Question

Transactions and events during 2021 (summarized in thousands of dollars) follow:

Borrowed $12 cash on March 1 using a short-term note.
Purchased land on March 2 for future building site; paid cash, $9.
Issued additional shares of common stock on April 3 for $23.
Purchased software on July 4, $10 cash.
Purchased supplies on account on October 5 for future use, $18.
Paid accounts payable on November 6, $13.
Signed a $25 service contract on November 7 to start February 1, 2022.
Recorded revenues of $160 on December 8, including $40 on credit and $120 collected in cash.
Recognized salaries and wages expense on December 9, $85 paid in cash.
Collected accounts receivable on December 10, $24.

Data for adjusting journal entries as of December 31:
Unrecorded amortization for the year on software, $5.
Supplies counted on December 31, 2021, $10.
Depreciation for the year on the equipment, $6.
Interest of $1 to accrue on notes payable.
Salaries and wages earned but not yet paid or recorded, $12.
Income tax for the year was $8. It will be paid in 2022.

What is the Post-closing Trial Balance?

Answer 1

To prepare the post-closing trial balance, we need to start with the balances after all closing entries have been made. The closing entries are made to transfer temporary account balances (revenues, expenses, dividends) to the retained earnings account. After these closing entries, only permanent accounts (assets, liabilities, and equity) will have balances.

Let's summarize the account balances after considering all the transactions and adjusting journal entries:

Assets:

Cash: $12 (Borrowed on March 1, no other transactions affecting cash)

Land: $9 (Purchased on March 2)

Software: $5 (Purchased on July 4, with $10 initial cost and $5 amortization)

Supplies: $8 (Purchased on October 5, $18 initial cost, and $10 counted on December 31)

Accounts Receivable: $0 (Collected all accounts receivable on December 10)

Liabilities:

Accounts Payable: $0 (Paid on November 6)

Notes Payable: $12 (Borrowed on March 1, with $1 interest to accrue)

Equity:

Common Stock: $23 (Issued on April 3)

Retained Earnings: $40 (This is calculated as follows: $160 in revenues - $85 in salaries and wages expense - $8 in income tax for the year)

Now, let's calculate the total equity by adding Common Stock and Retained Earnings:

$23 (Common Stock) + $40 (Retained Earnings) = $63

So, the post-closing trial balance is as follows:

Assets:

Cash: $12

Land: $9

Software: $5

Supplies: $8

Accounts Receivable: $0

Liabilities:

Accounts Payable: $0

Notes Payable: $12

Equity:

Common Stock: $23

Retained Earnings: $40

Total Assets: $34

Total Liabilities and Equity: $34

Answer 2

The post-closing trial balance is a report that shows the balances of all the accounts after adjusting and closing entries have been made. It includes only permanent accounts, such as assets, liabilities, and equity. The net worth of the company is calculated by subtracting the total liabilities from the total assets.

Step-by-step explanation:

The post-closing trial balance is a report that shows the balances of all the accounts after adjusting and closing entries have been made. It includes only permanent accounts, such as assets, liabilities, and equity. Temporary accounts, such as revenue and expense accounts, are closed out at the end of the accounting period. Based on the transactions and events provided, we can set up the post-closing trial balance as follows:

Assets

• Cash: $38 ($12 + $9 + $10 + $7)
• Land: $9
• Software: $5
• Supplies: $0 ($18 - $10)
• Accounts Receivable: $24

Liabilities

• Accounts Payable: $0 ($18 - $13)
• Notes Payable: $0
• Income Tax Payable: $8

Equity

• Common Stock: $23
• Retained Earnings: $160 ($40 - $85 + $24)

The total assets ($76) equal the total liabilities and equity ($76), indicating that the post-closing trial balance is in balance. The net worth of the company is calculated by subtracting the total liabilities from the total assets, which is $76 - $76 = $0.