Preparation Of A Worksheet Finance ✓ Solved

Preparation Of A Worksheet Financi

Comprehensive Problem Supplement P2: Preparation of a Worksheet, Financial Statements, and Adjusting and Closing Entries. At the end of the fiscal year, Siglo Delivery Service, Inc.’s trial balance appeared as follows: Siglo Delivery Service, Inc. Trial balance August 31, 2014, including balances for cash, accounts receivable, prepaid insurance, supplies, land, building, trucks, office equipment, various accumulated depreciation accounts, accounts payable, unearned fees, mortgage payable, common stock, retained earnings, dividends, revenue, lockbox fees, wages, salaries, expenses, and interest. The problem requires entering the trial balance amounts into a worksheet, completing the worksheet with specified adjustments (such as expired insurance, unused supplies, depreciation, unearned revenue, unrecorded lockbox fee income, accrued wages), and preparing the financial statements (income statement, statement of retained earnings, balance sheet). Additionally, it involves preparing adjusting and closing entries, and discussing if the worksheet can substitute for the financial statements.

Sample Paper For Above instruction

Introduction

The preparation of financial statements at the end of an accounting period is vital for assessing a company's financial position and performance. This process involves adjusting entries, compiling a worksheet, and ultimately producing formal financial statements. The case of Siglo Delivery Service, Inc., provides a comprehensive scenario combining various accounting components, including assets, liabilities, revenues, and expenses, as well as adjustments for accrued and deferred items.

Working through the Trial Balance and Adjustments

The initial step involves entering the trial balance amounts into a worksheet's trial balance columns. The provided balances are extensive and include cash, receivables, supplies, prepayments, land, building, vehicles, equipment, and associated accumulated depreciation, along with liabilities, equity, revenue, and expenses. After entering these figures, adjustments are made based on the information provided:

- Expired insurance ($3,060) decreases prepaid insurance.

- Unused supplies inventory ($1,430 supplies) and office supplies ($186) are used up, requiring adjustments to reduce supplies and recognize supplies expense.

- Estimated depreciation on the building ($14,400), trucks ($15,450), and office equipment ($2,700) are recorded to reflect the depreciation expense and accumulated depreciation.

- The unearned lockbox fees account has credits for total fees of a certain amount, and part of these fees ($5,630) are earned; unearned lockbox fees must be adjusted accordingly.

- Lockbox fee earned but unrecorded ($816) indicates revenue earned but not yet billed or received.

- Accrued wages payable ($unknown amount) need to be recognized to reflect wages incurred but not paid.

By systematically adjusting each account with the specified amounts, the worksheet will reflect a more accurate depiction of the company's financial position.

Preparation of Financial Statements

Based on the adjusted worksheet, the following financial statements can be prepared:

- Income Statement: Summarizes revenue and expenses, including service revenue, lockbox fees earned, wages expense, and depreciation. The net income derived informs shareholders of profitability.

- Statement of Retained Earnings: Begins with previous retained earnings, adds net income, subtracts dividends, to arrive at ending retained earnings.

- Balance Sheet: Presents assets, liabilities, and equity as of August 31, 2014, reflecting adjustments, accumulated depreciation, and retained earnings.

Adjusting and Closing Entries

Adjusting entries are recorded to update accounts for accrued expenses, unearned revenues, depreciation, and prepayments:

- Debit depreciation expense; credit accumulated depreciation.

- Debit insurance expense; credit prepaid insurance.

- Debit wages expense; credit wages payable.

- Debit unearned revenue; credit revenue for earned fees.

Closing entries transfer temporary account balances (revenues and expenses) into retained earnings, resetting those accounts for the next period.

Worksheet as a Substitute for Financial Statements

The worksheet is a useful tool for adjusting and summarizing financial data, but it is not a substitute for formal financial statements. The worksheet facilitates the preparation but lacks the official and standardized presentation required for external reporting, including footnotes and full disclosures mandated by accounting standards. It is primarily a working document that aids accountants and cannot replace the regulatory and informational value of final financial statements.

Conclusion

Accurate preparation of financial statements involves meticulous adjustments, proper recording in worksheets, and adherence to accounting principles. The case of Siglo Delivery Service illustrates these processes’ complexity and importance, emphasizing thoroughness for reliable financial reporting.

References

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