Question

T Accounts, Adjusting Entries, Financial Statements, and Closing Entries; optional end-of-period spreadsheet

The unadjusted trial balance of La Mesa Laundry at August 31, 20Y5, the end of the fiscal year, follows:

La Mesa Laundry Unadjusted Trial Balance August 31, 20Y5
	Debit Balances		Credit Balances
Cash	3,800
Laundry Supplies	9,000
Prepaid Insurance	6,000
Laundry Equipment	180,800
Accumulated Depreciation			49,200
Accounts Payable			7,800
Common Stock			15,000
Retained Earnings			80,000
Dividends	2,400
Laundry Revenue			248,000
Wages Expense	135,800
Rent Expense	43,200
Utilities Expense	16,000
Miscellaneous Expense	3,000
	400,000		400,000

The data needed to determine year-end adjustments are as follows:

1. Wages accrued but not paid at August 31 are $2,200.
2. Depreciation of equipment during the year is $8,150.
3. Laundry supplies on hand at August 31 are $2,000.
4. Insurance premiums expired during the year are $5,300.

Required:

1. The following steps have already been done for you: Each account balance listed in the unadjusted trial balance has been entered into its T account below, with the identification “Aug. 31 Bal.” T accounts for Wages Payable, Depreciation Expense, Laundry Supplies Expense, and Insurance Expense have been added below.

2. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (1) as needed.

3. Journalize and post the adjusting entries. Identify the adjustments by “Adj.” and the new balances as “Adj. Bal.”

Date	Account	Debit	Credit
20Y5
a. Aug. 31	Wages Expense
	Wages Payable
b. Aug. 31	Depreciation Expense
	Accumulated Depreciation
c. Aug. 31	Laundry Supplies Expense
	Laundry Supplies
d. Aug. 31	Insurance Expense
	Prepaid Insurance

The T accounts below are used to complete the posting requirements for part 3 and 6.

Cash
Aug. 31 Bal.	3,800

Laundry Supplies
Aug. 31 Bal.	9,000

Prepaid Insurance
Aug. 31 Bal.	6,000

Laundry Equipment
Aug. 31 Bal.	180,800

Accumulated Depreciation
		Aug. 31 Bal.	49,200

Accounts Payable
		Aug. 31 Bal.	7,800

Wages Payable

Common Stock
		Aug. 31 Bal.	15,000

Retained Earnings
		Aug. 31 Bal.	80,000

Dividends
Aug. 31 Bal.	2,400

Laundry Revenue
		Aug. 31 Bal.	248,000

Wages Expense
Aug. 31 Bal.	135,800

Rent Expense
Aug. 31 Bal.	43,200

Utilities Expense
Aug. 31 Bal.	16,000

Depreciation Expense

Laundry Supplies Expense

Insurance Expense

Miscellaneous Expense
Aug. 31 Bal.	3,000

4. Prepare an adjusted trial balance. List the accounts in order by type: Assets, Liabilities, Capital, Dividends, Revenue and Expenses. If a box does not require an entry, leave it blank.

La Mesa Laundry Adjusted Trial Balance August 31, 20Y5
	Debit Balances	Credit Balances

5. Prepare an income statement.

La Mesa Laundry Income Statement For the Year Ended August 31, 20Y5
		$
Expenses:
	$
Total expenses
		$

Prepare a statement of stockholders’ equity. During the year ended August 31, 20Y5, common stock of $3,000 was issued. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign.

La Mesa Laundry Statement of Stockholders’ Equity For the Year Ended August 31, 20Y5
	Common Stock	Retained Earnings	Total
	$	$	$
	$	$	$

Prepare a balance sheet.

La Mesa Laundry Balance Sheet August 31, 20Y5
Assets				Liabilities
Current assets:				Current liabilities:
		$			$
				Total liabilities		$
Total current assets			$
Property, plant, and equipment:				Stockholders' Equity
	$				$
Total property, plant, and equipment				Total stockholders' equity
Total assets			$	Total liabilities and stockholders' equity		$

6. Journalize the closing entries. If a box does not require an entry, leave it blank. Then post the entries to the T accounts in part 3 above. Identify the closing entries by "Clos." Provide the ending balance for the Retained Earnings account, and identify it by "Bal."

7. Prepare a post-closing trial balance. List the accounts in order by type: Assets, Liabilities, Capital, Dividends, Revenue and Expenses. If a box does not require an entry, leave it blank.

Answer 1

Date	Account	Debit	Credit
20Y5
a. Aug. 31	Wages Expense	$       2,200
	Wages Payable		$        2,200
b. Aug. 31	Depreciation Expense	$       8,150
	Accumulated Depreciation		$        8,150
c. Aug. 31	Laundry Supplies Expense	$       7,000
	Laundry Supplies		$        7,000
d. Aug. 31	Insurance Expense	$       5,300
	Prepaid Insurance		$        5,300

Adjusted Trial Balance

	Debit Balances	Credit Balances
Cash	$       3,800
Laundry Supplies	$       2,000
Prepaid Insurance	$          700
Laundry Equipment	$    180,800
Accumulated Depreciation		$      57,350
Accounts Payable		$       7,800
Wages Payable		$       2,200
Common Stock		$      15,000
Retained Earnings		$      80,000
Dividends	$       2,400
Laundry Revenue		$    248,000
Wages Expense	$    138,000
Rent Expense	$     43,200
Utilities Expense	$     16,000
Miscellaneous Expense	$       3,000
Laundry Supplies Expense	$       7,000
Depreciation Expense	$       8,150
Insurance Expense	$       5,300
	$    410,350	$    410,350

Income Statement
Revenue
Laundry Revenue		$      248,000
Expenses
Wages Expense	$       138,000
Rent Expense	$         43,200
Utilities Expense	$         16,000
Miscellaneous Expense	$            3,000
Laundry Supplies Expense	$            7,000
Depreciation Expense	$            8,150
Insurance Expense	$            5,300
Total Expenses		$      220,650
Net Income		$        27,350

	Common Stock	Retained Earnings	Total
Beginning Balance	$      15,000	$      80,000	$    95,000
Add : Net Income		$      27,350	$    27,350
	$      15,000	$    107,350	$   122,350
Less : Dividends		$       2,400	$      2,400
Ending Balance	$      15,000	$    104,950	$   119,950

Balance Sheet
Assets			Liabilities
Current Assets			Current Liabilities
Cash	$            3,800		Accounts Payable	$           7,800
Laundry Supplies	$            2,000		Wages Payable	$           2,200
Prepaid Insurance	$               700		Total Current Liabilities		$        10,000
Total Current Assets		$           6,500
Property, plant, and equipment:			Stockholders' Equity
Laundry Equipment	$       180,800		Common Stock	$         15,000
Accumulated Depreciation	$        -57,350		Retained Earnings	$      104,950
Property, plant, and equipment:		$      123,450	Total Stockholders' Equity		$      119,950
Total Assets		$      129,950	Total Liabilities & Stockholders' Equity		$      129,950

Closing Entries

Date	Account	Debit	Credit
20Y5
a. Aug. 31	Laundry Revenue	$     248,000
	Income Summary		$    248,000
b. Aug. 31	Income Summary	$     220,650
	Wages Expense		$    138,000
	Rent Expense		$      43,200
	Utilities Expense		$      16,000
	Miscellaneous Expense		$       3,000
	Laundry Supplies Expense		$       7,000
	Depreciation Expense		$       8,150
	Insurance Expense		$       5,300
a. Aug. 31	Income Summary	$      27,250
	Retained Earnings		$      27,250
a. Aug. 31	Dividends	$        2,400
	Income Summary		$       2,400

Closing Trial

	Debit Balances	Credit Balances
Cash	$        3,800
Laundry Supplies	$        2,000
Prepaid Insurance	$           700
Laundry Equipment	$     180,800
Accumulated Depreciation		$      57,350
Accounts Payable		$       7,800
Wages Payable		$       2,200
Common Stock		$      15,000
Retained Earnings		$    104,950
Dividends	$             -
Laundry Revenue		$            -
Wages Expense	$             -
Rent Expense	$             -
Utilities Expense	$             -
Miscellaneous Expense	$             -
Laundry Supplies Expense	$             -
Depreciation Expense	$             -
Insurance Expense	$             -
	$     187,300	$    187,300