Question

Problem 6-5 Prepare work sheet, classified income statement, statement of retained earnings, classified balance sheet, and closing entries (based on Appendix) (L.O.5-8) The following data are for Leone Lumber Company LEONE LUMBER COMPANY Trial Balance December 31, 2018 Acct. No. 100 103 105 107 108 112 170 171 200 300 310 410 412 Debits Credits Account Title $ 90,640 Cash 159,520 Accounts Receivable 285,200 Merchandise Inventory, January 1, 2018 5,360 Supplies on Hand 4,800 Prepaid Insurance 57,600 Prepaid Rent 88,000 Equipment $ 17,600 Accumulated Depreciation-Equipment 102,800 Accounts Payable Capital Stock 220,000 Retained Earnings, 1/1/18 219,640 Sales 1,122,360 Sales Returns and Allowances 5,160 Interest Revenue 1,000 Purchases 500,840 Purchases Returns and Allowances 4,040 Transportation-In 7,840 Advertising Expense 78,000 Sales Salaries Expense 138,400 Office Salaries Expense Officers' Salaries Expense 80,800 Utilities Expense 160,000 Legal and Accounting Expense 4,800 Interest Expense 10,000 600 9,880 $1.687.440 $1,687,440 418 500 502 503 505 508 509 510 511 536 540 567 Miscellaneous Administrative Expense Additional data 1. A total of $3,400 of the prepaid insurance has expired. 2. An inventory of supplies showed that $1,700 of inventory is still on hand. 3. Prepaid rent expired during the year is $50.600. 4. Depreciation expense on store equipment is $8,800. 5. Accrued sales salaries are $4.000. 6. Accrued office salaries are $3,000. 7. Merchandise inventory on hand is $350,000 Processing Information for Decisions and Establishing Accounting Policy

Answer 1

Leone Lumber Company Adjusting Enteries Trans. Particulars 1 Insurance Expense a/c To Prepaid Insurance (Insurance expensed) Dr. Debit in $ Credit in $ 3400 3400 2 Dr. 3660 Supplies Expense a/c To Supplies (Supplies expensed) 5360 - 1700 3660 Dr. 50600 Rent Expense a/c To Prepaid Rent (Rent expensed) 50600 8800 Depreciation Expense a/c Dr. To Accum. Depre - Equip. (To record depreciation) 8800 5 Dr. 3000 Office Salary expense a/c To Salary Payable (Salary accrued) 3000 Closing Enteries Date Particulars Debit in $ Credit in $ 31.12.2018 Income Summary a/c Dr. 996940 To Sales Returns and Allowances 5160 To Cost of goods sold 439840 To Advertising Expense 78000 To Sales Salaries Expense 138400 To Office Salaries expense 83800 To Officer's Salaries expense 160000 To Utilities Expense 4800 To Legal and Accounting expense 10000 To Interest Expense 600 To Miscellaneous Administrative expense 9880 To Insurance Expense 3400 To Supplies Expense 3660 To Rent Expense To Depreciation Expense 8800 (Expense accounts closed) 50600 Dr. Dr. 1122360 1000 31.12.2018 Sales a/c Interest Revenue a/c To Income Summary (Revenue accounts closed) 1123360 Dr. 126420 31.12.2018 Income Summary a/c To Retained Earnings (Profits transferred)

Worksheet For the period ending 31.12.2018 Particulars Cash Accounts Receivable Inventory Supplies Prepaid Insurance Prepaid Rent Equipment Accum. Depre - Equip. Accounts Payable Salary Payable Capital Stock Retained Earnings Sales Sales Returns and Allowances Interest Revenue Purchases Purchase Returns and Allowances Transportation in Advertising Expense Sales Salaries Expense Office Salaries expense Officer's Salaries expense Utilities Expense Legal and Accounting expense Interest Expense Miscellaneous Administrative expense Insurance Expense Supplies Expense Rent Expense Depreciation Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 90640 90640 159520 159520 285200 285200 5360 3660 1700 4800 3400 1400 57600 50600 7000 88000 88000 17600 8800 26400 102800 102800 3000 3000 220000 220000 219640 219640 1122360 1122360 5160 5160 1000 1000 500840 500840 4040 4040 7840 7840 78000 78000 138400 138400 80800 3000 83800 160000 160000 4800 4800 10000 10000 600 600 9880 9880 3400 3400 3660 3660 50600 50600 8800 8800 1687440 1687440 69460 69460 1699240 1699240

1122360 -5160 1117200 Statement of Income For the period ending 31.12.2018 Sales Sales Returns and Allowances Net Sales Cost of goods sold: Beginning Inventory Purchases Purchase Returns and Allowances Transportation in Ending Inventory Gross Profit 285200 500840 -4040 7840 -350000 439840 677360 Selling Expenses: Advertising Expense Sales Salaries Expense Supplies Expense Depreciation Expense 78000 138400 3660 8800 228860 83800 Administrative Expense: Office Salaries expense Officer's Salaries expense Utilities Expense Legal and Accounting expense Miscellaneous Administrative expense Insurance Expense Rent Expense Operating Income Non Operating Items: Interest Revenue Interest Expense Net Income 160000 4800 10000 9880 3400 50600 322480 126020 1000 -600 400 126420

Balance sheet As at 31.12.2018 Assets Current Assets Amounts in $ Amounts in $ Cash 102800 3000 105800 Accounts Receivable Inventory Supplies Prepaid Insurance Prepaid Rent Amounts in $ Amounts in $ Liabilities Current Liabilities 90640 Accounts Payable 159520 Salary Payable 350000 1700 1400 7000 610260 Non Current Assets Equipment Accum. Depre - Equip Total Assets 88000 -26400 Shareholders Equity Capital Stock 61600 Retained Earnings 671860 Total Liabilities & Equity 220000 346060 566060 671860 Statement of Retained Earnings For the period ending 31.12.2018 Beginning Balance 219640 Net Income 126420 346060