P4-3A Preparing trial balances, closing entries, and financial statements

Preparing trial balances, closing entries, and financial statements

P4-3A Preparing trial balances, closing entries, and financial statements

P4-3A Preparing trial balances, closing entries, and financial statements

KOBE REPAIRS

Adjusted Trial Balance

December 31, 2011

No. Account Title Debit Credit

101 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     $ 13,000

124 Office supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        1,200

128 Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . .                          1,950

167 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         48,000

168 Accumulated depreciation—Equipment . . . . . . . .                                               $ 4,000

201 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . .                                              12,000

210 Wages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                    500

301 S. Kobe, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . .                                               40,000

302 S. Kobe, Withdrawals . . . . . . . . . . . . . . . . . . . . . . .                       15,000

401 Repair fees earned . . . . . . . . . . . . . . . . . . . . . . . . .                                               77,750

612 Depreciation expense—Equipment . . . . . . . . . . . .                            4,000

623 Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . .                          36,500

637 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . .                              700

640 Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                           9,600

650 Office supplies expense . . . . . . . . . . . . . . . . . . . . .                          2,600

690 Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . . .                          1,700

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 $134,250         $134,250

Required

1. Prepare an income statement and a statement of owner’s equity for the year 2011, and a classified balance sheet at December 31, 2011. There are no owner investments in 2011.

2. Enter the adjusted trial balance in the first two columns of a six-column table. Use columns three and four for closing entry information and the last two columns for a post-closing trial balance. Insert an Income Summary account as the last item in the trial balance.

3. Enter closing entry information in the six-column table and prepare journal entries for it.

Analysis Component

4. Assume for this part only that

a. None of the $700 insurance expense had expired during the year. Instead, assume it is a prepayment of the next period’s insurance protection.

b. There are no earned and unpaid wages at the end of the year. (Hint: Reverse the $500 wages payable accrual.) Describe the financial statement changes that would result from these two assumptions.

Check

(1) Ending capital balance, $47,650; net income, $22,650

(2) P-C trial balance totals, $64,150

SOLUTION PREVIEW

KOBE REPAIRS For year Ended December 31, 2011
		Adjusted Trial balance			Closing Entries			Post-closing Trial Balance
No.	Account Title	Debit	Credit	(Jnl.)	Debit	(Jnl.)	Credit	Debit	Credit
101	Cash	13,000						13,000
124		1,200						1,200
128	Prepaid insurance	1,950						1,950

File name: P4-3A-Preparing-trial-balances.xls File type: XLS Price: $12

On April 1, 2011, Jennifer Stafford created a new travel agency, See-It-Now Travel. The following transactions occurred during the company’s first month.

On April 1, 2011, Jennifer Stafford created a new travel agency, See-It-Now Travel. The following transactions occurred during the company’s first month.

P4-2A Applying the accounting cycle - On April 1, 2011, Jennifer Stafford created a new travel agency, See-It-Now Travel.

P4-2A On April 1, 2011, Jennifer Stafford created a new travel agency, See-It-Now Travel. The following transactions occurred during the company’s first month.

April 1 Stafford invested $20,000 cash and computer equipment worth $40,000 in the company.

2 The company rented furnished office space by paying $1,700 cash for the first month’s (April) rent.

3 The company purchased $1,100 of office supplies for cash.

10 The company paid $3,600 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.

14 The company paid $1,800 cash for two weeks’ salaries earned by employees.

24 The company collected $7,900 cash on commissions from airlines on tickets obtained for customers.

28 The company paid $1,800 cash for two weeks’ salaries earned by employees.

29 The company paid $250 cash for minor repairs to the company’s computer.

30 The company paid $650 cash for this month’s telephone bill.

30 Stafford withdrew $1,500 cash from the company for personal use.

The company’s chart of accounts follows:

101 Cash                                                                     405 Commissions Earned

106 Accounts Receivable                                            612 Depreciation Expense — Computer Equip.

124 Office Supplies                                                     622 Salaries Expense

128 Prepaid Insurance                                                             637 Insurance Expense

167 Computer Equipment                                            640 Rent Expense

168 Accumulated Depreciation — Computer Equip.   650 Office Supplies Expense

209 Salaries Payable                                                    684 Repairs Expense

301 J. Stafford, Capital                                                            688 Telephone Expense

302 J. Stafford, Withdrawals                                       901 Income Summary

Required

1. Use the balance column format to set up each ledger account listed in its chart of accounts.

2. Prepare journal entries to record the transactions for April and post them to the ledger accounts. The company records prepaid and unearned items in balance sheet accounts.

3. Prepare an unadjusted trial balance as of April 30.

4. Use the following information to journalize and post adjusting entries for the month:

a. Two-thirds of one month’s insurance coverage has expired.

b. At the end of the month, $700 of office supplies are still available.

c. This month’s depreciation on the computer equipment is $600.

d. Employees earned $320 of unpaid and unrecorded salaries as of month-end.

e. The company earned $1,650 of commissions that are not yet billed at month-end.

5. Prepare the income statement and the statement of owner’s equity for the month of April and the balance sheet at April 30, 2011.

6. Prepare journal entries to close the temporary accounts and post these entries to the ledger.

7. Prepare a post-closing trial balance.

Check (3) Unadj. trial balance totals, $67,900

(4a) Dr. Insurance Expense, $200

(5) Net income, $1,830; J. Stafford, Capital (4/30/2011), $60,330; Total assets, $60,650

(7) P-C trial balance totals, $61,250

SOLUTION PREVIEW

SEE-IT-NOW TRAVEL

General Journal

Date	Accounting Titles	Acct No.	Debit	Credit
Transactions for April (Part 2):
Apr 1	Cash	101	20,000
	Computer Equipment	167	40,000
	Stafford, Capital	301		60,000	<-Correct
	Owner invested in the business

 File name: P4-2A-On-April-1-2011.xls File type: XLS    Price: $15 

Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single quality shirt in lots of a dozen according to each customer’s order and attaches the store’s label.

Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single quality shirt in lots of a dozen according to each customer’s order and attaches the store’s label.

P8-13 Variance analysis - Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single

P8-13 Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single quality shirt in lots of a dozen according to each customer’s order and attaches the store’s label.

The standard costs for a dozen shirts include the following:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . .               24yards@$0.55/yard            $13.20

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             3hours@$7.35/hour                  22.05

Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . .                3hours@$2.00/hour                   6.00

Standard cost per dozen . . . . . . . . . . . . . . . . . .                                                                     $41.25

During October, Folsum worked on three orders for shirts. Job cost records for the month disclose the following:

Lot                  Units in Lot                 Materials Used            Hours Worked

30                    1,000 dozen                24,100 yards                           2,980

31                    1,700 dozen                40,440 yards                          5,130

32                    1,200 dozen                28,825 yards                           2,890

The following information is also available:

a. Folsom purchased 95,000 yards of materials during October at a cost of $53,200. The materials price variance is recorded when goods are purchased, and all inventories are carried at standard cost.

b. Direct labor incurred amounted to $81,400 during October. According to payroll records, production employees were paid $7.40 per hour.

c. Overhead is applied on the basis of direct labor hours. Factory overhead totaling $22,800 was incurred during October.

d. A total of $288,000 was budgeted for overhead for the year, based on estimated production at the plant’s normal capacity of 48,000 dozen shirts per year. Overhead is 40% fixed and 60% variable at this level of production.

e. There was no work in process at October 1. During October, Lots 30 and 31 were completed, and all materials were issued for Lot 32, which was 80% completed as to labor and overhead.

Required:

1. Prepare a schedule computing the October standard cost of Lots 30, 31, and 32.

2. Prepare a schedule computing the materials price variance for October and indicate whether it is favorable or unfavorable.

3. For each lot produced during October, prepare schedules computing the following (indicate whether favorable or unfavorable):

a.Materials quantity variance in yards.

b. Labor efficiency variance in hours. (Hint: Don’t forget the percentage of completion.)

c. Labor rate variance in dollars.

4. Prepare a schedule computing the total controllable and volume overhead variances for October and indicate whether they are favorable or unfavorable.

SOLUTION PREVIEW

Problem 8-13

Standard Cost of Production for October
Lot	Quantity (Dozens)	Standard Cost per Dozen	Total Standard Cost
30	1,000	$                     41.25	$                   41,250
31	1,700	$                     41.25	70,125
32	1,200	$                     35.64	42,768

NOTE

The solution attachment will be automatically sent to your mail id. In case of any problem, it will be sent to your mail id by the customer care within a short time. Do not worry.

File name: P8-13-Folsom-Shirts.xls File type: XLS   Price: $12

Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single quality shirt in lots of a dozen according to each customer’s order and attaches the store’s label.

Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single quality shirt in lots of a dozen according to each customer’s order and attaches the store’s label.

P8-13 Variance analysis - Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single

P8-13 Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single quality shirt in lots of a dozen according to each customer’s order and attaches the store’s label.

The standard costs for a dozen shirts include the following:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . .               24yards@$0.55/yard            $13.20

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             3hours@$7.35/hour                  22.05

Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . .                3hours@$2.00/hour                   6.00

Standard cost per dozen . . . . . . . . . . . . . . . . . .                                                                     $41.25

During October, Folsum worked on three orders for shirts. Job cost records for the month disclose the following:

Lot                  Units in Lot                 Materials Used            Hours Worked

30                    1,000 dozen                24,100 yards                           2,980

31                    1,700 dozen                40,440 yards                          5,130

32                    1,200 dozen                28,825 yards                           2,890

The following information is also available:

a. Folsom purchased 95,000 yards of materials during October at a cost of $53,200. The materials price variance is recorded when goods are purchased, and all inventories are carried at standard cost.

b. Direct labor incurred amounted to $81,400 during October. According to payroll records, production employees were paid $7.40 per hour.

c. Overhead is applied on the basis of direct labor hours. Factory overhead totaling $22,800 was incurred during October.

d. A total of $288,000 was budgeted for overhead for the year, based on estimated production at the plant’s normal capacity of 48,000 dozen shirts per year. Overhead is 40% fixed and 60% variable at this level of production.

e. There was no work in process at October 1. During October, Lots 30 and 31 were completed, and all materials were issued for Lot 32, which was 80% completed as to labor and overhead.

Required:

1. Prepare a schedule computing the October standard cost of Lots 30, 31, and 32.

2. Prepare a schedule computing the materials price variance for October and indicate whether it is favorable or unfavorable.

3. For each lot produced during October, prepare schedules computing the following (indicate whether favorable or unfavorable):

a.Materials quantity variance in yards.

b. Labor efficiency variance in hours. (Hint: Don’t forget the percentage of completion.)

c. Labor rate variance in dollars.

4. Prepare a schedule computing the total controllable and volume overhead variances for October and indicate whether they are favorable or unfavorable.

SOLUTION PREVIEW

Problem 8-13

Standard Cost of Production for October
Lot	Quantity (Dozens)	Standard Cost per Dozen	Total Standard Cost
30	1,000	$                     41.25	$                   41,250
31	1,700	$                     41.25	70,125
32	1,200	$                     35.64	42,768

NOTE

The solution attachment will be automatically sent to your mail id. In case of any problem, it will be sent to your mail id by the customer care within a short time. Do not worry.

File name: P8-13-Folsom-Shirts.xls File type: XLS   Price: $12