Refer to the adjusted trial balance of Wilderness Guide Service Inc., illustrate
ID: 2386063 • Letter: R
Question
Refer to the adjusted trial balance of Wilderness Guide Service Inc., illustrated in Exercise 5.3 (3E) to respond to the following items.
a. Prepare all necessary closing entries at December 31, 2007. Prepare an after closing trial balance dated December 31, 3007. Compare retained earnings balance reported in the after-closing trial balance prepared in part b to the balance reported in the adjusted trial balance. Explain why the two balances are different. (Include in your explanation why the balance reported in the after-closing trial balance has increased or decreased subsequent to the closing process.)
Wilderness Guide Service
Adjusted Trial Balance
December 31, 2007
Cash 12,200
Accounts Receivable 31,000
Camping Supplies 7,900
Unexpired insurance Policies 2,400
Equipment 70,000
Accumulated Depreciation: equipment 60,000
Notes payable (due 4/1/09) 18,000
Accounts Payable 9,500
Capital Stock 25,000
Retained earnings 15,000
Dividends 1,000
Guide Revenue earned 102,000
Salary Expenses 87,500
Camping Supply expense 1,200
insurance Expense 9,600
Depreciation expense: equipment 5,000
Interest Expense 1,700
229,500 229,500
Explanation / Answer
income statement looks good. retained earnings had an opening amount of 15000 and you've said 0. in the balance sheet you should call unexpired insurance, prepaid insurance. this will then fix up the balance sheet as the OE figure is wrong. remember the balance sheet should show that A = OE + L