Question

In: Accounting

The Trial Balance section of the worksheet for ContemporaryFashions for the period ended December 31,...

The Trial Balance section of the worksheet for Contemporary Fashions for the period ended December 31, 2019, appears below. Adjustments data are also given.

ADJUSTMENTS

  1. Supplies used, $3,600

  2. Expired insurance, $2,400

  3. Depreciation expense for machinery, $1,200


Required:

  1. Complete the worksheet.

  2. Prepare an income statement.

  3. Prepare a statement of owner’s equity.

  4. Prepare a balance sheet. (Be sure to list the accounts in order of their liquidity.)

  5. Journalize the adjusting entries in the general journal.

  6. Journalize the closing entries in the general journal.

  7. Prepare a postclosing trial balance.

Analyze: If the adjusting entry for expired insurance had been recorded in error as a credit to Insurance Expense and a debit to Prepaid Insurance for $2,400, what reported net income would have resulted?



CONTEMPORARY FASHIONS
Worksheet
Month Ended December 31, 2019
Account NameTrial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance Sheet
DebitCreditDebitCreditDebitCreditDebitCreditDebitCredit
Cash$40,800








Accounts Receivable9,000








Supplies7,200

3,600





Prepaid Insurance10,800

2,400





Machinery84,000








Accumulated Depreciation—Machinery


1,200





Accounts Payable
13,500







Helen Kennedy, Capital
74,580







Helen Kennedy, Drawing6,000








Fees Income
82,500







Supplies Expense

3,600






Insurance Expense

2,400






Salaries Expense11,100








Depreciation Expense—Machinery

1,200






Utilities Expense1,680








Totals$170,580$170,580$7,200$7,200$0$0$0$0$0$0
Net income






$0$0$0$0


Req 5 & 6. Prepare a general journal.

  • 1. Record the adjusting entry for supplies.

  • 2. Record the adjusting entry for insurance.

  • 3. Record the adjusting entry for depreciation.

  • 4. Record the closing entry for revenue.

  • 5. Record the closing entry for expenses.

  • 6. Record the closing entry for the balance of income summary.

  • 7. Record the closing entry for the drawing account.


Solutions

Expert Solution

Account Name Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash $ 40,800.00 $ 40,800.00 $ 40,800.00
Accounts Receivable $    9,000.00 $    9,000.00 $    9,000.00
Supplies $    7,200.00 $ 3,600.00 $    3,600.00 $    3,600.00
Prepaid Insurance $ 10,800.00 $ 2,400.00 $    8,400.00 $    8,400.00
Machinery $ 84,000.00 $ 84,000.00 $ 84,000.00
Accumulated Depreciation—Machinery $ 1,200.00 $    1,200.00 $    1,200.00
Accounts Payable $ 13,500.00 $ 13,500.00 $ 13,500.00
Helen Kennedy, Capital $ 74,580.00 $ 74,580.00 $137,100.00
Helen Kennedy, Drawing $    6,000.00 $    6,000.00 $    6,000.00
Fees Income $ 82,500.00 $ 82,500.00 $ 82,500.00
Supplies Expense $ 3,600.00 $    3,600.00 $ 3,600.00
Insurance Expense $ 2,400.00 $    2,400.00 $ 2,400.00
Salaries Expense $ 11,100.00 $ 11,100.00 $ 11,100.00
Depreciation Expense—Machinery $ 1,200.00 $    1,200.00 $ 1,200.00
Utilities Expense $    1,680.00 $    1,680.00 $ 1,680.00
Totals $170,580.00 $170,580.00 $ 7,200.00 $ 7,200.00 $171,780.00 $171,780.00 $ 19,980.00 $ 82,500.00
Net income $ 62,520.00
$151,800.00 $151,800.00
Income Statement
Fees Income $ 82,500.00
Expenses:
Supplies Expense $   3,600.00
Insurance Expense $   2,400.00
Salaries Expense $ 11,100.00
Depreciation Expense—Machinery $   1,200.00
Utilities Expense $   1,680.00 $ 19,980.00
Net Income $ 62,520.00
Statement of Owner's Equity
Helen Kennedy, Capital, Beginning $   74,580.00
Add: Net Income $   62,520.00
Less: Helen Kennedy, Drawing $     6,000.00
Helen Kennedy, Capital, Ending $ 131,100.00
Balance Sheet
Assets
Cash $   40,800.00
Accounts Receivable $     9,000.00
Supplies $     3,600.00
Prepaid Insurance $     8,400.00
Machinery $ 84,000.00
Accumulated Depreciation—Machinery $   1,200.00 $   82,800.00
Total Assets $ 144,600.00
Liabilities and Owner's Equity
Accounts Payable $   13,500.00
Helen Kennedy, Capital, Ending $ 131,100.00
Total Liabilities and Equity $ 144,600.00
Adjusting Entries
Event Particulars Debit Credit
1) Supplies Expense $   3,600.00
To Supplies $   3,600.00
2) Insurance Expense $   2,400.00
To Prepaid Insurance $   2,400.00
3) Depreciation Expense $   1,200.00
To Accumulated Depreciation $   1,200.00
Closing Entries
Event Particulars Debit Credit
4) Fees Income $ 82,500.00
To Income Summary $ 82,500.00
5) Income Summary $ 19,980.00
To Supplies Expense $   3,600.00
To Insurance Expense $   2,400.00
To Depreciation Expense $   1,200.00
To Utilities Expense $   1,680.00
To Salaries Expense $ 11,100.00
6) Income Summary $ 62,520.00
To Helen Kennedy, Capital $ 62,520.00
7) Helen Kennedy, Capital $   6,000.00
To Helen Kennedy, Drawing $   6,000.00

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