ABM 4

Seatwork
Chapter 4

Light-It-Up Company maintains and repairs warning lights, such as those found on radio towers and lighthouses. Light-It-

Up Company prepared the following end-of-period spreadsheet at August 31, 20Y5, the end of the fiscal year:

Instructions
1. Prepare an income statement for the year ended August 31, 20Y5.
2. Prepare a statement of owner’s equity for the year ended August 31, 20Y5. During the year, Effie Jackson
invested an additional $25,000 in the business.
3. Prepare a balance sheet as of August 31, 20Y5.

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4. Based upon the end-of-period spreadsheet, journalize the closing entries.
5. Prepare a post-closing trial balance.
SOLUTIONS:
1.

2.

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3.

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4. CLOSING ENTRIES
Fees earned 430,000
Rent revenue 900
Income summary 430,900

Income summary 305,900

Salaries and wages expense 223,500
Advertising expense 30,700
Utilities expense 16,400
Depreciation expense-building 12,000
Repairs expense 8,850
Depreciation expense-equipment 4,800
Insurance expense 3,150
Supplies expense 2,180
Miscellaneous expense 4,320

Income summary 125,000

Effie Jackson, capital 125,000

Effie Jackson, capital 10,000

Effie Jackson, drawings 10,000

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Foxy Investigative Services is an investigative services firm that is owned and operated by Shirley Vickers. On November
30, 20Y8, the end of the fiscal year, the accountant for Foxy Investigative Services prepared an end-of-period spreadsheet,
a part of which follows:

Instructions
1. Prepare an income statement, a statement of owner’s equity, and a balance sheet. The owner made no additional
investments in the business during the year ended November 30, 20Y8.
2. Journalize the entries that were required to close the accounts at November 30, 20Y8.
3. If Shirley Vickers, Capital had instead decreased $46,000 after the closing entries were posted, and the owner
withdrawals remained the same, what would have been the amount of net income or net loss?

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SOLUTIONS:

1.

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2. CLOSING ENTRIES:

Service fees 675,500

Rent revenue 9,000
Income summary 684,500

Income summary 539,000

Salaries expense 435,000
Rent expense 55,000
Supplies expense 11,850
Depreciation expense-building 10,000
Utilities expense 8,800
Repairs expense 4,250
Insurance expense 3,000
Miscellaneous expense 11,100

Income summary 145,500

Shirley Vickers, capital 145,500

Shirley Vickers, capital 30,000

Shirley Vickers, drawings 30,000

3. $16,000 ($46,000 – $30,000) net loss. The $46,000 decrease is caused by the
$30,000 owner withdrawals and a $16,000 net loss.