Name: AbduMalik Salami

Course: Principles of Accounting BTA 111

Ch4 Assignments:
Chapter Four Exercise #1: Closing Entries.
Okabe Company ended its fiscal year on July 31, 2023. The company’s adjusted trial
balance as of the end of its fiscal year is shown below.
OKABE COMPANY
Adjusted Trial Balance
July 31, 2023
No. Account Titles
101 Cash $ 9,840 (Dr.)
112 Accounts Receivable 8,780 (Dr.)
157 Equipment 15,900 (Dr.)
158 Accumulated Depreciation—Equip. $ 7,400 (Cr.)
201 Accounts Payable 4,220 (Cr.)
208 Unearned Rent Revenue 1,800 (Cr.)
301 Owner’s Capital 45,200 (Cr.)
306 Owner’s Drawings 16,000 (Dr.)
400 Service Revenue 64,000 (Cr.)
429 Rent Revenue 6,500 (Cr.)
711 Depreciation Expense 8,000 (Dr.)
726 Salaries and Wages Expense 55,700 (Dr.)
732 Utilities Expense 14,900 (Dr.)
Instructions: Prepare the closing entries.

Solution
Okabe Company
GENERAL JOURNAL
For the Year Ended July 31, 2023
Date Account Titles and Explanation Ref. Debit ($) Credit ($)
31-Jul Service Revenue 400 64,000.00 -
Rent Revenue 429 6,500.00 -
Income Summary 70,500.00
(To close revenue accounts to Income Summary)
31-Jul Income Summary 78,600.00 -
Depreciation Expense 711 8,000.00
Salaries and Wages Expense 726 55,700.00
Utilities Expense 732 14,900.00
 (To close expense accounts to Income Summary)
31-Jul Income Summary 7,900.00 -
Owner’s Capital 301 7,900.00
(To close Income Summary to Owner’s Capital)
31-Jul Owner’s Capital 301 16,000.00 -
Owner’s Drawings 306 16,000.00
(To close Drawings to Owner’s Capital)

Chapter Four Exercise #2: Create Financial Statements from Adjusted Trial Balance
THAO COMPANY
Worksheet For the Year Ended December 31, 2023
Adjusted Account Trial Balance
No. Account Titles
101 Cash 5,300 (Dr.)
112 Accounts Receivable 10,800 (Dr.)
126 Supplies 1,500 (Dr.)
130 Prepaid Insurance 2,000 (Dr.)
157 Equipment 27,000 (Dr.)
158 Accumulated Depreciation—Equipment 5,600 (Cr.)
200 Notes Payable 15,000 (Cr.)
201 Accounts Payable 6,100 (Cr.)
212 Salaries and Wages Payable 2,400 (Cr.)
230 Interest Payable 600 (Cr.)
301 Owner’s Capital 13,000 (Cr.)
306 Owner’s Drawings 7,000 (Dr.)
400 Service Revenue 61,000 (Cr.)
610 Advertising Expense 8,400 (Dr.)
631 Supplies Expense 4,000 (Dr.)
711 Depreciation Expense 5,600 (Dr.)
722 Insurance Expense 3,500 (Dr.)
726 Salaries and Wages Expense 28,000 (Dr.)
905 Interest Expense 600 (Dr.)
Totals 103,700 (Dr.) 103,700 (Cr.)
Instructions
(a) Prepare an income statement, owner’s equity statement, and a classified balance sheet.
(Note: $5,000 of the notes payable become due in 2024) D. Thao did not make any additional
investments in the business during the year.
(b) Prepare the closing entries.
Solution
Financial Statements
THAO COMPANY
Income Statement
For the Year Ended December 31, 2023
Revenues Amount ($) Amount ($)
Service Revenue - 61,000.00
Total Revenues - 61,000.00

Expenses
Advertising Expense 8,400.00 -
Supplies Expense 4,000.00 -
Depreciation Expense 5,600.00 -
Insurance Expense 3,500.00 -
Salaries and Wages Expense 28,000.00 -
Interest Expense 600.00 -
Total Expenses 50,100.00
Net Income 10,900.00

THAO COMPANY
Owner’s Equity Statement
For the Year Ended December 31, 2023
Item Amount ($)
Owner’s Capital (Jan 1, 2023) 13,000.00
Add: Net Income 10,900.00
Less: Owner’s Drawings (7,000.00)
Owner’s Capital (Dec 31, 2023) 16,900.00

THAO COMPANY
Classified Balance Sheet
As of December 31, 2023
Assets
Current Assets: Amount ($) Amount ($)
Cash 5,300.00
Accounts Receivable 10,800.00
Supplies 1,500.00
Prepaid Insurance 2,000.00
Total Current Assets 19,600.00
Property, Plant, and Equipment:
Equipment 27,000.00
Less: Accumulated Depreciation (5,600.00)
Total Property, Plant, and Equipment 21,400.00
Total Assets 41,000.00
 Liabilities and Owner’s Equity
Current Liabilities: Amount ($) Amount ($)
Accounts Payable 6,100.00
Salaries and Wages Payable 2,400.00
Interest Payable 600.00
Notes Payable (Due in 2024) 5,000.00
Total Current Liabilities 14,100.00
Long-Term Liabilities:
Notes Payable (Beyond 2024) 10,000.00
Total Liabilities 24,100.00
Owner’s Equity:
Owner’s Capital 16,900.00
Total Liabilities and Owner’s Equity 41,000.00

THAO COMPANY
GENERAL JOURNAL
For the Year Ended July 31, 2023
Date Account Titles and Explanation Ref. Debit ($) Credit ($)
31-Dec Service Revenue 400 61,000.00 -
Income Summary - 61,000.00
(To close revenues to Income Summary)
31-Dec Income Summary 50,100.00 -
Advertising Expense 610 - 8,400.00
Supplies Expense 631 - 4,000.00
Depreciation Expense 711 - 5,600.00
Insurance Expense 722 - 3,500.00
Salaries and Wages Expense 726 - 28,000.00
Interest Expense 905 - 600.00
(To close expenses to Income Summary)
31-Dec Income Summary 10,900.00 -
Owner’s Capital 301 - 10,900.00
(To close net income to Owner’s Capital)
31-Dec Owner’s Capital 301 7,000.00 -
Owner’s Drawings 306 - 7,000.00
(To close Drawings to Owner’s Capital)

Chapter Four Exercise #3 List all major steps in completing an accounting cycle.

Solution
The major steps in completing an accounting cycle include:
1. Identify and Analyze Transactions – Review source documents (invoices, receipts, bank
statements) to determine financial events.
2. Record Transactions in the Journal – Enter transactions in the general journal using
double-entry accounting.
3. Post to the Ledger – Transfer journal entries to the general ledger, categorizing accounts
properly.
4. Prepare an Unadjusted Trial Balance – Summarize all ledger balances to check for
mathematical accuracy.
5. Adjust Entries – Make necessary adjustments for accrued expenses, prepaid items,
depreciation, and other adjustments.
6. Prepare an Adjusted Trial Balance – Ensure debits and credits still match after
adjustments.
7. Prepare Financial Statements – Use the adjusted trial balance to create the Income
Statement, Owner’s Equity Statement, and Balance Sheet.
8. Record and Post Closing Entries – Close temporary accounts (revenues, expenses,
drawings) to prepare for the next period.
9. Prepare a Post-Closing Trial Balance – Verify that only permanent accounts remain and
that debits still equal credits.
10. Reverse Entries (Optional) – Reverse certain adjusting entries at the beginning of the
next accounting period for efficiency.