The unadjusted trial balance of La Mesa Laundry at August 31, 2019, the end of the fiscal year, follows:
La Mesa Laundry Unadjusted Trial Balance August 31, 2019 Debit Balances Credit Balances Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,800 Laundry Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 Laundry Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,800 Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,200 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,800 Bobbi Downey, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 Bobbi Downey, Drawing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400 Laundry Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248,000 Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,800 Rent Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,200 Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000 Miscellaneous Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 400,000 400,000
The data needed to determine year-end adjustments are as follows:
a. Wages accrued but not paid at August 31 are $2,200.
b. Depreciation of equipment during the year is $8,150.
c. Laundry supplies on hand at August 31 are $2,000.
d. Insurance premiums expired during the year are $5,300.
Instructions
1. For each account listed in the unadjusted trial balance, enter the balance in a T account. Identify the balance as “Aug. 31 Bal.” In addition, add T accounts for Wages Payable, Depreciation Expense, Laundry Supplies Expense, and Insurance Expense.
2. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (1) as needed.
3. Journalize and post the adjusting entries. Identify the adjustments as “Adj.” and the new balances as “Adj. Bal.”
4. Prepare an adjusted trial balance.
5. Prepare an income statement, a statement of owner’s equity (no additional investments were made during the year), and a balance sheet.
6. Journalize and post the closing entries. Identify the closing entries as “Clos.”
7. Prepare a post-closing trial balance.
Answer:
1., 3., and 6.
Aug. 31 Bal. 3,800
Aug. 31 Bal. 9,000 Aug. 31 Adj. 7,000
31 Adj. Bal. 2,000
Aug. 31 Bal. 6,000 Aug. 31 Adj. 5,300
31 Adj. Bal. 700
Aug. 31 Bal. 180,800
Aug. 31 Bal. 49,200
31 Adj. 8,150
31 Adj. Bal. 57,350
Aug. 31 Bal. 7,800
Aug. 31 Adj. 2,200
Aug. 31 Clos. 2,400 Aug. 31 Bal. 95,000
31 Clos. 27,350
31 Bal. 119,950
Aug. 31 Bal. 2,400 Aug. 31 Clos. 2,400
Aug. 31 Clos. 248,000 Aug. 31 Bal. 248,000
Aug. 31 Bal. 135,800 Aug. 31 Clos. 138,000
31 Adj. 2,200
31 Adj. Bal. 138,000
Aug. 31 Bal. 43,200 Aug. 31 Clos. 43,200
Aug. 31 Bal. 16,000 Aug. 31 Clos. 16,000
Aug. 31 Adj. 8,150 Aug. 31 Clos. 8,150
Aug. 31 Adj. 7,000 Aug. 31 Clos. 7,000
Aug. 31 Adj. 5,300 Aug. 31 Clos. 5,300
Aug. 31 Bal. 3,000 Aug. 31 Clos. 3,000
2. Optional (Appendix)
Account Title Debit Credit Debit Credit Debit Credit Debit Credit
Cash 3,8003,8003,800
Laundry Supplies 9,000 (c) 7,000 2,0002,000
Prepaid Insurance 6,000 (d) 5,300 700700
Laundry Equipment 180,800180,800180,800
Accum. Depreciation 49,200 (b) 8,150 57,35057,350
Accounts Payable 7,8007,8007,800
Wages Payable(a) 2,200 2,2002,200
Bobbi Downey, Capital 95,00095,00095,000
Bobbi Downey, Drawing 2,4002,4002,400
Laundry Revenue 248,000248,000 248,000
Wages Expense 135,800 (a) 2,200 138,000 138,000
Rent Expense 43,20043,200 43,200
Utilities Expense 16,00016,000 16,000
Depreciation Expense(b) 8,150 8,150 8,150
Laundry Supplies Exp.(c) 7,000 7,000 7,000
Insurance Expense(d) 5,300 5,300 5,300
Miscellaneous Expense 3,0003,000 3,000
400,000 400,000 22,650 22,650 410,350 410,350 220,650 248,000 189,700 162,350
Net income27,35027,350
248,000 248,000 189,700 189,700
3.
2019
Aug. 31 Wages Expense2,200
Wages Payable2,200
Accrued wages.
31 Depreciation Expense8,150
Accumulated Depreciation8,150
Equipment depreciation.
31 Laundry Supplies Expense 7,000
Laundry Supplies7,000
Supplies used ($9,000 – $2,000).
31 Insurance Expense5,300
Prepaid Insurance5,300
Insurance expired.
4.
Debit Credit
Balances Balances
Cash3,800
Laundry Supplies2,000
Prepaid Insurance700
Laundry Equipment180,800
Accumulated Depreciation57,350
Accounts Payable7,800
Wages Payable2,200
Bobbi Downey, Capital95,000
Bobbi Downey, Drawing2,400
Laundry Revenue248,000
Wages Expense138,000
Rent Expense43,200
Utilities Expense16,000
Depreciation Expense8,150
Laundry Supplies Expense7,000
Insurance Expense5,300
Miscellaneous Expense3,000
410,350 410,350
5.
Laundry revenue$248,000
Expenses:
Wages expense$138,000
Rent expense43,200
Utilities expense16,000
Depreciation expense8,150
Laundry supplies expense7,000
Insurance expense5,300
Miscellaneous expense3,000
Total expenses220,650
Net income$ 27,350
Bobbi Downey, capital, September 1, 2018$ 95,000
Net income for the year$27,350
Withdrawals(2,400)
Increase in owner’s equity24,950
Bobbi Downey, capital, August 31, 2019$119,950
LA MESA LAUNDRY
Balance Sheet
August 31, 2019
Assets
Current assets:
Cash$ 3,800
Laundry supplies2,000
Prepaid insurance700
Total current assets$ 6,500
Property, plant, and equipme2
Laundry equipment$180,800
Less accumulated depreciation 57,350
Total property, plant, and equipment123,450
Total assets$129,950
Current liabilities:
Accounts payable$ 7,800
Wages payable2,200
Total liabilities$ 10,000
Bobbi Downey, capital119,950
Total liabilities and owner’s equity$129,950
6.
2019
Aug. 31 Laundry Revenue248,000
Wages Expense138,000
Rent Expense43,200
Utilities Expense16,000
Depreciation Expense8,150
Laundry Supplies Expense7,000
Insurance Expense5,300
Miscellaneous Expense3,000
Bobbi Downey, Capital27,350
31 Bobbi Downey, Capital2,400
Bobbi Downey, Drawing2,400
7.
Debit Credit
Balances Balances
Cash3,800
Laundry Supplies2,000
Prepaid Insurance700
Laundry Equipment180,800
Accumulated Depreciation57,350
Accounts Payable7,800
Wages Payable2,200
Bobbi Downey, Capital119,950
187,300 187,300