Journalize the adjusting and closing entries

Reference no: EM131532847

Question: The following unadjusted trial balance is for Adams Construction Co. as of the end of its 2011 fiscal year. The June 30, 2010, credit balance of the owner's capital account was $52,660, and the owner invested $25,000 cash in the company during the 2011 fiscal year.

Required: 1. Prepare a 10-column work sheet for fiscal year 2011, starting with the unadjusted trial balance and including adjustments based on these additional facts.

a. The supplies available at the end of fiscal year 2011 had a cost of $3,200.

b. The cost of expired insurance for the fiscal year is $3,900.

c. Annual depreciation on equipment is $8,500.

d. The June utilities expense of $550 is not included in the unadjusted trial balance because the bill arrived after the trial balance was prepared. The $550 amount owed needs to be recorded.

e. The company's employees have earned $1,600 of accrued wages at fiscal year-end.

f. The rent expense incurred and not yet paid or recorded at fiscal year-end is $200.

g. Additional property taxes of $900 have been assessed for this fiscal year but have not been paid or recorded in the accounts.

h. The long-term note payable bears interest at 12% per year. The unadjusted Interest Expense account equals the amount paid for the first 11 months of the 2011 fiscal year. The $240 accrued interest for June has not yet been paid or recorded. (The company is required to make a $5,000 payment toward the note payable during the 2012 fiscal year.)

2. Enter adjusting and closing information in the work sheet; then journalize the adjusting and closing entries.

3. Prepare the income statement and the statement of owner's equity for the year ended June 30 and the classified balance sheet at June 30, 2011.

Analysis Component

4. Analyze the following separate errors and describe how each would affect the 10-column work sheet. Explain whether the error is likely to be discovered in completing the work sheet and, if not, the effect of the error on the financial statements.

a. Assume that the adjustment for supplies used consisted of a credit to Supplies and a debit to Supplies Expense for $3,200, when the correct amount was $5,700.

b. When the adjusted trial balance in the work sheet is completed, assume that the $17,500 Cash balance is incorrectly entered in the Credit column.

Reference no: EM131532847

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