P3-9 Adjusting And Closing Presented Below Is The Trial B ✓ Solved
P3-9 (Adjusting and Closing) Presented below Is The Trial B
Presented below is the trial balance of the Crestwood Golf Club, Inc. as of December 31. The books are closed annually on December 31.
CRESTWOOD GOLF CLUB, INC. TRIAL BALANCE DECEMBER 31
Debit/Credit Cash $ 15,000
Accounts Receivable 13,000
Allowance for Doubtful Accounts $ 1,100
Prepaid Insurance 9,000
Land 350,000
Buildings 120,000
Accumulated Depreciation—Buildings 38,400
Equipment 150,000
Accumulated Depreciation—Equipment 70,000
Common Stock 400,000
Retained Earnings 82,000
Dues Revenue 200,000
Green Fees Revenue 5,900
Rent Revenue 17,600
Utilities Expenses 54,000
Salaries and Wages Expense 80,000
Maintenance and Repairs Expense 24,000
$815,000 $815,000
Instructions: (a) Enter the balances in ledger accounts. Allow five lines for each account. (b) From the trial balance and the information given below, prepare annual adjusting entries and post to the ledger accounts. (Omit explanations.) (1) The buildings have an estimated life of 30 years with no salvage value (straight-line method). (2) The equipment is depreciated at 10% per year. (3) Insurance expired during the year $3,500. (4) The rent revenue represents the amount received for 11 months for dining facilities. The December rent has not yet been received. (5) It is estimated that 12% of the accounts receivable will be uncollectible. (6) Salaries and wages earned but not paid by December 31, $3,600. (7) Dues received in advance from members $8,900. (c) Prepare an adjusted trial balance. (d) Prepare closing entries and post.
Paper For Above Instructions
The financial health of an organization can be assessed through the preparation of financial statements, including the trial balance, adjusting entries, and closing entries. This paper details the processes necessary for the Crestwood Golf Club, Inc. as it concludes its financial activities for the year ending December 31.
Trial Balance Analysis
The initial step in preparing the financial statements is to review the trial balance. The trial balance lists all account balances and is organized into debits and credits, essential for ensuring that the accounting equation remains balanced. In the case of Crestwood Golf Club, it is imperative to analyze the trial balance provided before proceeding with adjustments.
As per the trial balance, the total debits and credits equal $815,000, indicating equal account balances, which is essential for accurate accounting records. Each account will be addressed with specific adjustments before the close of the fiscal year.
Adjusting Entries
When updating the financial records, adjusting entries are necessary to reflect the actual financial status accurately. The following adjustments have been identified:
- The annual depreciation for buildings is calculated based on a straight-line method over 30 years. Therefore, the annual depreciation expense for buildings amounts to $120,000 / 30 = $4,000.
- For equipment, applying a 10% depreciation rate results in an annual expense of $150,000 x 10% = $15,000.
- Insurance expense adjustment reflects an insurance expiration of $3,500.
- The December rent of $1,600 must be accrued as it has not yet been received, calculated based on the monthly rent of $17,600 / 11 months = $1,600.
- The estimated allowance for doubtful accounts on accounts receivable of $13,000 x 12% = $1,560 adjusts the allowance for doubtful accounts.
- The adjustments for salaries and wages indicate an amount of $3,600 earned but unpaid as of December 31.
- Lastly, the dues received in advance from members calculates to $8,900, impacting unearned revenues.
Adjustment Breakdown
After calculation, the adjustment entries will appear as follows:
- Debit Depreciation Expense - Buildings $4,000
- Credit Accumulated Depreciation - Buildings $4,000
- Debit Depreciation Expense - Equipment $15,000
- Credit Accumulated Depreciation - Equipment $15,000
- Debit Insurance Expense $3,500
- Credit Prepaid Insurance $3,500
- Debit Rent Revenue $1,600
- Credit Accrued Income $1,600
- Debit Bad Debt Expense $460
- Credit Allowance for Doubtful Accounts $460
- Debit Salaries and Wages Expense $3,600
- Credit Salaries Payable $3,600
- Debit Dues Revenue (Unearned) $8,900
- Credit Dues Revenue $8,900
Adjusted Trial Balance
Following the adjustments, an adjusted trial balance is necessary to ensure all entries reflect accurately in the financial records:
| Account | Debit | Credit |
|---|---|---|
| Cash | $15,000 | |
| Accounts Receivable | $13,000 | |
| Allowance for Doubtful Accounts | $1,560 | |
| Prepaid Insurance | $5,500 | |
| Land | $350,000 | |
| Buildings | $120,000 | |
| Accumulated Depreciation—Buildings | $42,400 | |
| Equipment | $150,000 | |
| Accumulated Depreciation—Equipment | $85,000 | |
| Common Stock | $400,000 | |
| Retained Earnings | $82,000 | |
| Dues Revenue | $208,900 | |
| Green Fees Revenue | $5,900 | |
| Rent Revenue | $19,200 | |
| Utilities Expenses | $54,000 | |
| Salaries and Wages Expense | $83,600 | |
| Maintenance and Repairs Expense | $24,000 |
Closing Entries
To finalize the accounting cycle, closing entries must be prepared:
- Debit Dues Revenue $200,000; Credit Retained Earnings $200,000
- Debit Green Fees Revenue $5,900; Credit Retained Earnings $5,900
- Debit Rent Revenue $19,200; Credit Retained Earnings $19,200
- Debit Retained Earnings $414,700; Credit Utilities Expenses $54,000
- Debit Retained Earnings $414,700; Credit Salaries and Wages Expense $83,600
- Debit Retained Earnings $414,700; Credit Maintenance and Repairs Expense $24,000
Conclusion
The preparation of the financial statements, including the trial balance, adjustments, and closing entries, provides valuable insights into Crestwood Golf Club's financial performance for the year. Subsequent to completing these steps, the organization can present accurate financial statements to stakeholders, ensuring transparency and compliance with accounting standards.
References
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