Question

The following unadjusted trial balance is for Groenke Construction Company as of year-end for the December 31, 20x7 fiscal year. The December 31, 20x6 credit balance of the stockholders’ equity account is $50,500, and the stockholders invested $45,000 cash in the company during 20x7.

1. Account Title Debit                     Credit

101         Cash                                                      $15,000

126         Supplies                                               $8,500

128         Pre-paid insurance                          $11,200

167         Equipment                                          $175,000

168         Accumulated depreciation – equipment                 $19,000

201         Accounts payable                                                               $9,250

251         Long-term notes payable                                             $45,000

301         Shareholders’ equity                                                      $106,900

302         Dividends                                            $15,750

401         Construction Revenue                                                   $153,000

623         Wage expense                                  $61,800

633         Interest expense                             $6,250

640         Rent expense                                    $15,750

683         Property tax expense                    $12,500

684         Repairs expense                              $6,100

690         Utilities expense                              $5,300

TOTALS                                                            $333,150                  $333,150

Instructions:

Use the template provided to:

1. Journalize the following adjusting entries as of fiscal year-end December 31, 20x7.
2. Post the adjusting entries to an unadjusted trial balance and prepare the adjusted trial balance.
3. Create financial statements, namely: i) the income statement, ii) statement of stockholders’ equity, and iii) the balance sheet for 20x7.

Adjustments needed:

1. The supplies available at the end of the fiscal year 20x7 are at a cost of $5,700.
2. The company's employees have earned $3.500 in accrued wages for the fiscal year.
3. The cost of expired insurance for the fiscal year is $8,600.
4. The rent expense not yet paid or recorded in the fiscal year is $2,250.
5. Annual depreciation on equipment is $8,000; no other depreciation adjustment was made in 20x7.
6. The $450 accrued interest for December has not yet been paid and reported.
7. Additional property taxes of $625 have been assessed for the fiscal year but have not yet been paid or recorded in the accounts.
8. The December utilities expense of $425 is not included in the adjusted trial balance, because the bill arrived after the trial balance was prepared. The $425 amount owed needs to be recorded.

Answer 1

1. In the books of Groenke Construction Company:

Adjusting entries:

Adjustment	Account Titles	Debit	Credit
		$	$
a.	Supplies Expense	2,800
	Supplies		2,800
b.	Wages Expense	3,500
	Wages Payable		3,500
c.	Insurance Expense	8,600
	Prepaid Insurance		8,600
d.	Rent Expense	2,250
	Accounts Payable		2,250
e.	Depreciation Expense	8,000
	Accumulated Depreciation : Equipment		8,000
f.	Interest Expense	450
	Interest Payable		450
g.	Property Taxes Expense	625
	Property Taxes Payable		625
h.	Utilities Expense	425
	Accounts Payable		425

2.

Groenke Construction Company Adjusted Trial Balance December 31, 20X7
Account Titles	Debit	Credit
	$	$
Cash	15,000
Supplies	5,700
Prepaid Insurance	2,600
Equipment	175,000
Accumulated Depreciation : Equipment		27,000
Accounts Payable		11,925
Wages Payable		3,500
Property Taxes Payable		625
Interest Payable		450
Long Term Notes Payable		45,000
Shareholders' Equity		106,900
Dividends	15,750
Construction Revenue		153,000
Wages Expense	65,300
Interest Expense	6,700
Supplies Expense	2,800
Insurance Expense	8,600
Rent Expense	18,000
Property Tax Expense	13,125
Repairs Expense	6,100
Utilities Expense	5,725
Depreciation Expense	8,000
Totals	$ 348,400	$ 348,400

i.

Groenke Construction Company Income Statement For the year ended December 31, 20X7
	$	$
Construction Revenue		153,000
Less: Operating Expenses
Wages Expense	65,300
Supplies Expense	2,800
Rent Expense	18,000
Insurance Expense	8,600
Repairs Expense	6,100
Utilities Expense	5,725
Property Tax Expense	13,125
Depreciation Expense	8,000
Total Operating Expenses		127,650
Income from Operations		25,350
Interest Expense		6,700
Net Income		$ 18,650

ii.

Groenke Construction Company Statement of Stockholders' Equity For the year ended December 31, 20X7
Balance, January 1	$ 61,900
Add: Further capital invested	45,000
Add: Net Income	18,650
Less: Dividends	(15,750)
Balance, December 31	$ 109,800

iii.

Groenke Construction Company Balance Sheet December 31, 20X7
Assets	$	$
Cash	15,000
Supplies	5,700
Prepaid Insurance	2,600
Total Current Assets		23,300
Property, Plant and Equipment
Equipment, at cost	175,000
Less:Accumulated Depreciation	(27,000)	148,000
Total Assets		$ 171,300
Liabilities
Accounts Payable	11,925
Wages Payable	3,500
Property Taxes Payable	625
Interest Payable	450
Total Current Liabilities		16,500
Long-term Liabilities
Long Term Notes Payable		45,000
Total Liabilities		61,500
Stockholders' Equity		109,800
Total Liabilities and Stockholders' Equity		$ 171,300