Accounting 25th Edition Solution
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Complete Answer (Next Page)
CHAPTER 4
COMPLETING THE ACCOUNTING CYCLE
4-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, DISCUSSION QUESTIONS
1. The end-of-period spreadsheet illustrates the flow of accounting information from the unadjusted
trial balance into the adjusted trial balance and into the financial statements. In doing so, the
spreadsheet illustrates the impact of the adjustments on the financial statements.
2. a. Current assets are composed of cash and other assets that may reasonably be expected
to be realized in cash or sold or used up, usually within one year or less, through the normal
operations of the business.
b. Property, plant, and equipment is composed of assets that are used in the business and that
are of a permanent or relatively fixed nature.
3. Current liabilities are liabilities that will be due within a short time (usually one year or less) and
that are to be paid out of current assets. Liabilities that will not be due for a comparatively long
time (usually more than one year) are called long-term liabilities.
4. Revenue, expense, and drawing accounts are generally referred to as temporary accounts.
5. Closing entries are necessary at the end of an accounting period (1) to transfer the balances in
temporary accounts to permanent accounts and (2) to prepare the temporary accounts for use in
recording transactions for the next accounting period.
6. Adjusting entries bring the accounts up to date, while closing entries reduce the revenue, expense,
and drawing accounts to zero balances for use in recording transactions for the next accounting
period.
7. The purpose of the post-closing trial balance is to make sure that the ledger is in balance at the
beginning of the next period.
8. a. The financial statements are the most important output of the accounting cycle.
b. Yes, all companies have an accounting cycle that begins with analyzing and journalizing
transactions and ends with a post-closing trial balance. However, companies may differ in
how they implement the steps in the accounting cycle. For example, while most companies
use computerized accounting systems, some companies may use manual systems.
9. The natural business year is the fiscal year that ends when business activities have reached the
lowest point in the annual operating cycle.
10. All the companies listed are general merchandisers whose busiest time of the year is during the
holiday season, which extends through most of December. Traditionally, the lowest point of
business activity for general merchandisers will be near the end of January and the beginning of
February. Thus, these companies have chosen their natural business year for their fiscal year.
4-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 4 Completing the Accounting Cycle
PRACTICE EXERCISES
PE 4–1A
1. Balance sheet 5. Income statement
2. Income statement 6. Income statement
3. Statement of owner's equity 7. Balance sheet
4. Balance sheet 8. Balance sheet
PE 4–1B
1. Balance sheet 5. Balance sheet
2. Balance sheet 6. Balance sheet
3. Income statement 7. Statement of owner’s equity
4. Income statement 8. Income statement
PE 4–2A
Daffodil Advertising Services
Statement of Owner’s Equity
For the Year Ended December 31, 2013
Francis Matthews, capital, January 1, 2013 $475,000
Additional investment during 2013 $ 50,000
Net income 139,500
$189,500
Less withdrawals 30,000
Increase in owner’s equity 159,500
Francis Matthews, capital, December 31, 2013 $634,500
PE 4–2B
Grab Bag Delivery Services
Statement of Owner’s Equity
For the Year Ended December 31, 2013
Blake Knudson, capital, January 1, 2013 $918,000
Net loss $43,500
Add withdrawals 15,000
Decrease in owner’s equity 58,500
Blake Knudson, capital, December 31, 2013 $859,500
4-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 4 Completing the Accounting Cycle
PE 4–3A
1. Property, plant, and equipment 5. Current liability
2. Owner’s equity 6. Current asset
3. Long-term liability 7. Current liability
4. Current asset 8. Current liability
PE 4–3B
1. Current liability 5. Owner’s equity
2. Current asset 6. Long-term liability
3. Property, plant, and equipment 7. Current asset
4. Current asset 8. Current liability
PE 4–4A
Closing Entries
Aug. 31 Fees Earned 880,000
Income Summary 880,000
31 Income Summary 629,000
Wages Expense 524,000
Rent Expense 80,000
Supplies Expense 16,000
Miscellaneous Expense 9,000
31 Income Summary 251,000
Rita Sands, Capital 251,000
31 Rita Sands, Capital 55,000
Rita Sands, Drawing 55,000
4-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
(Download complete and 100% accurate work written as per
requirements)
Topic: _________________
Student Name: __________
Course Title: ____________
Instructor: ______________
Date of submission: _______
For any problem feel free to message me on “Stuvia”
Complete Answer (Next Page)
CHAPTER 4
COMPLETING THE ACCOUNTING CYCLE
4-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, DISCUSSION QUESTIONS
1. The end-of-period spreadsheet illustrates the flow of accounting information from the unadjusted
trial balance into the adjusted trial balance and into the financial statements. In doing so, the
spreadsheet illustrates the impact of the adjustments on the financial statements.
2. a. Current assets are composed of cash and other assets that may reasonably be expected
to be realized in cash or sold or used up, usually within one year or less, through the normal
operations of the business.
b. Property, plant, and equipment is composed of assets that are used in the business and that
are of a permanent or relatively fixed nature.
3. Current liabilities are liabilities that will be due within a short time (usually one year or less) and
that are to be paid out of current assets. Liabilities that will not be due for a comparatively long
time (usually more than one year) are called long-term liabilities.
4. Revenue, expense, and drawing accounts are generally referred to as temporary accounts.
5. Closing entries are necessary at the end of an accounting period (1) to transfer the balances in
temporary accounts to permanent accounts and (2) to prepare the temporary accounts for use in
recording transactions for the next accounting period.
6. Adjusting entries bring the accounts up to date, while closing entries reduce the revenue, expense,
and drawing accounts to zero balances for use in recording transactions for the next accounting
period.
7. The purpose of the post-closing trial balance is to make sure that the ledger is in balance at the
beginning of the next period.
8. a. The financial statements are the most important output of the accounting cycle.
b. Yes, all companies have an accounting cycle that begins with analyzing and journalizing
transactions and ends with a post-closing trial balance. However, companies may differ in
how they implement the steps in the accounting cycle. For example, while most companies
use computerized accounting systems, some companies may use manual systems.
9. The natural business year is the fiscal year that ends when business activities have reached the
lowest point in the annual operating cycle.
10. All the companies listed are general merchandisers whose busiest time of the year is during the
holiday season, which extends through most of December. Traditionally, the lowest point of
business activity for general merchandisers will be near the end of January and the beginning of
February. Thus, these companies have chosen their natural business year for their fiscal year.
4-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 4 Completing the Accounting Cycle
PRACTICE EXERCISES
PE 4–1A
1. Balance sheet 5. Income statement
2. Income statement 6. Income statement
3. Statement of owner's equity 7. Balance sheet
4. Balance sheet 8. Balance sheet
PE 4–1B
1. Balance sheet 5. Balance sheet
2. Balance sheet 6. Balance sheet
3. Income statement 7. Statement of owner’s equity
4. Income statement 8. Income statement
PE 4–2A
Daffodil Advertising Services
Statement of Owner’s Equity
For the Year Ended December 31, 2013
Francis Matthews, capital, January 1, 2013 $475,000
Additional investment during 2013 $ 50,000
Net income 139,500
$189,500
Less withdrawals 30,000
Increase in owner’s equity 159,500
Francis Matthews, capital, December 31, 2013 $634,500
PE 4–2B
Grab Bag Delivery Services
Statement of Owner’s Equity
For the Year Ended December 31, 2013
Blake Knudson, capital, January 1, 2013 $918,000
Net loss $43,500
Add withdrawals 15,000
Decrease in owner’s equity 58,500
Blake Knudson, capital, December 31, 2013 $859,500
4-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 4 Completing the Accounting Cycle
PE 4–3A
1. Property, plant, and equipment 5. Current liability
2. Owner’s equity 6. Current asset
3. Long-term liability 7. Current liability
4. Current asset 8. Current liability
PE 4–3B
1. Current liability 5. Owner’s equity
2. Current asset 6. Long-term liability
3. Property, plant, and equipment 7. Current asset
4. Current asset 8. Current liability
PE 4–4A
Closing Entries
Aug. 31 Fees Earned 880,000
Income Summary 880,000
31 Income Summary 629,000
Wages Expense 524,000
Rent Expense 80,000
Supplies Expense 16,000
Miscellaneous Expense 9,000
31 Income Summary 251,000
Rita Sands, Capital 251,000
31 Rita Sands, Capital 55,000
Rita Sands, Drawing 55,000
4-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
