Financial Statements and Closing Entries The Gorman Group is a financial plannin
ID: 2551120 • Letter: F
Question
Financial Statements and Closing Entries
The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2019, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:
Required:
1. Prepare an income statement.
Prepare a statement of owner's equity (no additional investments were made during the year.)
Prepare a balance sheet.
2. Journalize the entries that were required to close the accounts at October 31. For a compound transaction, if an amount box does not require an entry, leave it blank.
3. If the balance of Nicole Gorman, Capital had instead increased $115,000 after the closing entries were posted and the withdrawals remained the same, what would have been the amount of net income or net loss?
$
End-of-Period Spreadsheet
For the Year Ended October 31, 2019 Adjusted Trial Balance Account Title Dr. Cr. Cash $15,050 Accounts Receivable 32,770 Supplies 5,120 Prepaid Insurance 11,060 Land 116,000 Buildings 419,000 Accumulated Depreciation-Buildings 136,400 Equipment 303,000 Accumulated Depreciation-Equipment 177,700 Accounts Payable 38,760 Salaries Payable 3,840 Unearned Rent 1,740 Nicole Gorman, Capital 497,580 Nicole Gorman, Drawing 29,100 Service Fees 552,700 Rent Revenue 5,840 Salaries Expense 396,240 Depreciation Expense—Equipment 21,500 Rent Expense 18,000 Supplies Expense 12,750 Utilities Expense 11,520 Depreciation Expense—Buildings 7,680 Repairs Expense 6,350 Insurance Expense 3,480 Miscellaneous Expense 5,940 1,414,560 1,414,560
Explanation / Answer
Answer
Income Statement
For the Year Ended October 31, 2019
Revenues:
Service Fees
$ 5,52,700.00
Rent Revenue
$ 5,840.00
Total revenues
$ 5,58,540.00
Expenses:
Salaries Expense
$ 3,96,240.00
Depreciation Expense—Equipment
$ 21,500.00
Rent Expense
$ 18,000.00
Supplies Expense
$ 12,750.00
Utilities Expense
$ 11,520.00
Depreciation Expense—Buildings
$ 7,680.00
Repairs Expense
$ 6,350.00
Insurance Expense
$ 3,480.00
Miscellaneous Expense
$ 5,940.00
Total expenses
$ 4,83,460.00
Net income
$ 75,080.00
Gorman Group
Statement of Owner's Equity
For the Year Ended October 31, 2019
Nicole Gorman, Capital
$ 4,97,580.00
Net income
$ 75,080.00
$ 75,080.00
Total
$ 5,72,660.00
Nicole Gorman, Drawing
$ 29,100.00
Ending Balance
$ 5,43,560.00
Balance Sheet
October 31, 2019
Assets
Liabilities
Current assets:
Current liabilities:
Cash
$ 15,050.00
Accounts Payable
$ 38,760.00
Accounts Receivable
$ 32,770.00
Salaries Payable
$ 3,840.00
Supplies
$ 5,120.00
Unearned Rent
$ 1,740.00
Prepaid Insurance
$ 11,060.00
Total liabilities
$ 44,340.00
Total current assets
$ 64,000.00
Property, plant, and equipment:
Owner's Equity
Land
$ 1,16,000.00
Buildings
$ 4,19,000.00
Beginning Balance
$ 4,97,580.00
Accumulated Depreciation-Buildings
$ (1,36,400.00)
$ 2,82,600.00
Add: Net Income
$ 75,080.00
Equipment
$ 3,03,000.00
Total
$ 5,72,660.00
Accumulated Depreciation-Equipment
$ (1,77,700.00)
$ 1,25,300.00
Less: Drawings
$ 29,100.00
$ 5,43,560.00
Total property, plant, and building
$ 5,23,900.00
Total assets
$ 5,87,900.00
Total liabilities and owner's equity
$ 5,87,900.00
Date
Account
Debit
Credit
Oct. 31
Service Fees
5,52,700
Rent Revenue
5,840
Salaries Expense
396240
Depreciation Expense—Equipment
21500
Rent Expense
18000
Supplies Expense
12750
Utilities Expense
11520
Depreciation Expense—Buildings
7680
Repairs Expense
6350
Insurance Expense
3480
Miscellaneous Expense
5940
Nicole Gorman, Capital
75080
Oct. 31
Nicole Gorman, Capital
29100
Nicole Gorman, Drawing
29100
Current Ending Balance
$ 5,43,560.00
Add: Increase
115000
Add: Drawings
$ 29,100.00
Less: Beginning Balance
$ 4,97,580.00
Net Income would have been
$ 1,90,080.00
Income Statement
For the Year Ended October 31, 2019
Revenues:
Service Fees
$ 5,52,700.00
Rent Revenue
$ 5,840.00
Total revenues
$ 5,58,540.00
Expenses:
Salaries Expense
$ 3,96,240.00
Depreciation Expense—Equipment
$ 21,500.00
Rent Expense
$ 18,000.00
Supplies Expense
$ 12,750.00
Utilities Expense
$ 11,520.00
Depreciation Expense—Buildings
$ 7,680.00
Repairs Expense
$ 6,350.00
Insurance Expense
$ 3,480.00
Miscellaneous Expense
$ 5,940.00
Total expenses
$ 4,83,460.00
Net income
$ 75,080.00
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