Question

Finders Investigative Services is an investigative services firm that

is owned and operated by Stacy Tanner. On June 30, 2019, the end of

the fiscal year, the accountant for Finders Investigative Services

prepared an end-of-period spreadsheet, a part of which follows:

Finders Investigative Services

End-of-Period Spreadsheet

For the Year Ended June 30, 2019

~

   Adjusted Trial Balance

Account Title ~ Dr. Cr.

~   

Cash ~ 28,000

Accounts Receivable ~ 69,600

Supplies ~ 4,600   

Prepaid Insurance ~ 2,500   

Building ~ 439,500

Accumulated Depreciation-Building ~ 44,200

Accounts Payable ~ 11,700

Salaries Payable ~ 3,000

Unearned Rent ~ 2,000

Stacy Tanner, Capital ~ 373,800

Stacy Tanner, Drawing ~ 12,000

Service Fees ~ 718,000

Rent Revenue ~ 12,000

Salaries Expense ~ 522,100

Rent Expense ~ 48,000

Supplies Expense ~ 10,800

Depreciation Expense-Building ~ 8,750   

Utilities Expense ~ 7,150   

Repairs Expense ~ 3,000   

Insurance Expense ~ 2,500   

Miscellaneous Expense ~ 6,200   

~ 1,164,700 1,164,700

Required:

1. Prepare an income statement, a statement of owner’s equity (no

additional investments were made during the year), and a balance

sheet. *

2. Journalize the entries that were required to close the accounts at June 30. *

3. If Stacy Tanner, Capital has instead decreased $30,000 after the

closing entries were posted, and the withdrawals remained the same,

what would have been the amount of net income or net loss?

* Be sure to read the instructions for each financial statement

carefully. Refer to the chart of accounts and the list of Labels and

Amount Descriptions provided for the exact wording of the answer

choices for text entries.

Answer 1

• All working forms part of the answer
• Requirement 1

Income Statement
For the year ended 30 June 2019
Revenues:
Service Fees	$                    718,000.00
Rent Revenue	$                      12,000.00
Total revenues		$ 730,000.00
Expenses:
Salaries Expense	$                    522,100.00
Rent Expense	$                      48,000.00
Supplies Expense	$                      10,800.00
Depreciation Expense-Building	$                        8,750.00
Utilities Expense	$                        7,150.00
Repairs Expense	$                        3,000.00
Insurance Expense	$                        2,500.00
Miscellaneous Expense	$                        6,200.00
Total Expenses		$ 608,500.00
Net Income		$ 121,500.00

Statement of Owner's Equity
For the year ended 30 June 2019
Stacy Tanner, Capital - Beginning Balance		$ 373,800.00
Add: Net Income	$                    121,500.00
Less: Drawings	$                      12,000.00
Net Increase (Decrease) in Capital		$ 109,500.00
Stacy Tanner, Capital - Ending Balance on 30 June 2019		$ 483,300.00

Balance Sheet
as at 30 June 2019
ASSETS
Cash	$    28,000.00
Accounts Receivable	$    69,600.00
Supplies	$      4,600.00
Prepaid Insurance	$      2,500.00
Total Current Assets		$ 104,700.00
Building	$ 439,500.00
Accumulated Depreciation-Building	$ (44,200.00)	$ 395,300.00
Total Assets		$ 500,000.00
LIABILITIES
Accounts Payable	$    11,700.00
Salaries Payable	$      3,000.00
Unearned Rent	$      2,000.00
Total Liabilities		$    16,700.00
OWNER'S EQUITY
Stacy Tanner, Capital - Ending Balance on 30 June 2019		$ 483,300.00
Total Liabilities & Owner's Equity		$ 500,000.00

• Requirement 2

--Closing Entries can be recorded in two alternative ways:
>in 4 entries, or
>in 2 entries

--Alternative #1

               

Closing Entries
No.	General Journal	Debit	Credit
1	Service Fees	$ 718,000.00
	Rent Revenue	$    12,000.00
	Income Summary		$ 730,000.00
	(revenue accounts closed)
2	Income Summary	$ 608,500.00
	Salaries Expense		$ 522,100.00
	Rent Expense		$    48,000.00
	Supplies Expense		$    10,800.00
	Depreciation Expense-Building		$      8,750.00
	Utilities Expense		$      7,150.00
	Repairs Expense		$      3,000.00
	Insurance Expense		$      2,500.00
	Miscellaneous Expense		$      6,200.00
	(expenses account closed)
3	Income Summary	$ 121,500.00
	Stacy Tanner, Capital		$ 121,500.00
	(Income Summary Net Income balance closed)
4	Stacy Tanner, Capital	$    12,000.00
	Stacy Tanner, Drawing		$    12,000.00
	(Withdrawals account closed)

--Alternative #2

Closing Entries
No.	General Journal	Debit	Credit
1	Service Fees	$ 718,000.00
	Rent Revenue	$    12,000.00
	Salaries Expense		$ 522,100.00
	Rent Expense		$    48,000.00
	Supplies Expense		$    10,800.00
	Depreciation Expense-Building		$      8,750.00
	Utilities Expense		$      7,150.00
	Repairs Expense		$      3,000.00
	Insurance Expense		$      2,500.00
	Miscellaneous Expense		$      6,200.00
	Stacy Tanner, Capital		$ 121,500.00
	(Revenu and expense account closed)
2	Stacy Tanner, Capital	$    12,000.00
	Stacy Tanner, Drawing		$    12,000.00
	(Withdrawals account closed)

• Requirement 3

--Question says Capital has decreased by $ 30,000 after closing entries.

--Capital is decreased by amount of withdrawals and net loss, and increased by Net Income.

--Withdrawals are just $ 12,000, but capital has decreased by more than $ 12,000 [by $ 30,000].

--Hence, remaining decrease in due to NET LOSS

Decrease in Capital	$    30,000.00
Amount of Drawings	$ (12,000.00)
Net Loss	$    18,000.00