Assignment 6: Adjusting Journal Entries and

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Name: ____________________ Due Date: December 12, 2011

Score: _____ out of a possible 47 Course value: 7.5%

Assignment 6: Adjusting Journal Entries and

Worksheets

A series of transactions are presented and their journal entries are also presented. Your task will be as follows:

A) Complete the adjusting journal entries (the initial journal entries are already completed) 15 marks

B) Complete the T-accounts/General Ledger – include the credit and debit totals for each account. The journal entries made prior to your adjusting journal entries are already included (but not totaled). Make sure the credit or debit balance of each account is presented – this total should reflect the balance of the account AFTER the adjusting journal entries and match the adjusted trial balance on the worksheet. 8 marks

C) Complete the following elements of the worksheet: 18 marks a. Adjustments

b. Adjusted Trial Balance c. Income Statement d. Balance Sheet

The Unadjusted Trial Balance has already been completed for you. This is based on the journal entries / general ledger entries made BEFORE the required adjusting journal entries (that you will complete).

D) Complete a fully labeled Income Statement and Balance Sheet for WestShore Car Rental: 6 Marks

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Accounting 11

Page 2 of 14 Company Name: WestShore Car Rental

Background: WestShore Car Rental (WCR) is a brand new company that is hoping to make big money in the exciting field of car rental. The owner of the company, Jane Smith, has high hopes and has contributed her own money to start the business. The business mainly rents to individuals but has one big client, the airport

Chart of Accounts:

Assets

1000 Cash

1001 Accounts Receivable 1002 Prepaid Insurance 1003 Vehicles

1004 Accumulated Depreciation:

Vehicles

1005 Investments – Bonds 1006 Interest Receivable

Liabilities

2000 Accounts Payable 2001 Wages Payable

2002 Unearned Rental Revenue Revenues

3000 Rental Revenue 3001 Interest Revenue

Expenses

4000 Depreciation Expense 4001 Insurance Expense 4002 Wages Expense

Equity

5000 Owner – Contributed Capital (the money the owner

contributed to start the business)

5001 Retained Earnings 5002 Owner - Withdrawals 5003 Income Summary

The company only makes adjusting journal entries once per

year (lazy accountant!) at the fiscal year end (December 31).

Your job is to make the required adjusting journal entries in

the General Journal and reflect this in the General Ledger / T-

accounts and complete the worksheet.

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Selected 2010 Transactions (recorded):

These transactions have already been recorded in the general journal (see page 5).

January 1: The owner, Jane Smith, deposits $100,000 into a bank account for the purposes of starting the business.

January 1: WCR (WestShore Car Rental) purchases $24,000 of insurance for the next 2 years on credit.

January 1: WCR purchases a vehicle for $20,000 in cash. The vehicle uses the declining balance method of depreciation at a percentage rate of 10%.

January 4: WCR purchases (with cash) an extremely risky $10,000 investment bond.

This bond will pay the company $4,000 interest in two years time (in other words they will receive a cheque at the end of 2011)

January 8: The Airport writes a cheque to WCR for $200,000 for a two year rental agreement.

March 10: Pays the insurance company the full amount for the prepaid insurance (writes a cheque)

June 1: Customer rents a car (on account) for $1,000

June 20: Customer from June 1 pays outstanding balance ($1,000)

Nov. 30: Wages paid for period of January to November equal to $50,000 (paid by cheque).

Dec. 1 The owner takes $10,000 in cash from the business (a withdrawal)

Adjusting Journal Entries (not yet recorded):

Dec. 31 Wages that are payable to WCR employees at year end are equal to

$6,000, the company will write cheques next year.

Dec. 31 In addition, adjusting journal entries are also required for the following:

 Prepaid insurance

 Depreciation expense

 Investment bond revenue

 Rental Revenue from the Airport customer

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Accounting 11

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Work Area:

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Recorded journal entries in the General Journal (all 2010

entries)

Date Accounts and Descriptions Debit Credit

January 1 Cash 100,000

Owner – Contributed Capital 100,000 Startup capital from owner

1 Prepaid Insurance 24,000

Accounts Payable 24,000

Purchasing prepaid insurance

1 Vehicles 20,000

Cash 20,000

Purchase of vehicle expected to last 10 years with no salvage value

4 Investments - Bond 10,000

Cash 10,000

Purchase of investment bond, will pay

$4,000 in interest (by cheque) in two years (end of 2011)

8 Cash 200,000

Unearned Rental Revenue 200,000

Airport payment for contracting WCR for two years of work.

March 10 Accounts Payable 24,000

Cash 24,000

Paying insurance company for prepaid insurance

June 1 Accounts Receivable 1,000

Rental Revenue 1,000

Customer rents a car, pays on credit

June 20 Cash 1,000

Accounts Receivable 1,000

Customer from June 1 pays their outstanding invoice

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Accounting 11

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Date Accounts and Descriptions Debit Credit

November 30 Wages Expense 50,000

Cash 50,000

Company pays wages workers earned January through November

December 1 Owner - Withdrawals 10,000

Cash 10,000

Owner withdrawing $10,000 in cash from the company.

On the following page, record the

required adjusting journal entries.

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Part A: Adjusting Journal Entries:

(15 Marks)

General Journal Page

Date Accounts and Descriptions Debit Credit

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Accounting 11

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Part B: General Ledger/T-Accounts

(8 Marks)

On the following pages “post” your journal

entries to the appropriate T-Account (General

Ledger). The journal entries that were recorded

prior to December 31 have already been

“posted”.

Include the total balance for each of the accounts

after the adjusting journal entries have been

posted. Circle debit or credit to indicate the type

of balance.

Example:

An Account

Balance 100,000

Debit Or Credit?

500,000

200,000

200,000 Posted from

an adjusting journal entry

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General Ledger/T-Accounts

Prepaid Insurance Cash

Accounts Receivables

Investments - Bonds Accumulated

Depreciation:

Vehicles Vehicles

Accounts Payable Wages Payable

Interest Receivable 100,000

20,000 10,000 200,000

24,000 1,000

10,000 50,000

1,000

1,000

24,000

20,000 10,000

24,000 24,000

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

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Accounting 11

Page 10 of 14 Interest Revenue Rental Revenue

Unearned Rental Revenue

Wages Expense Insurance Expense

Depreciation Expense

Income Summary Retained Earnings

Owner - Contributed Capital

Owner - Withdrawals

Balance:

200,000 1,000

50,000

100,000

10,000

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

Balance Debit Or Credit?

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Part C: Worksheet (18 marks)

The Unadjusted Trial Balance has been provided for you. Fill

in the remainder of the 10 column worksheet including the

following:

 Adjustments

 Adjusted Trial Balance

 Income Statement

 Balance Sheet

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Accounting 11

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Worksheet for WestShore Car Rental

Unadjusted Trial

Balance Adjustments

Adjusted Trial

Balance Income Statement Balance Sheet

Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit

Cash 187,000

Accounts Receivable 0

Prepaid Insurance 24,000

Vehicles 20,000

Accumulated Depreciation:

Vehicles 0

Investments - Bonds 10,000

Interest Receivable 0

Accounts Payable 0

Wages Payable 0

Unearned Rental Revenue 200,000

Owner - Contributed Capital 100,000

Owner - Withdrawals 10,000

Retained Earnings +++++++++++++++++++ Not Relevant for this Worksheet Solution ++++++++++++++++

Income Summary +++++++++++++++++++ Not Relevant for this Worksheet Solution ++++++++++++++++

Rental Revenue 1,000

Interest Revenue 0

Depreciation Expense 0

Insurance Expense 0

Wages Expense 50,000

Totals 301,000 301,000

Net Income (not an actual account, will eventually end up in Retained Earnings with

journal entries)

Financial Statement Totals

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Part D: Income Statement and Balance Sheet (6 marks)

1) Income Statement – Take the information from your completed worksheet and create an income statement (based on a format outlined in Section 4 of the course).

3 Marks

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Accounting 11

Page 14 of 14 Part D continued …

1) Balance Sheet – Take the information from your completed worksheet and create a balance sheet (based on a format outlined in Section 4 of the course). 3 Marks

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