Question

Comprehensive Problem 1 Part B

Page 150 COMPREHENSIVE PROBLEM 1 PART B (CHAPTERS 1, 3, 4) The purpose of Comprehensive Problem 1 is to review and reinforce your understanding of the accounting cycle. The number of accounts included in this comprehensive problem has been kept to a minimum so that you can simulate what might happen in actual practice without unnecessary redundancy or excessive time requirements BACKGROUND Sam and Ben considered the first year of operations of Sparkle Pool & Spa Services, Inc. a success. They have asked you to prepare the company's financial statements and perform the year end closing process After all the transactions and adjusting entries from the fiscal year were recorded and posted to the accounts, the September 30, 2020 year-end adjusted trial balance (with accounts listed in alphabetical order) was prepared and is presented on the following page. COMPREHENSIVE PROBLEM 1 REQUIREMENTS Part B (use the September 30, 2020 adjusted trial balance on the following page to complete the below requirements): (3) Prepare, in good form, the 2020 fiscal year financial statements: (a) Income Statement: Check figure: Net Income = $23,410. (b) Statement of Retained Earnings: Check figure: Retained Earnings, September 30, 2020 = $11,410 (c) Balance Sheet: Check figure: Total Assets = $ 87,490. (4) Prepare the year-end closing entries in the general journal (all CJEs are dated September 30). Check figure: Total debits = $448,000. Post the closing entries to Income Summary and Retained Earnings in the general ledger and compute the ending balances of these accounts. DISCOVERY OF ERRORS If your FINANCIAL STATEMENT amounts do not agree with the check figures: (1) Remember that each account is included in only one statement; check each account off as it is used. (2) Calculate the difference between your amount and the check figure and then look for accounts that are: (a) (b) included on a particular statement but should not be, or omitted.

Answer 1

Prepare financial position as follows:

SPARKLE POOL & SPA SERVICES, INC. INCOME STATEMENT For the Month Ended September 30,2020 Revenue: Service revenue $218,000 Less: Operating expenses: Salaries and wages expense $140,000 Rent expense $15,300 supplies expense $10.000 Advertising expense $4,700 Depreciation expense $7,860 Insurance expense $900 Interest expense $1,680 Legal fees expense $850 Utilities expense $4,500 Income taxes expense $8.800 $194,590 Net Income $23.410

SPARKLE POOL & SPA SERVICES, INC. Statement of Retained earnings For the Month Ended September 30,2020 Beginning balance Add: Net Income $23,410 Less: Dividends ($12,000) Ending balance $11.410 SO

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SPARKLE POOL & SPA SERVICES, INC.
BALANCE SHEET
September 30, 2020
Assets:
Current assets:
Cash	$43,000
Accounts receivable	$11,800
Supplies	$2,870
Prepaid Insurance	$900
Total current assets		$58,570
Computers	$3,780
Less: Accumulted Depr-Computer	($1,260)	$2,520
Truck	$33,000
Less: Accumulted Depr-truck	($6,600)	$26,400
Total Assets		$87,490
Liabilities:
Accounts payable	$5,600
Salaries & wage payable	$3,500
Interest payable	$1,680
Unearned service revenue	$1,300
Note payable	$24,000
Total liabilities		$36,080
Stockholders' equity
Common stock	$40,000
Retained earnings	$11,410	$51,410
Total Liabilities $ SE		$87,490

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Prepare closing entries as follows:

Credit Date Account Titles Sep 30, 2020 Service revenue Income summary Debit $218,000 $218,000 $194,590 Sep. 30, 2020 Income summary Salaries and wages expense Rent expense supplies expense Advertising expense Depreciation expense Insurance expense Interest expense Legal fees expense Utilities expense Income taxes expense $140,000 $15,300 $10,000 $4,700 $7,860 $900 $1,680 $850 $4.500 $8.800 $23.410 Sep. 30, 2020 Income summary ($218,000-$194590) Retained earnings $23,410 $12.000 Sep. 30, 2020 Retained Earnings Dividends $12,000