Adams Construction Company

The following unadjusted trial balance is for Adams Construction Co. as of the end of its 2005 fiscal

year. The June 30, 2004, credit balance of the owner’s capital account was $52,660, and the owner

invested $25,000 cash in the company during the 2005 fiscal year.

101

126

128

167

168

201

203

208

210

213

251

301

302

401

612

623

633

637

640

652

683

684

690

Cash

Supplies

Prepaid insurance

Equipment

Accumulated depreciation-Equipment

Accounts payable

Interest payable

Rent payable

Wages payable

Property taxes payable

Long-term notes payable

S. Adams, Capital

S. Adams, Withdrawals

Construction fees earned

Depreciation expense-Equipment

Wages expense

Interest expense

Insurance expense

Rent expense

Supplies expense

Property taxes expense

Repairs expense

Utilities expense

Totals

$ 17,500

8,900

6,200

131,000

30,000

0

45,860

2,640

0

13,200

0

4,600

2,810

4,000

$ 266,710

$ 25,250

5,800

0

0

0

0

24,000

77,660

134,000

$ 266,710

Required

1. Prepare a 10-column work sheet for fiscal year 2005, starting with the unadjusted trial balance

and including adjustments based on these additional facts:

a. The supplies available at the end of fiscal year 2005 had a cost of $3,200.

b. The cost of expired insurance for the fiscal year is $3,900.

c. Annual depreciation on equipment is $8,500.

d. The June utilities expense of $550 is not included in the unadjusted trial balance because the

bill arrived after the trial balance was prepared. The $550 amount owed needs to be recorded.

e. The company’s employees have earned $1,600 of accrued wages at fiscal year-end.

f. The rent expense incurred and not yet paid or recorded at fiscal year-end is $200.

g. Additional property taxes of $900 have been assessed for this fiscal year but have not been

paid or recorded in the accounts.

h. The long-term note payable bears interest at 1% per month. The unadjusted Interest Expense

account equals the amount paid for the first 11 months of the 2005 fiscal year. The $240 accrued

interest for June has not yet been paid or recorded. (Note that the company is required

to make a $5,000 payment toward the note payable during the 2006 fiscal year.)

2. Use the work sheet to enter the adjusting and closing entries; then journalize them.

3. Prepare the income statement and the statement of owner’s equity for the year ended June 30 and

the classified balance sheet at June 30, 2005.

Analysis Component

4. Analyze the following separate errors and describe how each would affect the 10-column work

sheet. Explain whether the error is likely to be discovered in completing the work sheet and, if

not, the effect of the error on the financial statements.

a. Assume that the adjustment for supplies used consisted of a credit to Supplies for $3,200 and

a debit for $3,200 to Supplies Expense.

b. When the adjusted trial balance in the work sheet is completed, the $17,500 Cash balance is

incorrectly entered in the Credit column.

 

 

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