4-34 CH A PT E R 4 Completing the Accounting Cycle

Solution
1. Dec. 31 Service Revenue 65,000
Income Summary 65,000
31 Income Summary 48,000
Salaries and Wages Expense 39,000
Maintenance and Repairs Expense 9,000
31 Income Summary 17,000
Owner’s Capital 17,000
31 Owner’s Capital 3,000
Owner’s Drawing 3,000

Prepare correcting entries.
2. (LO 3) At Shields Company, the following errors were discovered after the transactions had been
journalized and posted. Prepare the correcting entries.
a. A cash sale to a customer for $780 was recorded as a debit to Cash $780 and a credit to
Accounts Receivable $780.
b. The purchase of equipment on account for $1,730 was recorded as a debit to Equipment
$1,370 and a credit to Accounts Payable $1,370.

Solution
2. a. Accounts Receivable 780
Service Revenue 780
b. Equipment ($1,730 − $1,370) 360
Accounts Payable 360

Prepare the current assets section of a 3. (LO 4) Financial Statement The balance sheet debit column of the worksheet for Miguel
balance sheet. Company includes the following accounts: Accounts Receivable $25,000, Prepaid Insurance $7,000,
Cash $8,000, Supplies $11,000, and Stock Investments (short-term) $14,000. Prepare the current
assets section of the balance sheet, listing the accounts in proper sequence.

Solution
3.

Miguel Company
Partial Balance Sheet

Current assets
Cash $ 8,000
Stock investments 14,000
Accounts receivable 25,000
Supplies 11,000
Prepaid insurance 7,000
Total current assets $65,000

Practice Exercises
Journalize and post closing entries, 1. (LO 2) Hercules Company ended its fiscal year on August 31, 2020. The company’s adjusted trial
and prepare a post-closing trial balance as of the end of its fiscal year is as shown below.
balance.