Q35PSB - Horngren'S Financial And Managerial Accounting

Question

The adjusted trial balance of Rocket Real Estate Appraisal at June 30, 2018, follows: ROCKET REAL ESTATE APPRAISAL Adjusted Trial Balance June 30, 2018Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Building Accumulated Depreciation—Building Land Accounts Payable Interest Payable Salaries Payable Unearned Revenue Notes Payable (long-term) Common Stock Dividends Retained Earnings Service Revenue Insurance Expense Salaries Expense Supplies Expense Interest Expense Balance \( 5,000 \) 178,100 \( 178,100 12,800 \) 25,200 71,000 8,000 1,000 2,100 37,000 25,800 5,500 1,600 1,700 18,700 5,000 33,000 48,100 4,100 32,000 600 8,000 2,900 7,100 Utilities Expense Depreciation Expense—Building Total . Requirements 1. Prepare the company’s income statement for the year ended June 30, 2018. 2. Prepare the company’s statement of retained earnings for the year ended June 30, 2018. 3. Prepare the company’s classified balance sheet in report form at June 30, 2018. 4. Journalize the closing entries. 5. Open the T-accounts using the balances from the adjusted trial balance, and post the closing entries to the T-accounts. 6. Prepare the company’s post-closing trial balance at June 30, 2018.

Step-by-Step Solution

Answer

(1) In income statement, net loss is $6,600. 

(2) In statement of retained earnings, ending balance is $600.

(3) In balance sheet, total assets and total liabilities & stockholders’ equity equals $72,400.

(4) Closing entries are mentioned in Step 4. 

(5) T accounts are mentioned in Step 5. 

(6) In post-closing trial balance, total debits and credits equals $97,600.

Step-by-Step-Solution Step 1: Income Statement

(1) Income statement is shown as follows: 

ROCKET REAL ESTATE APPRAISAL
Income Statement
Year Ended  June 30, 2018
Revenues
Service Revenue		$48,100
Expenses
Insurance Expense	$4,100
Salaries Expense	32,000
Supplies Expense	600
Interest Expense	8,000
Utilities Expense	2,900
Depreciation Expense—Building	7,100
Total Expenses		54,700
Net Loss		$(6,600)

Step 2: Statement of Retained Earnings

(2) Statement of retained earnings is shown as follows: 

ROCKET REAL ESTATE APPRAISAL
Statement of Retained Earnings
Year Ended  June 30, 2018
Retained Earnings, Beginning Balance	$33,000
Net loss for the year	(6,600)
	26,400
Dividends	(25,800)
Retained Earnings,  November 30, 2018	$600

Step 3: Classified Balance Sheet

(3) Balance Sheet is shown as follows:

ROCKET REAL ESTATE APPRAISAL
Balance Sheet
June 30, 2018
Assets
Current Assets:
Cash		$5,000
Accounts Receivable		5,500
Office Supplies		1,600
Prepaid Insurance		1,700
Total Current Assets			$13,800
Property, Plant, and Equipment:
Land		12,800
Building	$71,000
Less: Accumulated Depreciation- Building	(25,200)	45,800
Total Property, Plant, and Equipment:			58,600
Total Assets			$72,400

Liabilities
Current Liabilities:
Accounts Payable		18,700
Interest Payable		8,000
Salaries Payable		2,100
Unearned revenue		1,000
Total Current Liabilities:			$29,800
Long-term Liabilities
Notes Payable			37,000
Total Liabilities			66,800
Stockholders’ Equity
Common Stock			5,000
Retained Earnings			600
Total Stockholders’ Equity			5,600
Total Liabilities and Stockholders’ Equity			$72,400

Step 4: Closing entries for the period

(4) Closing entries are as follows:

Date	Accounts and Explanation	Debit	Credit
Dec. 31	Service Revenue	$48,100
	Income Summary		$85,000
	To close revenue.
Dec. 31	Income Summary	$54,700
	Insurance Expense		$4,100
	Salaries Expense		$32,000
	Supplies Expense		$600
	Interest Expense		$8,000
	Utilities Expense		$2,900
	Depreciation Expense—Building		$7,100
	To close expenses.
Dec. 31	Retained Earnings	$6,600
	Income Summary		$6,600
	To close Income Summary
Dec. 31	Retained Earnings	$25,800
	Dividends		$25,800
	To close Dividends

Step 5: T Accounts

(5) T accounts are shown as follows: 

Posting of closing entry is shown as follows: 

Retained Earnings
Clos.	$6,600	$33,000	Adj. Bal.
Clos.	$25,800
		$600	Bal.

Dividends
Adj. Bal.	$25,800	$25,800	Clos.
Bal.	0

Income Summary
Clos.	$54,700	$48,100	Clos.
Bal.	$6,600
		$6,600	Clos.
Bal.	0

Service Revenue
Clos.	$48,100	$48,100	Adj. Bal.
		0	Bal.

Insurance Expense
Adj. Bal.	$4,100	$4,100	Clos.
Bal.	0

Salaries Expense
Adj. Bal.	$32,000	$32,000	Clos.
Bal.	0

Supplies Expense
Adj. Bal.	$600	$600	Clos.
Bal.	0

Interest Expense
Adj. Bal.	$8,000	$8,000	Clos.
Bal.	0

Utilities Expense
Adj. Bal.	$2,900	$2,900	Clos.
Bal.	0

Depreciation Expense—Building
Adj. Bal.	$7,100	$7,100	Clos.
Bal.	0

Step 6: Post-Closing trial balance

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

ROCKET REAL ESTATE APPRAISAL
Post-Closing Trial Balance
June 30, 2018
	Balance
Account Title	Debit	Credit
Cash	$5,000
Accounts Receivable	5,500
Office Supplies	1,600
Prepaid Insurance	1,700
Land	12,800
Building	71,000
Accumulated Depreciation—Building		$25,200
Accounts Payable		18,700
Interest Payable		8,000
Salaries Payable		2,100
Unearned Revenue		1,000
Notes Payable (long-term)		37,000
Common Stock		5,000
Retained Earnings		600
Total	$97,600	$97,600