Page 195 - Accounting Principles (A Business Perspective)

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a. The Dividends account is closed to the Retained Earnings account rather than to the Income Summary
account.
b. Plant, property, and equipment is one of the long-term asset categories. Response (a) should not include

equipment. Response (c) should not include notes receivable. Stockholders' equity is not subdivided into current
and long-term categories.
Comprehensive review problem
Lopez Delivery Service Company has the following chart of accounts:

Acct. Acct.
No. Account Title No. Account Title
100 Cash 310 Retained Earnings
103 Accounts Receivable 320 Dividends
107 Supplies on Hand 400 Service Revenue
108 Prepaid Insurance 507 Salaries Expense
112 Prepaid Rent 511 Utilities Expense
140 Buildings 512 Insurance Expense
141 Accumulated Depreciation—Buildings 515 Rent Expense
150 Trucks 518 Supplies Expense
151 Accumulated Depreciation—Trucks 520 Depreciation Expense—Buildings
200 Accounts Payable 521 Depreciation Expense—Trucks
206 Salaries Payable 568 Miscellaneous Expense
300 Capital Stock 600 Income Summary
The post-closing trial balance as of 2010 May 31, was as follows:
LOPEZ DELIVERY SERVICE COMPANY
Post-Closing Trial Balance
2010 May 31
Acct.
No. Account Title Debits Credits
100 Cash $ 80,000
103 Accounts Receivable 30,000
107 Supplies on Hand 14,000
108 Prepaid Insurance 4,800
112 Prepaid Rent 12,000
140 Buildings 320,000
141 Accumulated Depreciation —Buildings $ 36,000
150 Trucks 80,000
151 Accumulated Depreciation—Trucks 30,000
200 Accounts Payable 24,000
300 Capital Stock 300,000
310 Retained Earnings 150,800
$ 540,800 $ 540,800
The transactions for June 2010 were as follows:

June 1 Performed delivery services for customers on account, USD 60,000.
3 Paid dividends, USD 10,000.
4 Purchased a USD 20,000 truck on account.
7 Collected USD 22,000 of the accounts receivable.
8 Paid USD 16,000 of the accounts payable.
11 Purchased USD 4,000 of supplies on account. The asset account for supplies was debited.
17 Performed delivery services for cash, USD 32,000.

20 Paid the utilities bills for June, USD 1,200.

Accounting Principles: A Business Perspective 196 A Global Text