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How the Accounting Cycle is Completed

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P4-3A The completed financial statement columns of the worksheet for Woods Company, Inc. are shown below.

For the Year Ended December 31, 2008
Account Income Statement Balance Sheet
No. Account Titles Dr. Cr. Dr. Cr.
101 Cash 8,200
112 Accounts Receivable 7,500
130 Prepaid Insurance 1,800
157 Equipment 28,000
167 Accumulated Depreciation 8,600
201 Accounts Payable 11,700
212 Salaries Payable 3,000
311 Common Stock 20,000
320 Retained Earnings 14,000
332 Dividends 7,200
400 Service Revenue 44,000
622 Repair Expense 5,400
711 Depreciation Expense 2,800
722 Insurance Expense 1,200
726 Salaries Expense 35,200
732 Utilities Expense 4,000
Totals 48,600 44,000 52,700 57,300
Net Loss 4,600 4,600
48,600 48,600 57,300 57,300

(a) Prepare an income statement, a retained earnings statement, and a classified balance sheet. No additional common stock was issued during 2008.
(b) Prepare the closing entries.
(c) Post the closing entries and rule and balance the accounts. Use T accounts. Income Summary is account No. 350.
(d) Prepare a post-closing trial balance.

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Solution Preview

See attached file.

The attached MS Excel document will show how the problem is completed. The first step is to complete the financial statements: Income Statement, Retained Earnings Statement, and Balance Sheet. The information for these is found on the worksheet. The second part is to journalize the closing entries. This ...

Solution Summary

This solution is comprised of one accounting problem that deals with how to prepare an income statement, a retained earnings statement, a classified balance sheet, closing entries, posting the closing entries, ruling and balancing the accounts, and how to prepare a post-closing trial balance. Special attention is also given to understanding the closing entries.

The problem shown here is taken from Financial Accounting, 6th ed, Wiley Publishing, however, the detail step-by-step explanation of each of these complicated topics provides students with a clear understanding of the concepts.