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Financial Statements and Accounting Cycle

To close the accounting cycle for Joe Smith's business, complete the following:

1) Journalize and post the adjusting entries for Joe's business. Make the following adjusting entries: (Note: you may need to create additional ledger accounts)

- Adjustment for expired insurance

- Adjustment for office supplies used (note: a physical inventory of supplies on Nov 30 showed $35 worth of supplies)

- Adjustment for depreciation on the tools, reference materials, and truck used for the business. To keep things simple, Joe will use the straight-line depreciation method. The tools and reference materials are expected to have a useful life of 10 years. The tools are expected to have a salvage value of $50 at the end of 10 years. The reference materials are not expected to have a salvage value. The truck is expected to last 5 years and to have a salvage value of $2,500. (note: use individual depreciation accounts for each type of asset - 3 different accounts)

- Adjustment for accrued interest on the truck loan. The annual interest rate on the loan is 6%.

2) Journalize and post the closing entries.
3) Prepare a post-closing trial balance.
4) Prepare the financial statements (income statement, statement of owner's equity, and balance sheet) for the first three months.

Use the general journal and ledger accounts from P2-IP2.(This one was the one Koshali you delivered to me.)


Solution Preview

See attached file. I have modified and added new sheets to the file you sent me to maintain continuity. The ...

Solution Summary

The solution examines financial statements and accounting cycle for Joe Smith's business.