Question

In-Class Case #4 Chapter 4 the following is an unadjusted trial balance before any adjustments have been made) for Garcia, Inc. at December 31 of the current year: Debit Credit 42,000 11,600 900 800 19,000 9,200 8,300 3,000 Account Titles Cash Accounts Receivable Supplies Prepaid Insurance Service Vehicles Accumulated Depreciation Other Assets Accounts Payable Wages Payable Income Taxes Payable Note Payable (3 years) Common Stock (5,000 shares outstanding) Additional Paid-in-Capital Retained Earnings Service Revenue Remaining Expenses Income Tax Expense Totals 17,000 400 19,000 6,000 61,360 33,360 115,960 115,960 Additional information not yet recorded: a) The supplies count at year-end reflected $300 remaining supplies on hand (unused). b) Insurance expired during the year: $800. c) Depreciation expense for the year: $3,700. d) Wages earned by employees not yet paid at year-end: $640. e) Income tax expense incurred but unpaid at year-end: $5,540. Required 1. Record the adjusting entries listed above, post to general ledger accounts, and prepare an adjusted trial balance. 2. Compare your balances with those on the given income statement, retained earnings statement, and balance sheet for December 31. 3. Record closing entries for the year, post to general ledger accounts, and prepare a post-closing trial balance.

Answer 1

Part 1

Journal Entries

Journal Entries Date Particular Debit Rs. Credit Rs. 31-12-XX 31-12-XX $ 600.00 600.00 Shortage of Supplies A/C Dr. To Supplies (Being loss of supplies found on physical verification booked as shortage at year-end) Dr Dr. $ 800.00 31-12-XX Insurance Expense A/C 31-12-XX To Prepaid Insurance A/C (Being Insurance expired for the year-end) $ 800.00 $ 3,700.00 31-12-XX 31-12-XX Depreciation expense A/C Dr. To Accumulated Depreciation A/C (Being Depreciation booked for the year-end) $ 3,700.00 Dr. 640.00 640.00 31-12-XX Wages Expense A/C 31-12-XX To Wages Payable A/C (Being wages earned by the employees remained unpaid at year-end) Dr. $ 5,540.00 31-12-XX 31-12-XX 5,540.00 Income Tax Expense A/C To Income Tax Payable A/C (Being income tax expense incurred but not remained unpaid at year-end)

Posting in General Ledger

Shortage of Supplies Prepaid Insurance Wages Expense Debit Debit Particular To Supplies Credit Particular Amount Credit Particular Date 31-12-XX Debit Particular To balance b/d Amount Date $ 600.00 Amount Date 31-12-XX Credit Particular By Insurance expense Amount Date $ 800.00 31-12-XX Amount $ 800.00 Date 31-12-XX Particular To Wages Payable Amount Date $ 640.00 31-12-XX By balance c/d 31-12-XX By balance c/d $ 600.00 $ 600.00 $ 600.00 - $ 800.00 $ 800.00 D $ 640.00 $ 640.00 I $ 640.00 Sunplies Depreciation expense Wages Payable Debit Particular Credit Particular Credit Particular Debit Particular Date Credit Particular Amount Amount Date Date Amount Date Amount Date Debit Particular To Accumulated 31-12-XX Depreciation Amount 31-12-XX To balance b/d $ 900.00 31-12-XX By Shortage of Supplies $ 600.00 $ 3,700.00 31-12-XX By Wages Expense $ 640.00 31-12-XX By balance c/d 31-12-XX By balance c/d 31-12-XX To balance c/d $ 300.00 $ 900.00 $ 3,700.00 $ 3,700.00 $ 640.00 | $ 640.00 $ 900.00 $ 3,700.00 640.00 Insurance Expense Debit Particular To Prepaid Insurance Credit Particular Debit Particular Accumulated Depreciation Credit Amount Date Particular 31-12-XX By balance b/d Date Income Tax Expense Credit Amount Date Particular $5,540.00 Date 31-12-XX Date Amount $ 800.00 Amount Amo $ 9,200.00 Debit Date Particular 31-12-XX Income Tax Payable 31-12-XX By Depreciation expense $ 3,700.00 LT 31-12-XX By balance c/d $ 800.00 31-12-XX To balance c/d $ 800.00 $ 800.00 31-12-xx To balance c/d $ 12,000.00 $ 12,900.00 $ 12,900.00 31-12-XX By balance c/d Tessao 31-12-XX _By balance e/d $ 5,540.00 $ 5,540.00 $5.540.00 $ 800.00 $ 12,900.00 $ 5,540.00 Debit Particular Income Tax Payable Credit Amount Particular 31-12-XX Income Tax Expense Date Amount 5540 31-12-XX To balance c/d $ 5,540.00 $ 5,540.00 $ 5,540.00

Adjusted Trial Balance

Credit Rs. Particulars Cash Accounts Receivable Supplies Prepaid Insurance Adjusted Trial Balance Debit Rs. $ 42,000.00 $ 11,600.00 $ 300.00 $ 19,000.00 $ 12,900.00 $ 8,300.00 Service Vehicles Accumulated Depreciation Other Assets Accounts Payable Wages Payable Income Tax Payable $ $ $ 3,000.00 640.00 5,540.00 Note Payable (3 Years) Common Stock (5000 Shares outstanding) Additional paid-up-Capital Retained Earnings Service Revenue Remaining Expenses $ 17,000.00 $ 400.00 $ 19,000.00 $ 6,000.00 $ 61,360.00 $ 33,360.00 Income Tax Expense Shortage of Supplies Insurance Expense Depreciation Expense $ 5,540.00 $ 600.00 $ 800.00 $ 3,700.00 Wages Expense $ 640.00 Total $1,25,840.00 $ 1,25,840.00

Part 2

Income Statement & Retained Earnings Statement
Debit Date Particular Before 31-12-XX To Shortage of Supplies $ 31-12-XX To Insurance Expense $ 31-12-XX To Depreciation Expense $ - - - Income Statement Credit After Date Particular Before After $ 600.00 31-12-XX By Service Revenue $ 61,360.00 $ 61,360.00 $ 800.00 $ 3.700.00 31-12-XX To Wages Expense 31-12-XX To Remaining Expense 640.00 33,360.00 $ 33,360.00 $ 31-12-XX To Income Tax Expense $ - $ 5.540.00 To balance transferred 31-12-XX to Retained Earnings $ 28,000.00 $ 16,720.00 $ 61,360.00 $ 61,360.00 $ 61,360.00 $ 61,360.00 Retained Earnings Debit Before Date Particular After Date Particular 31-12-XX By balance b/d Credit Before After $ 6,000.00 $ 6,000.00 By balance transferred 31-12-xx from Income Statement $ 28,000.00 $ 16,720.00 31-12-XX To balance c/d $ 34,000.00 $ 22,720.00 $ 34,000.00 $ 22.720.00 $ 34,000.00 $ 22,720.00
Balance Sheet for Garcia Inc.
Balance Sheet Assets Before After Liabilities Particular Common Stock (5000 Shares outstanding) Additional paid-up-Capital Before After Particular $ 400.00 $ 400.00 Service Vehicles $ 19,000.00 $ 19,000.00 Less: Accumulated Depreciation (Net Block) Service Vehicles $ 19000 $-9200 $ 9,800.00 $ 6,100.00 Retained Earnings + Profits $ 34,000.00 $ 22,720.00 Supplies $ 3,000.00 $ 3,000.00 Accounts Receivable $ 640.00 Cash Accounts Payable Wages Payable $ 900.00 $ 300.00 $ 11,600.00 $ 11,600.00 $ 42,000.00 $ 42,000.00 Income Tax Payable $ $ 8,300.00 5,540.00 Other Assets Prepaid Insurance $ $ 8,300.00 800.00 Note Payable (3 Years) $ 17,000.00 $ 17,000.00 $ 73,400.00 $ 68,300.00 | $ 73,400.00 $ 68,300.00

Part 3

Closing Journal Entries

Closing Journal Entries Debit Rs. Date Particular Credit Rs. Dr. 600.00 31-12-XX 31-12-XX Income Statement A/C To Shortage of Supplies A/C 600.00 (Being loss of supplies found on physical verification booked as shortage at year-end booked as expense) 31-12-XX 31-12-XX $ 800.00 800.00 Income Statement A/C Dr. To Insurance Expense A/c (Being Insurance expired for the year-end booked as expense) Dr. $ 31-12-XX 31-12-XX 3,700.00 Income Statement A/C To Depreciation Expense A/C 3,700.00 (Being Depreciation booked for the year-end booked as expense) 31-12-xx 31-12-XX $ 640.00 640.00 Income Statement A/C Dr. Dr. To Wages Expense A/C (Being wages earned by the employees remained unpaid at year-end booked as expense) 5,540.00 31-12-XX 31-12-XX 5,540.00 Income Statement A/C Dr. To Income Tax Expense A/C (Being income tax expense remained unpaid at year- end booked as expense)

Posting in General Ledger

Shortage of Supplies Wages Expense Debit Date Particular 31-12-xx To Supplies Credit Particular Prepaid Insurance Credit Amount Date Particular Amount S 800.00 31-12-XX By Insurance expenses 800.00 Date Debit Date Particular 31-12-XX To balance b/d Credit Particular Amount Debit Date Particular 31-12-XX To Wages Payable Amount $ 600.00 Date Amount Amount $ 640.00 31-12-XX By Income Statement 31-12-XX By Income Statement $ 600.00 $ 600.00 $ $ 640.00 640.00 $ 600.00 $ 800.00 $ 800.00 $ 640.00 Supplies Wages Payable Debit Credit Particular Depreciation expense Credit Amount Date Particular Debit Particular Credit Particular Date Particular Amount Date Amount Amount Date Amount Date Amount Debit Date Particular To Accumulated 31-12-xx Depreciation 31-12-XX To balance b/d $ 900.00 31-12-xx By Shortage of Supplies $ 600.00 $ 3,700.00 31-12-xx By Wages Expense $ 640.00 31-12-XX By balance c/d 31-12-XX By Income Statement 31-12-XX To balance c/d $ 640.00 $ 900.00 $ 300.00 $ 900.00 $ 3,700.00 $ 3,700.00 $ 3,700.00 $ 640.00 $ 640.00 Insurance Expense Debit Date Particular 31-12-XX To Prepaid Insurance Credit Particular Debit Particular Accumulated Depreciation Credit Amount Date Particular 31-12-XX By balance b/d Date Amount Date Amount S 800.00 Amount 31-12-xx By balance bejà Income Tax Expense Credit Amount Date Particular $ 5,540.00 Amount $ 9,200.00 Debit Date Particular 31-12-xx Income Tax Payable fe 9200.00 31-12-xx By Depreciation expense S 3,700.00 31-12-XX To balance c/d 31-12-XX By Income Statement $ 31-12-XX By Income Statement 800.00 $ 800.00 $ 800.00 $ 12,900.00 $ 12,900.00 $ 5,540.00 $ 5,540.00 $ 12,900.00 $ 5,540.00 Income Tay Double Debit Credit Date Particular Amount Amount Date Particular 31-12-XX Income Tax Expense 5540 31-12-XX To balance c/d $ 5,540.00 $ 5,540.00 $ 5,540.00

Post Closing Trial Balance

Credit Rs. Particulars Cash Accounts Receivable Supplies Prepaid Insurance Post-Closing Trial Balance Debit Rs. $ 42,000.00 $ 11,600.00 | $ 300.00 $ 19,000.00 $ 12,900.00 $ 8,300.00 Service Vehicles Accumulated Depreciation Other Assets Accounts Payable Wages Payable Income Tax Payable $ 3,000.00 640.00 5,540.00 $ Note Payable (3 Years) Common Stock (5000 Shares outstanding) Additional paid-up-Capital Retained Earnings $ 17,000.00 $ 400.00 $ 19,000.00 $ 22,720.00 Total $ 81,200.00 $ 81,200.00

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Credit Rs. Particulars Cash Accounts Receivable Supplies Prepaid Insurance Adjusted Trial Balance Debit Rs. $ 42,000.00 $ 11,600.00 $ 300.00 $ 19,000.00 $ 12,900.00 $ 8,300.00 Service Vehicles Accumulated Depreciation Other Assets Accounts Payable Wages Payable Income Tax Payable $ $ $ 3,000.00 640.00 5,540.00 Note Payable (3 Years) Common Stock (5000 Shares outstanding) Additional paid-up-Capital Retained Earnings Service Revenue Remaining Expenses $ 17,000.00 $ 400.00 $ 19,000.00 $ 6,000.00 $ 61,360.00 $ 33,360.00 Income Tax Expense Shortage of Supplies Insurance Expense Depreciation Expense $ 5,540.00 $ 600.00 $ 800.00 $ 3,700.00 Wages Expense $ 640.00 Total $1,25,840.00 $ 1,25,840.00

Debit Date Particular Before 31-12-XX To Shortage of Supplies $ 31-12-XX To Insurance Expense $ 31-12-XX To Depreciation Expense $ - - - Income Statement Credit After Date Particular Before After $ 600.00 31-12-XX By Service Revenue $ 61,360.00 $ 61,360.00 $ 800.00 $ 3.700.00 31-12-XX To Wages Expense 31-12-XX To Remaining Expense 640.00 33,360.00 $ 33,360.00 $ 31-12-XX To Income Tax Expense $ - $ 5.540.00 To balance transferred 31-12-XX to Retained Earnings $ 28,000.00 $ 16,720.00 $ 61,360.00 $ 61,360.00 $ 61,360.00 $ 61,360.00 Retained Earnings Debit Before Date Particular After Date Particular 31-12-XX By balance b/d Credit Before After $ 6,000.00 $ 6,000.00 By balance transferred 31-12-xx from Income Statement $ 28,000.00 $ 16,720.00 31-12-XX To balance c/d $ 34,000.00 $ 22,720.00 $ 34,000.00 $ 22.720.00 $ 34,000.00 $ 22,720.00

Balance Sheet Assets Before After Liabilities Particular Common Stock (5000 Shares outstanding) Additional paid-up-Capital Before After Particular $ 400.00 $ 400.00 Service Vehicles $ 19,000.00 $ 19,000.00 Less: Accumulated Depreciation (Net Block) Service Vehicles $ 19000 $-9200 $ 9,800.00 $ 6,100.00 Retained Earnings + Profits $ 34,000.00 $ 22,720.00 Supplies $ 3,000.00 $ 3,000.00 Accounts Receivable $ 640.00 Cash Accounts Payable Wages Payable $ 900.00 $ 300.00 $ 11,600.00 $ 11,600.00 $ 42,000.00 $ 42,000.00 Income Tax Payable $ $ 8,300.00 5,540.00 Other Assets Prepaid Insurance $ $ 8,300.00 800.00 Note Payable (3 Years) $ 17,000.00 $ 17,000.00 $ 73,400.00 $ 68,300.00 | $ 73,400.00 $ 68,300.00

Closing Journal Entries Debit Rs. Date Particular Credit Rs. Dr. 600.00 31-12-XX 31-12-XX Income Statement A/C To Shortage of Supplies A/C 600.00 (Being loss of supplies found on physical verification booked as shortage at year-end booked as expense) 31-12-XX 31-12-XX $ 800.00 800.00 Income Statement A/C Dr. To Insurance Expense A/c (Being Insurance expired for the year-end booked as expense) Dr. $ 31-12-XX 31-12-XX 3,700.00 Income Statement A/C To Depreciation Expense A/C 3,700.00 (Being Depreciation booked for the year-end booked as expense) 31-12-xx 31-12-XX $ 640.00 640.00 Income Statement A/C Dr. Dr. To Wages Expense A/C (Being wages earned by the employees remained unpaid at year-end booked as expense) 5,540.00 31-12-XX 31-12-XX 5,540.00 Income Statement A/C Dr. To Income Tax Expense A/C (Being income tax expense remained unpaid at year- end booked as expense)

Credit Rs. Particulars Cash Accounts Receivable Supplies Prepaid Insurance Post-Closing Trial Balance Debit Rs. $ 42,000.00 $ 11,600.00 | $ 300.00 $ 19,000.00 $ 12,900.00 $ 8,300.00 Service Vehicles Accumulated Depreciation Other Assets Accounts Payable Wages Payable Income Tax Payable $ 3,000.00 640.00 5,540.00 $ Note Payable (3 Years) Common Stock (5000 Shares outstanding) Additional paid-up-Capital Retained Earnings $ 17,000.00 $ 400.00 $ 19,000.00 $ 22,720.00 Total $ 81,200.00 $ 81,200.00