ACC 151 Lecture Notes - Lecture 6: Retained Earnings, Market Liquidity, Accounts Receivable

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harlequinfox232

19 Jan 2016

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Financial statement can be prepared from the adjusted trail balance. Accounts receivable are relatively liquid because cash collections usually follow quickly. Inventory is less liquid because inventory must be sold. Equipment and buildings are even less liquid because these assets are not for sale. Assets and liabilities are presented in order of liquidity. Classifying assets and liabilities based on their liquidity. Converted to cash, sold, or consumed during the next 12 months or within the business"s normal operating cycle if longer than a year. Land, buildings, furniture and fixtures, and equipment are plant assets. Long-term investments, intangible assets, and other assets are also long-term. Debts that must be paid within one year or within the operating cycle if longer than a year. Accounts payable, notes payable due within one year, salary. All liabilities that are not current are classified as long-term liabilities.

Related Questions

The following accounts (normal balances) are listed on B Company’s adjusted trial balance:

Particulars	Amount
Service Revenue	$93,600
Salaries Expense	$45,146
Rent Expense	$20,289
Advertising Expense	$7,174
Dividends	$2,794

What is the closing entry for the income summary account?

A. Debit Income summary account and credit dividends account by $2,794.

B. Debit Income summary account and credit retained earnings account by $20,991.

C. Debit income summary account and credit retained earnings by $18,197.

D. Debit retained earnings account and credit Income summary account by $20,991.

tandolphin64

Following is the adjusted trial balance of Post Company. Basedon this information prepare a Balance Sheet, Income Statement andStatement of Retained Earnings.


POST COMPANY
ADJUSTED TRIAL BALANCE
	Debit	Credit
Cash	80,000
Accounts Receivable	11,100
Prepaid Insurance	1,500
Equipment	10,000
Accumulated Depreciation		4,000
Supplies	500
Accounts Payable		2,900
Wages Payable		300
Unearned Revenue		1,500
Contributed Capital		80,000
Retained Earnings		0
Sales		17,000
Gas Expense	400
Supply Expense	400
Insurance Expense	200
Depreciation Expense	200
Wage Expense	400
Dividends	1,000
	99,700	99,700

Question 4

Explain the closing entry process and prepare the closingentries in journal form based on the information in question 3.






















Dividends

bluecricket831

Chandler, Inc. is owned by Roscoe Chandler and providesappraisal services to individuals and companies wishing to purchaseand sell fine art. Chandler, Inc. began business on January 1,2016, and is just completing its first year of business. Roscoeasks for your help in completing the accounting cycle for thecompany by assisting with the closing process.

Before the closing entries are made, you begin with an adjustedtrial balance. The closing entries are essentially the link fromthe adjusted trial balance to the post-closing trial balance.

Chandler, Inc.

ADJUSTED TRIAL BALANCE

December 31, 2016

	ACCOUNTTITLE	DEBIT	CREDIT
1	Cash	76,000.00
2	Accounts Receivable	29,000.00
3	Prepaid Insurance	16,000.00
4	Equipment	60,000.00
5	Accumulated Depreciation-Equipment		40,000.00
6	Accounts Payable		6,000.00
7	Salaries Payable		8,000.00
8	Income Taxes Payable		4,000.00
9	Common Stock		2,000.00
10	Retained Earnings		18,000.00
11	Dividends	5,000.00
12	Income Summary
13	Fees Earned		175,600.00
14	Rent Revenue		92,000.00
15	Interest Revenue		17,200.00
16	Salaries Expense	71,000.00
17	Selling Expense	25,600.00
18	Income Taxes Expense	15,000.00
19	Depreciation Expense-Equipment	47,200.00
20	Insurance Expense	17,000.00
21	Miscellaneous Expense	1,000.00
22	Totals	362,800.00	362,800.00

The final step of the accounting cycle is the closing process.The main goal of this stage of the cycle is to ensure that thebalance of each temporary account is returned to zero and that netincome is transferred to the retained earnings account. The firststep in successfully undertaking the closing process is tounderstand the difference between a temporary account and apermanent account. Roscoe has some questions about the process.

Answer questions (1) - (3) below.

1. If a temporary account has an ending balance of $57,000, whatis its beginning balance for the following accounting period?

2. If a permanent account has an ending balance of $57,000, whatis its beginning balance for the following accounting period?

3. Roscoe will be preparing his yearly financial statementsafter completing Chandler, Inc.âs closing process, and is asomewhat confused about the characteristics of the accounts on hisChart of Accounts. He has started by creating the chart below, andasks for your help in completing it. For each account or type ofaccount listed, choose all descriptions that apply.

Temporary Account

Permanent Account

Closed to Income SummaryAccount

Yes

Revenues

Asset accounts

Retained Earnings account

Expenses

Liability accounts

Dividends account

Roscoe has attempted to prepare the closing entries forChandler, Inc. on this panel. Heâs not sure if heâs entered thejournal entries correctly, and asks you to review them. You findthat two of the entries are correct, but two are incorrect.

Determine which entries are incorrect, and enter all four of theclosing entries for Chandler, Inc. as of Dec. 31 on the Journalpanel.

PAGE 25

JOURNAL

	DATE	DESCRIPTION	DEBIT	CREDIT
1		Closing Entries
2	Dec. 31	Income Summary	284,800.00
3		Fees Earned		175,600.00
4		Rent Revenue		92,000.00
5		Interest Revenue		17,200.00
6	31	Income Summary	176,800.00
7		Salaries Expense		71,000.00
8		Selling Expense		25,600.00
9		Income Taxes Expense		15,000.00
10		Depreciation Expense-Equipment		47,200.00
11		Insurance Expense		17,000.00
12		Miscellaneous Expense		1,000.00
13	31	Retained Earnings	461,600.00
14		Income Summary		461,600.00
15	31	Retained Earnings	5,000.00
16		Dividends		5,000.00

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ACC 151 Lecture Notes - Lecture 6: Retained Earnings, Market Liquidity, Accounts Receivable

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