Group 7AP 4-7 (page 219)

Heather Broadwell

Jimmy Ha

Linda Yin

William Quan

Brittany Spangler

Austin Co.Unadjusted Trial Balance

As of the end of the annual accounting period, December 31, 2007

ACCOUNT TITLES DEBIT CREDIT

Cash $ 19,600

Accounts Receivable 7,000

Supplies 1,300

Prepaid insurance 900

Equipment 27,000

Accumulated depreciation, equipment 12,000

Other Assets 5,100

Accounts Payable 2,500

Wages Payable

Income Taxes Payable

Note Payable (2 yrs; 12% interest due ea. Dec. 31) 5,000

Contributed Capital (4,000 shares outstanding) 16,000

Retained Earnings 10,300

Service Revenue 48,000

Remaining expenses (not detailed; excludes income tax) 32,900

Income Tax Expense

TOTALS $93,800 $93,800

#1 Record the 2007 adjusting entries

2007 Adjusting Entries

a) Deferred ExpenseT-Account:

Adjusting Entry:Bal. 12,000 Deprec. Expense (+E, -SE) 3,000

3,000 Accum. Deprec.. (+XA, -A) 3,000 End. 15,000

b) Deferred ExpenseT-Account:

Adjusting Entry:Bal. 900 Insurance Expense (+E, -SE) 450

450 Prepaid Expenses (-A) 450 End. 450

c) Accrued ExpenseT-Account:

Adjusting Entry:Bal. - Wages Expense (+E, -SE) 1,100

1,100 Accrued Wages Payable (+L) 1,100 End. 1,100

Accum. Deprec. (XA)

Prepaid Expenses (A)

Accrued Wages Payable (L)

A)Depreciation expense for 2007, $3,000

B)Insurance expired during 2007, $450

C) Wages earned by employees but not yet paid on December 31,2007, $1,100

2007 Adjusting Entries:

d) Deferred ExpenseT-Account:

Adjusting Entry:Bal. 1,300 Supplies Expense (+E, -SE) 700

700 Supplies (-A) 700 End. 600

e) Accrued ExpenseT-Account:

Adjusting Entry:Bal. - Income Tax Expense (+E, -SE) 2,950

2,950 Income Tax Payable (+L) 2,950 End. 2,950

f Accrued ExpenseT-Account:

Adjusting Entry:Bal. - Interest Expense (+E, -SE) 600

600 Accrued Int. Payable (+L) 600 End. 600

Income Tax Payable (L)

Supplies (A)

Accrued Int. Payable

D) The supplies count on December 31, 2007, reflected $600 remaining on hand to be used in 2008

E) Income tax expense was $2,950

f) $5,000 Note payable: 2 years; 12% interest due each Dec. 31

$5,000 x 12% = $600

#2 Prepare an income statement and a classified balance sheet for 2007 to include the effects of the

preceding five transactions

Revenue 48,000 Expenses

Supplies Expense 700 Wages Expense 1,100 Insurance Expense 450 Interest Expense 600 Depreciation Expense 3,000 Other Expense 32,900 Total Expenses 38,750

Pretax Income 9,250 Income Tax Expense 2,950 Net Income 6,300

Austin Co.Income Statement

For the Year Ended December 31, 2007

A ssets

Current A ssets

Cash 19,600

A ccounts Receivable 7,000

Supplies 600

Prepaid Insurance 450

T otal Current A ssets 27,650

Equipment (net of depreciation) 12,000

Other A ssets 5,100

T otal A ssets 44,750

L iabilities

Current L iabilities

A ccounts Payable 2,500

A ccrued Wages Payable 1,100

A ccrued Interest Payable 600

Income T ax Payable 2,950

T otal Current L iabilities 7,150

Note Payable 5,000

T otal L iabilities 12,150

Stockholders' Equity

Contributed Capital 16,000

Retained Earnings 16,600

T otal L iabilities & Stockholders' Equity 44,750

A ustin Co.

Balance Sheet

A s of December 31, 2007

#3 Record the 2007 closing entry

2007 Closing Entry:

Revenue (-R) 48,000 Supplies Expense (-E) 700 Wages Expense (-E) 1,100 Insurance Expense (-E) 450 Depreciation Expense (-E) 3,000 Interest Expense (-E) 600 Other Expense (-E) 32,900 Income Tax Expense (-E) 2,950 Retained Earnings (+SE) 6,300