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5 Steps of the Accounting Cycle
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Terms in this set (5)
Analyze Transactions
View source documents that describe business transactions.
Determine which accounts are affected by this transaction.
Ex: Checks , Invoices , and Bank Statements.
Journalize
Applies the rules of double-entry accounting
*Each transaction affects at least two accounts.
Debit on the Left / Credit on the right.
*Record transactions in a journal
Post
All journal entries are posted in a ledger by an account.
*Accounts show a running balance of each account
Prepare a Trial Balance
Lists all accounts and their balances.
*These balances are used to create the financial statements
Prepare Financial Statments
Use the account balances to create financial statements
*Financial statements must be created in certain order
Income Statement first
Balance sheet last
Net income from Income Statement goes into Capital account on Balance Sheet
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Verified questions
ACCOUNTING
The adjusted trial balance for Tybalt Construction as of December 31, 2017, follows. $$ \begin{matrix} & \text{TYBALT CONSTRUCTION Adjusted Trial Balance December 31,2017}\\ \text{No.} & \text{Account Title} & \text{Debit} & \text{Credit}\\ \text{101 } & \text{Cash} \ldots\ldots\ldots & \text{\$ 5,000}\\ \text{104} & \text{Short-term investments} \ldots\ldots\ldots & \text{23,000}\\ \text{126} & \text{Supplies} \ldots\ldots\ldots & \text{8,100}\\ \text{128} & \text{Prepaid insurance} \ldots\ldots\ldots & \text{7,000}\\ \text{167} & \text{Equipment} \ldots\ldots\ldots & \text{40,000}\\ \text{168} & \text{Accumulated depreciation—Equipment} \ldots\ldots\ldots & \quad & \text{\$ 20,000}\\ \text{173} & \text{Building} \ldots\ldots\ldots & \text{150,000}\\ \text{174} & \text{Accumulated depreciation—Building} \ldots\ldots\ldots &\quad & \text{50,000}\\ \text{183} & \text{Land} \ldots\ldots\ldots & \text{55,000}\\ \text{201} & \text{Accounts payable} \ldots\ldots\ldots & \quad & \text{16,500}\\ \text{203} & \text{Interest payable} \ldots\ldots\ldots & \quad & \text{2,500}\\ \text{208} & \text{Rent payable} \ldots\ldots\ldots & \quad & \text{3,500}\\ \text{210} & \text{Wages payable} \ldots\ldots\ldots & \quad & \text{2,500}\\ \text{213} & \text{Property taxes payable} \ldots\ldots\ldots & \quad & \text{900}\\ \text{233} & \text{Unearned professional fees} \ldots\ldots\ldots & \quad & \text{7,500}\\ \text{251} & \text{Long-term notes payable} \ldots\ldots\ldots & \quad & \text{67,000}\\ \text{307} & \text{Common stock} \ldots\ldots\ldots & \quad & \text{5,000}\\ \text{318} & \text{Retained earnings} \ldots\ldots\ldots & \quad & \text{121,400}\\ \text{319} & \text{Dividends} \ldots\ldots\ldots & \text{13,000}\\ \text{401} & \text{Professional fees earned} \ldots\ldots\ldots & \quad & \text{97,000}\\ \text{406} & \text{Rent earned} \ldots\ldots\ldots & \quad & \text{14,000}\\ \text{407} & \text{Dividends earned} \ldots\ldots\ldots & \quad & \text{2,000}\\ \text{409} & \text{Interest earned} \ldots\ldots\ldots & \quad & \text{2,100}\\ \text{606} & \text{Depreciation expense—Building} \ldots\ldots\ldots & \text{11,000}\\ \text{612} & \text{Depreciation expense—Equipment} \ldots\ldots\ldots & \text{6,000}\\ \text{623} & \text{Wages expense} \ldots\ldots\ldots & \text{32,000}\\ \text{633} & \text{Interest expense} \ldots\ldots\ldots & \text{5,100}\\ \text{637} & \text{Insurance expense} \ldots\ldots\ldots & \text{10,000}\\ \text{640} & \text{Rent expense} \ldots\ldots\ldots & \text{13,400}\\ \text{652} & \text{Supplies expense} \ldots\ldots\ldots & \text{7,400}\\ \text{682} & \text{Postage expense} \ldots\ldots\ldots & \text{4,200}\\ \text{683} & \text{Property taxes expense} \ldots\ldots\ldots & \text{5,000}\\ \text{684} & \text{Repairs expense} \ldots\ldots\ldots & \text{8,900}\\ \text{688} & \text{Telephone expense} \ldots\ldots\ldots & \text{3,200}\\ \text{690} & \text{Utilities expense} \ldots\ldots\ldots & \text{4,600}\\ \quad & \text{Totals} \ldots\ldots\ldots & \text{\$ 411,900} & \text{\$ 411,900} \end{matrix} $$ The December 31, 2016, credit balance of the Retained Earnings account was $121,400. Tybalt Construction is required to make a$7,000 payment on its long-term notes payable during 2018. 1. Prepare the income statement and the statement of retained earnings for the calendar year 2017 and the classified balance sheet at December 31, 2017. 2. Prepare the necessary closing entries at December 31, 2017. 3. Use the information in the financial statements to compute these ratios: (a) return on assets (total assets at December 31, 2016, was $200,000); (b) debt ratio; (c) profit margin ratio (use total revenues as the denominator); and (d) current ratio. Round ratios to three decimals for parts a and c, and to two decimals for parts b and d.
ACCOUNTING
A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $500,000; March 31,$600,000; June 30, $400,000; October 30,$600,000. To help finance construction, the company arranged a 7% construction loan on January 1 for $700,000. The company’s other borrowings, outstanding for the whole year, consisted of a$3 million loan and a $5 million note with interest rates of 8% and 6%, respectively. Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year.
ACCOUNTING
Marion Cassidy operates a service business called Cassidy Company. Cassidy Company uses the accounts shown in the following accounting equation. Use the form to complete this problem. $$ \begin{matrix} & \mathrm{{\scriptscriptstyle Assets +}} & & & & \mathrm{{\scriptscriptstyle Liabilities +}} & \mathrm{{\scriptscriptstyle Owners \ Equity}}\\\mathrm{{\scriptscriptstyle Trans.}} & \mathrm{{\scriptscriptstyle Cash +}} & \mathrm{{\scriptscriptstyle Accts. \ Rec. +}} & \mathrm{{\scriptscriptstyle Supplies +}} & \mathrm{{\scriptscriptstyle Prepaid =}} & \mathrm{{\scriptscriptstyle Accts \ Pay. +}} & \mathrm{{\scriptscriptstyle Peter \ Smith,}}\\\mathrm{{\scriptscriptstyle No}} & & \mathrm{{\scriptscriptstyle Ana \ Santiago}} & \mathrm{ } & \mathrm{{\scriptscriptstyle Insurance}} & \mathrm{{\scriptscriptstyle Delta \ Co.}} & \mathrm{{\scriptscriptstyle Capital}}\\\mathrm{{\scriptscriptstyle Beg. \ Bal.}} & \mathrm{{\scriptscriptstyle 2,300}} & \mathrm{{\scriptscriptstyle 0}} & \mathrm{{\scriptscriptstyle 200}} & \mathrm{{\scriptscriptstyle 100}} & \mathrm{{\scriptscriptstyle 1,800}} & \mathrm{{\scriptscriptstyle 800}}\\\mathrm{{\scriptscriptstyle 1.}} & \mathrm{{\scriptscriptstyle -400}} & & & & & \mathrm{{\scriptscriptstyle -400 (expense)}}\\ \mathrm{{\scriptscriptstyle New \ Bal.}} & \mathrm{{\scriptscriptstyle 1,900}} & \mathrm{{\scriptscriptstyle 0}} & \mathrm{{\scriptscriptstyle 200}} & \mathrm{{\scriptscriptstyle 100}} & \mathrm{{\scriptscriptstyle 1,800}} & \mathrm{{\scriptscriptstyle 400}}\\\mathrm{{\scriptscriptstyle 2.}}\\\end{matrix} $$ Transactions: 1. Paid cash for rent, $400.00. 2. Received cash from owner as an investment,$500.00. 3. Paid cash for telephone bill, $50.00. 4. Received cash from sales,$1,025.00. 5. Bought supplies on account from Delta Company, $450.00. 6. Sold services on account to Ana Santiago,$730.00. 7. Paid cash for advertising, $660.00. 8. Paid cash for supplies,$150.00. 9. Received cash on account from Ana Santiago, $400.00. 10. Paid cash on account to Delta Company,$1,500.00. 11. Paid cash for one month of insurance, $100.00. 12. Received cash from sales,$1,230.00. 13. Paid cash to owner for personal use, $1,200.00. Instructions: For each transaction, complete the following. Transaction 1 is given as an example. a. Analyze the transaction to determine which accounts in the accounting equation are affected. b. Write the amount in the appropriate columns, using a plus (+) if the account increases or a minus (-) if the account decreases. c. For transactions that change owner’s equity, write in parentheses a description of the transaction to the right of the amount. d. Calculate the new balance for each account in the accounting equation. e. Before going on to the next transaction, determine that the accounting equation is still in balance.
ACCOUNTING
The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Required: 1. Obtain the relevant authoritative literature on the impairment or disposal of long-lived assets using the FASB Accounting Standards Codification at the FASB website (asc.fasb.org). Indicate the Codification topic number that provides guidance on accounting for the impairment of long-lived assets. 2. What is the specific citation that discusses the disclosures required in the notes to the financial statements for the impairment of long-lived assets classified as held and used? 3. Describe the disclosure requirements.
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