Recording Adjusting and Closing Entries and Preparinga Balance Sheetand Income Statement Including Earnings per Share (AP4-7)
Ellis, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period, December 31, 2011:
Account Titles | Debit | Credit |
Cash | $ 46,000 |
|
Accounts receivable | 10,400 |
|
Supplies | 640 |
|
Prepaid insurance | 800 |
|
Service trucks | 16,000 |
|
Accumulated depreciation |
| $9,600 |
Other assets | 8,960 |
|
Accounts payable |
| 2,400 |
Wages payable |
|
|
Income taxes payable |
|
|
Note payable (3 years; 10% interest due each December 31) |
| 16.000 |
Contributed capital (5,000 shares outstanding) |
| 20,560 |
Retained earnings |
| 6,000 |
Service revenue |
| 61.600 |
Remaining expenses (not detailed: excludes income tax) | 33,360 |
|
Income tax expense |
|
|
Totals | $116,160 | $116.160 |
Data not yet recorded at December 31. 2011. included:
a. The supplies count on December 31. 2011. reflected $240 remaining supplies on hand to be used in 2012.
b. Insurance expired during 2011. $400.
c. Depreciation expense for 2011. $4,200.
d. Wages earned by employees not yet paid on December 31, 2011. $720.
e. Income tax expense, $5.880.
Required:
1. Record the 2011 adjusting entries.
2. Prepare an income statement and a classified balance sheet that include the effects of the preceding five transactions.
3. Record the 2011 closing entry.
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