Question

Financial Statements and Closing Entries

Last Chance Company offers legal consulting advice to prison inmates. Last Chance Company prepared the end-of-period spreadsheet that follows at June 30, 2019, the end of the fiscal year:

	Last Chance Company
	End-of-Period Spreadsheet
	For the Year Ended June 30, 2019
	Unadjusted						Adjusted
	Trial Balance		Adjustments				Trial Balance
Account Title	Dr.	Cr.		Dr.		Cr.	Dr.	Cr.
Cash	5,100						5,100
Accounts Receivable	22,750		(a)	3,750			26,500
Prepaid Insurance	3,600				(b)	1,300	2,300
Supplies	2,025				(c)	1,500	525
Land	80,000						80,000
Building	340,000						340,000
Accum. Depr.—Building		190,000			(d)	3,000		193,000
Equipment	140,000						140,000
Accum. Depr.—Equipment		54,450			(e)	4,550		59,000
Accounts Payable		9,750						9,750
Salaries & Wages Payable					(f)	1,900		1,900
Unearned Rent		4,500	(g)	3,000				1,500
Tami Garrigan, Capital		361,300						361,300
Tami Garrigan, Drawing	20,000						20,000
Fees Earned		280,000			(a)	3,750		283,750
Rent Revenue					(g)	3,000		3,000
Salaries & Wages Expense	145,100		(f)	1,900			147,000
Advertising Expense	86,800						86,800
Utilities Expense	30,000						30,000
Travel Expense	18,750						18,750
Depr. Exp.—Equipment			(e)	4,550			4,550
Depr. Exp.—Building			(d)	3,000			3,000
Supplies Expense			(c)	1,500			1,500
Insurance Expense			(b)	1,300			1,300
Misc. Expense	5,875						5,875
	900,000	900,000		19,000		19,000	913,200	913,200

Required:

1. Prepare an income statement for the year ended June 30.

Last Chance Company
Income Statement
For the Year Ended June 30, 2019
Revenues:
Fees earned	$
Rent revenue
Total revenues		$
Expenses:
Salaries and wages expense	$
Advertising expense
Utilities expense
Supplies
Depreciation expense-equipment
Building
Supplies expense
Insurance expense
Miscellaneous expense
Total expenses
Net loss		$

2. Prepare a statement of owner's equity for the year ended June 30. No additional investments were made during the year.

Last Chance Company
Statement of Owner's Equity
For the Year Ended June 30, 2019
Tami Garrigan, capital, July 1, 2018		$
	$
		$

3. Prepare a balance sheet as of June 30.

Last Chance Company
Balance Sheet
June 30, 2019
Assets
Current assets:
		$
Total current assets			$
Property, plant, and equipment:
		$
	$
	$
Total property, plant, and equipment
Total assets			$
Liabilities
Current liabilities:
		$
Total liabilities			$
Owner's Equity
Total liabilities and owner's equity			$

Feedback

The balance sheet includes all accounts that would be transferred to the balance sheet columns of the worksheet, except for the capital and drawing balances. The ending capital in the balance sheet must be the same amount as that calculated in the statement of owner's equity. Make sure that the accounting equation remains in balance for this financial statement.

4. On the basis of the end-of-period spreadsheet, journalize the closing entries. For a compound transaction, if a box does not require an entry, leave it blank.

June. 30
June. 30

Feedback

In preparing closing entries, recall that (1) Difference in revenue and expense account balances are transferred to the owner’s capital account; and (2) The balance of the owner’s drawing account is transferred to the owner’s capital account.

5. Prepare a post-closing trial balance. If a box does not require an entry, leave it blank.

Last Chance Company
Post-Closing Trial Balance
June 30, 2019
	Debit Balances	Credit Balances

Answer 1

Last Chance Company Amounts Amounts 283750 3000 286750 Balance sheet As at 30.6.2019 Assets Current Assets Cash Accounts Receivable Prepaid Insurance Supplies Amounts Amounts Liabilities Current Liabilities 5100 Accounts Payable 26500 Salaries & Wages Payable 2300 Unearned Rent 525 34425 9750 1900 1500 13150 Income Statement For the Year Ended June 30, 2019 Revenues: Fees earned Rent revenue Total revenues Expenses: Salaries and wages expense Advertising expense Utilities expense Travel Expense Depreciation expense-equipment Depreciation expense- Building Supplies expense Insurance expense Miscellaneous expense Total expenses Net loss 80000 147000 86800 30000 18750 4550 3000 1500 1300 5875 Non Current Assets Land Building Accum. Depr.- Building Equipment Accum. Depr.-Equipment Total Assets 340000 -193000 140000 -59000 147000 Owner's Equity 81000 Tami Garrigan, Capital 342425 Total Liabilities & Equity 329275 342425 298775 -12025 Statement of Owner's Equity For the Year Ended June 30, 2019 Tami Garrigan, capital, July 1, 2018 Less:Net Loss Less:Tami Garrigan, Drawing 361300 -12025 -20000 329275 Closing Enteries Date Particulars 30.6.2019 Income Summary Salaries and wages expense Advertising expense Utilities expense Travel Expense Depreciation expense-equipment Depreciation expense- Building Supplies expense Insurance expense Miscellaneous expense (Expense accounts closed) Debit in $ Credit in $ 298775 147000 86800 30000 18750 4550 3000 1500 1300 5875 Debit in $ Credit in $ 5100 26500 2300 525 80000 340000 283750 3000 Post-Closing Trial Balance For the Year Ended June 30, 2019 Particulars Cash Accounts Receivable Prepaid Insurance Supplies Land Building Accum. Depr.- Building Equipment Accum. Depr.-Equipment Accounts Payable Salaries & Wages Payable Unearned Rent Tami Garrigan, Capital Totals 30.6.2019 Fees earned Rent revenue Income Summary (Revenue accounts closed) 286750 193000 140000 12025 59000 30.6.2019 Tami Garrigan, Capital Income Summary (Loss Transferred) 12025 9750 1900 1500 329275 594425 20000 30.6.2019 Tami Garrigan, Capital Tami Garrigan, Drawing (Dawings account closed) 20000 594425