The following revenue and expense account balances were taken from the ledger of Wholistic Health Services Co, after the accounts had been adjusted on February 29, 2016, the end of the fiscal year:

$$\begin{array}{lrlr}\text { Depreciation Expense } & \$ 7,500 & \text { Service Revenue } & \$ 448,400 \\ \text { Insurance Expense } & 3,000 & \text { Supplies Expense } & 2,750 \\ \text { Miscellaneous Expense } & 8,150 & \text { Utilities Expense } & 33,900 \\ \text { Rent Expense } & 54,000 & \text { Wages Expense } & 360,000\end{array}$$

Prepare an income statement.

Why are closing entries required at the end of an accounting period?

The following account balances were taken from the adjusted trial balance for Laser Messenger Service, a delivery service firm, for the fiscal year ended April 30, 2016:

$$\begin{array}{lrlr}\text { Depreciation Expense } & \$ 8,650 & \text { Rent Expense } & \$ 60,000 \\ \text { Fees Earned } & 674,000 & \text { Salaries Expense } & 336,900 \\ \text { Insurance Expense } & 1,500 & \text { Supplies Expense } & 4,100 \\ \text { Miscellaneous Expense } & 3,650 & \text { Utilities Expense } & 41,200\end{array}$$

Prepare an income statement.

After the accounts have been adjusted at April 30, the end of the fiscal year, the following balances were taken from the ledger of Nuclear Landscaping Co.:

Journalize the four entries required to close the accounts.

On December 31, a business estimates depreciation on equipment used during the first year of operations to be $13,900. b. If the adjusting entry in (a) were omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of December 31?

The supplies and supplies expense accounts at December 31, after adjusting entries have been posted at the end of the first year of operations, are shown in the following T accounts:

$$\begin{array}{ c } \hspace{0pt}\textbf{Supplies} \end{array}\\$$

$$\begin{array} {r|l}\hline \hspace{5pt}\text{Bal.}\hspace{25pt}{1,560}& \text{{}}{\hspace{65pt}\text{}\hspace{5pt}}\\ \end{array}$$

$$\begin{array}{ c } \hspace{0pt}\textbf{Supplies Expense} \end{array}\\$$

$$\begin{array} {r|l}\hline \hspace{5pt}\text{Bal.}\hspace{25pt}{4,250}& \text{{}}{\hspace{65pt}\text{}\hspace{5pt}}\\ \end{array}$$

Determine the amount of supplies purchased during the year.

The supplies and supplies expense accounts at December 31, after adjusting entries have been posted at the end of the first year of operations, are shown in the following T accounts:

Determine the amount of supplies purchased during the year.

The supplies and supplies expense accounts at February 28, after adjusting entries have been posted at the end of the first year of operations, are shown in the following T accounts:

$$\begin{array}{cc} \begin{array}{cc} \begin{array}{c} \text{Supplies} \end{array}\\ \begin{array}{cc|cc} \hline \text{Bal.} & 690 && \hspace{50pt} \end{array} \end{array} & \begin{array}{cc} \begin{array}{c} \text{Supplies Expense} \end{array}\\ \begin{array}{cc|cc} \hline \hspace{50pt} && \text{Bal.} & 4,110 \end{array} \end{array} \end{array}$$

Determine the amount of supplies purchased during the year.

After the accounts have been adjusted at October 31 , the end of the fiscal year, the following balances were taken from the ledger of Smart Delivery Services Co.:

$$\begin{array}{lr}\text { Fraser Smart, Capital } & \$ 3,550,000 \\ \text { Fraser Smart, Drawing } & 40,000 \\ \text { Fees Earned } & 1,145,000 \\ \text { Wages Expense } & 740,000 \\ \text { Rent Expense } & 65,000 \\ \text { Supplies Expense } & 14,750 \\ \text { Miscellaneous Expense } & 8,800\end{array}$$

Journalize the four entries required to close the accounts.

For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much. a. The payment of cash for the purchase of office equipment of $12,900 was debited to Land for$12,900 and credited to Cash for $12,900. b. The payment of$1,840 on account was debited to Accounts Payable for $184 and credited to Cash for$1,840. c. The receipt of cash on account of $3,800 was recorded as a debit to Cash for$8,300and a credit to Accounts Receivable for $3,800

In groups of three or four, compare the balance sheets of two different companies, and present to the class a summary of the similarities and differences of the two companies. You may obtain the balance sheets you need from one of the following sources:

$$\begin{array}{ll} \text{1.} & \text{Your school or local library.}\\ \text{2.} & \text{The investor relations department of each company.}\\ \text{3.} & \text{The company’s Web site on the Internet.}\\ \text{4.} & \text{EDGAR (Electronic Data Gathering, Analysis, and Retrieval), the electronic archives of financial statements filed with the Securities and Exchange Commission.} \end{array}$$

SEC documents can be retrieved using the $\text{EdgarScan}^{\text{TM}}$ service at http://sec.gov. To obtain annual report information, click on “Search for Company Filing,” click on “Companies & Other Filers,” type in the company name, and then click on “Find Companies.” Click on the CIK related to the company name, search for Form 10-K, and click on “Retrieve Selected Findings.” Finally, click on the “html” for the latest period and the related document.

The accountant for Healthy Life Company, a medical services consulting firm, mistakenly omitted adjusting entries for (b) accrued wages ($12,770)$. Indicate the effect of each error, considered individually, on the income statement for the current year ended July 31. Also indicate the effect of each error on the July 31 balance sheet. Set up a table similar to the following, and record your answers by inserting the dollar amount in the appropriate spaces. Insert a zero if the error does not affect the item.

Emerson Company is a small editorial services company owned and operated by Suzanne Emerson. On October 31, 20Y6, Emerson Company’s accounting clerk prepared the following unadjusted trial balance:

The data needed to determine year-end adjustments are as follows:

a. Unexpired insurance at October 31, $550.
b. Supplies on hand at October 31,$610.
c. Depreciation of building for the year, $10,920.
d. Depreciation of equipment for the year,$7,830.
e. Unearned rent at October 31, $2,050.
f. Accrued salaries and wages at October 31,$2,550.
g. Fees earned but unbilled on October 31, $9,140.

Required:

1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable, Rent Revenue, Insurance Expense, Depreciation Expense—Building, Depreciation Expense—Equipment and Supplies Expense. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
2. Determine the balances of the accounts affected by the adjusting entries and prepare an adjusted trial balance.

The following accounts appear in an adjusted trial balance of Kangaroo Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability; (d) long-term liability; or (e) owner's equity section of the December 31, 2015, balance sheet of Kangaroo Consulting.

1. Accounts Payable
2. Lea Gabel, Capital
3. Accounts Receivable
4. Note Payable (due in ten years)
5. Accumulated Depreciation-Building
6. Supplies
7. Cash
8. Wages Payable