Question

The following unadjusted trial balance is for Groenke Construction Company as of year-end for the December 31, 20x7 fiscal year. The December 31, 20x6 credit balance of the stockholders’ equity account is $50,500, and the stockholders invested $45,000 cash in the company during 20x7.

1. Account Title Debit                     Credit

101         Cash                                                      $15,000

126         Supplies                                               $8,500

128         Pre-paid insurance                          $11,200

167         Equipment                                          $175,000

168         Accumulated depreciation – equipment                 $19,000

201         Accounts payable                                                               $9,250

251         Long-term notes payable                                               $45,000

301         Shareholders’ equity                                                      $106,900

302         Dividends                                            $15,750

401         Construction Revenue                                                   $153,000

623         Wage expense                                  $61,800

633         Interest expense                               $6,250

640         Rent expense                                    $15,750

683         Property tax expense                    $12,500

684         Repairs expense                                $6,100

690         Utilities expense                                $5,300

TOTALS                                                            $333,150                  $333,150

Instructions:

Use the template provided to:

1. Journalize the following adjusting entries as of fiscal year-end December 31, 20x7.
2. Post the adjusting entries to an unadjusted trial balance and prepare the adjusted trial balance.
3. Create financial statements, namely: i) the income statement, ii) statement of stockholders’ equity, and iii) the balance sheet for 20x7.

Adjustments needed:

1. The supplies available at the end of the fiscal year 20x7 are at a cost of $5,700.
2. The company's employees have earned $3.500 in accrued wages for the fiscal year.
3. The cost of expired insurance for the fiscal year is $8,600.
4. The rent expense not yet paid or recorded in the fiscal year is $2,250.
5. Annual depreciation on equipment is $8,000; no other depreciation adjustment was made in 20x7.
6. The $450 accrued interest for December has not yet been paid and reported.
7. Additional property taxes of $625 have been assessed for the fiscal year but have not yet been paid or recorded in the accounts.
8. The December utilities expense of $425 is not included in the adjusted trial balance, because the bill arrived after the trial balance was prepared. The $425 amount owed needs to be recorded.

Answer 1

1. Preparation of adjusting entries

Transaction	General Journal	Debit	Credit
A	Supplies Expense (8,500 - 5,700)	$2,800
	Supplies		$2,800
B	Wages Expense	$3,500
	Wages Payable		$3,500
C	Insurance Expense	$8,600
	Prepaid Insurance		$8,600
D	Rent Expense	$2,250
	Rent Payable		$2,250
E	Depreciation Expense	$8,000
	Accumulated Depreciation - equipment		$8,000
F	Interest Expense	$450
	Interest Payable		$450
G	PropertyTax expense	$625
	Property tax Payable		$625
H	Utilities Expense	$425
	Utilities Payable		$425

2. Preparation of adjusted trial balance

Garvey Company Adjusted Trial Balance December 31, 2015
	Debit($)	Credit($)
Cash	15,000
Supplies	5,700
Prepaid Insurance (11,200 - 8,600)	2,600
Equipment	175,000
Accumulated Depreciation - equipment (19,000 + 8,000)		27,000
Accounts Payable		9,250
Wages payable		3,500
Rent payable		2,250
Interest Payable		450
Property tax payable		625
Utilities payable		425
Long tern notes Payable		45,000
Stockholders Equity		106,900
Dividends	15,750
Construction Revenue		153,000
Wages Expense (61,800 + 3,500)	65,300
Interest Expense (6,250 + 450)	6,700
Rent Expense (15,750 + 2,250)	18,000
Property tax Expense (12,500 + 625)	13,125
Repairs Expense	6,100
Utilities Expense (5,300 + 425)	5,725
Supplies Expense	2,800
Insurance Expense	8,600
Depreciation Expense	8,000
Totals	$348,400	$348,400

3. Preparation of financial statements

i). Income statement

Groenke Construction Company Income Statement For theYear Ended December 31, 20x7
	$	$
Income :
Construction Revenue		153,000
Expenses :
Wages	65,300
Interest expense	6,700
Rent expense	18,000
Property Tax	13,125
Repair Expense	6,100
Utilities Expense	5,725
Supplies Expense	2,800
Insurance Expense	8,600
Depreciation Expense	8,000
Total Expenses		(134,350)
Net Profit		$18,650

ii) Statement of Stockholders Equity

Opening Balance	$ 50,500
Add :
Investment made in cash	45,000
Shares issued	11,400
Net Income	18,650
Less :
Dividend paid	(15,750)
Stockholders Equity as on December 31, 20x7	$109800

iii). Balance sheet of Groenke Construction Company as on December 31, 20x7

ASSETS	$	LIABILITIES	$
Current Assets		Current Liabilities
Cash	15,000	Accounts payable	9,250
Prepaid Insurance	2,600	Other Current Liabilities : Wages payable 3,500 Rent payable 2,250 Interest Payable 450 Property tax payable 625 Utilities payable    425	7,250
Supplies	5,700
	23,300		16,500
Non current assets		Non current liabilities
Equipment	175,000	Long term note payable	45,000
Accumulated Depreciation	(27,000)
	148,000	Stockholder's Equity (from above)	109,800
Total Assets	$171,300	Total liabilities and Stockholders Equity	$171,300