lesson 22-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 22-1LESSON 22-1

Preparing a Work Sheet for a Corporation

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LESSON 22-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

INTEREST INCOME ADJUSTMENTINTEREST INCOME ADJUSTMENT

1. Debit Interest Receivable.

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page 638

2. Credit Interest Income.

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1. Credit Supplies.

SUPPLIES ADJUSTMENTSUPPLIES ADJUSTMENT

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page 638

2. Debit Supplies Expense.

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1. Debit Federal Income Tax Expense.

FEDERAL INCOME TAX ADJUSTMENTFEDERAL INCOME TAX ADJUSTMENT

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page 639

2. Credit Federal Income Tax Payable.

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COMPLETING A WORK SHEETCOMPLETING A WORK SHEET page 641

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1. Total the Income Statement and Balance Sheet columns.

2. Calculate and enter the net income after federal income tax.

3. Extend the net income after federal income tax amount.

4. Calculate the column totals.

5. Rule double lines.



Preparing an Income Statement

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INCOME STATEMENTINCOME STATEMENT page 645

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ANALYZING AN INCOME STATEMENTANALYZING AN INCOME STATEMENT page 647

Cost of Merchandise Sold Component

Percentage=Net Sales÷

Cost of Merchandise

Sold

57.3%=$2,078,876.70÷$1,190,794.80



Preparing a Statement of Stockholders’ Equity and Balance Sheet

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STATEMENT OF STOCKHOLDERS’ STATEMENT OF STOCKHOLDERS’ EQUITYEQUITY

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page 649

2. Prepare the capital stock section.

1. Write the heading.

3. Prepare the retained earnings section.

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BALANCE SHEETBALANCE SHEET page 650

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BALANCE SHEETBALANCE SHEET page 650

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ANALYZING A BALANCE SHEETANALYZING A BALANCE SHEET page 652

WorkingCapital

=Total

Current Liabilities

–Total Current

Assets

$172,100.02=$57,494.53–$229,594.55

CurrentRatio

=Total

Current Liabilities

÷Total Current

Assets

4.0 to 1=$57,494.53÷$229,594.55

Working Capital

Current Ratio

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TERMS REVIEWTERMS REVIEW

long-term liabilities working capital current ratio

page 653



Adjusting, Closing, and Reversing Entries for a Corporation

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ADJUSTING ENTRIESADJUSTING ENTRIES page 654

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CLOSING ENTRY FOR ACCOUNTS CLOSING ENTRY FOR ACCOUNTS WITH CREDIT BALANCESWITH CREDIT BALANCES

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page 655

1. Enter the balance of accounts in the Income Statement credit column as a debit.

2. Enter the total of the debit entries as a credit to Income Summary.

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CLOSING ENTRY FOR ACCOUNTS CLOSING ENTRY FOR ACCOUNTS WITH DEBIT BALANCESWITH DEBIT BALANCES

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page 656

3. Enter the total of the credit entries as a debit to Income Summary.

2. Enter the balance of every account in the Income Statement debit column as a credit.

1. Enter the account title Income Summary.

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CLOSING ENTRY TO RECORD CLOSING ENTRY TO RECORD NET INCOMENET INCOME

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page 657

2. Credit Retained Earnings.

1. Debit Income Summary.

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CLOSING ENTRY FOR DIVIDENDSCLOSING ENTRY FOR DIVIDENDS

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page 657

2. Credit Dividends.

1. Debit Retained Earnings.

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REVERSING ENTRIESREVERSING ENTRIES

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page 658

113. Reverse the entry that

created a balance in Federal Income Tax Payable.

2. Reverse the entry that created a balance in Interest Payable.

1. Reverse the entry that created a balance in Interest Receivable.

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(continued on next slide)

ACCOUNTING CYCLE FOR A MERCHANDISING ACCOUNTING CYCLE FOR A MERCHANDISING BUSINESS ORGANIZED AS A CORPORATIONBUSINESS ORGANIZED AS A CORPORATION

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page 659

1. Source documents are checked for accuracy, and transactions are analyzed into debit and credit parts.

2. Transactions, from information on source documents, are recorded in journals.

3. Journal entries are posted to the accounts payable, accounts receivable, and general ledgers.

4. Schedules of accounts payable and accounts receivable are prepared from the subsidiary ledgers.

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9. Reversing entries are journalized and posted to the general ledger.

ACCOUNTING CYCLE FOR A MERCHANDISING ACCOUNTING CYCLE FOR A MERCHANDISING BUSINESS ORGANIZED AS A CORPORATIONBUSINESS ORGANIZED AS A CORPORATION

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7755

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page 659

5. A work sheet, including a trial balance and an adjustment for federal income tax expense, is prepared from the general ledger.

6. Financial statements are prepared from the work sheet.

7. Adjusting and closing entries are journalized from the work sheet and posted to the general ledger.

8. A post-closing trial balance of the general ledger is prepared.

(continued from previous slide)

lesson 22-1

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