
	Depreciation Expense—Equipment		$4,500
	To close expenses.
Dec. 31	Income Summary	$35,300
	Retained Earnings		$35,300
	To close Income Summary
Dec. 31	Retained Earnings	$29,500
	Dividends		$29,500
	To close Dividends