Accounting

Accounting Question And Answer 2

 Assignment: Adjusting and Closing

Below is the unadjusted trial balance for Sally’s Lawn Care at the year ended Dec. 31, 2020.

Sally’s Lawn Care

Unadjusted Trial Balance

December 31, 2020

                                                                                                   Debit                         Credit

Cash                                                                                         $ 8,000

Accounts Receivable                                                                 1,200

Supplies                                                                                      300

Equipment                                                                                 10,000

Accumulated Amortization, Equipment                                                                      2,000

Accounts Payable                                                                                                           500

Unearned Revenue                                                                                                        2,600

Wages Payable                                                                                                                200

Sally Ng, capital                                                                                                           4,000

Sally Ng, withdrawals                                                                  1,100

Service Revenue                                                                                                           37,400

Wages Expense                                                                          23,500

Rent Expense                                                                             2,600 ……….

                                                                                                 46,700                                   46,700

a) Prepare adjusting entries for the year ending Dec. 31, 2020 for the following: ( /10)

i. At year end, it was found that $50 of supplies were remaining (on hand).

ii. The equipment was bought on Jan.1, 2019. It has a useful life of 5 years.

iii. Sally has completed 50% of the contracts recorded as unearned revenue.

iv. Sally pays her one employee Bill $500 per week for work done Monday- Friday. He always gets

paid on the Saturday for work done the previous week. Assume December 31, 2020 is a Thursday.

v. Sally has a contract to shovel snow for her neighbour through the winter months of November

2020 to March 2021. The contract is worth $1000 total for the whole winter, and she will bill

her neighbour at the end of March 2021. As of the end of December 2020, she has completed

2 months of shovelling.

b) Post the adjustments to the ledger (t-accounts) *Include only changed accounts* ( /3)

c) Prepare an Adjusted Trial Balance ( /3)

d) Using the adjusted trial balance, prepare the necessary closing journal entries (hint: 4 entries). ( /8)

e) Prepare the t-accounts after closing for Capital, Income Summary, and Withdrawals ( /3)

f) Prepare a Post-Closing Trial Balance ( /3)

Solution

a) Adjusting entries for the year ending December 31, 2020

I. (300 - 50 = 250)

Supply expenses   250

                supplies          250

ii. 10,000/5 = 2000

Amortization expense       2000

accumulated amortization, equipment     2000

iii. 2,600/2 = 1,300 now earned

Unearned revenue   1,300

          Service revenue      1,300

iv. 4 x 500 = 2000

Wage expenses     2,000

            wages payable 2,000

v. From November 2020 to March 2012= 5 months

2 month worth – 2/5 * 1000 = 400

Accounts receivable     400

                       service revenue    400

b. Posting the adjustments to the ledger (T-account)

Assets

Accounts receivable
1,200
400
1,600

Supplies
300	250
50

ACC. Amortization Equipment
	2000
	2000
	4000

Liabilities

Wages payable
	200
	2,000
	2,200

Unearned revenue
1,300	2,600
	1,300

Owners equity

Service revenue
	37,400
	1,300
	400
	39,100

Supplies expenses
50

amortization expense
2,000

Wages expense
23,500
2,000
25,500

C. Adjusted Trial Balance

Sally’s law care

Adjusted Trial Balance

December 31, 2020

	Debt	Credit
Cash	$8,000
Accounts receivable	1,600
Supplies	250
Equipment	10,000
Accumulated Amortization, equipment		$4,000
Accounts payable		500
Unearned revenue		1,300
Wages payable		2,200
Sally’s Ng, Capital		4,000
Sally’s Ng, Withdraws	1,100
Service revenue		39,100
Supplies expenses	50
Amortization expense	2,000
wages expense	25,500
Rent expense	2,600
	$51,100	$51,100

Income statement

Sally’s law care

income statement

For the Year ended December 31, 2020

Service Revenue 39,100

Less Expenses:

Supplies expenses 50

wage expenses 25,500

Total expenses 25,550

NET INCOME 13,550

d. Closing journal entries

Dec 31 service revenue 39,100

income summary 39,100

Dec 31 Income Summary 25,550

Supplies expenses 50

Wage expenses 25,500

Dec 31 Income summary 13,550

Selly’s Ng, capital 13,550

Dec 31 Selly’s Ng, Captal 1,100

Selly’s Ng, Drawings 1,100

e. T-Account

Selly’s Ng, Capital
1,100	4,000
	13,550
	16,450

Income summary
28,150	39,100
10,950
0

Selly’s Ng, Drawings
1,100	1,100
0

f) Post closing trial balance

Sally’s law care

Post Closing Trial Balance

December 31, 2020

                                                                                               Debit                        Credit

Cash                                                                                      8,000

Supplies                                                                                  250

equipment                                                                               10,000

Accounts payable                                                                                                      500

unearned revenue                                                                                                     1,300

Selly’s Ng, Capital                                                                                                   16,450

                                                                                               18,250                        18,250

*Ledger

T - Accounts after closing