I-04.

05

On January 1, 20X7, Jacqueline Fernandez formed a corporation to purchase wheat harvesting

equipment and provide contract support services to farmers throughout the Midwest.
Information about the first year of operation follows:
Jan. 1

Investors provided $2,500,000 of cash in exchange for stock of

Fernandez Corporation

Jan. 1

Purchased combines and trucks in exchange for $1,000,000 cash and

a $3,000,000 note payable

Feb. 7

Purchased $40,000 of supplies on account that will be needed during

the upcoming harvest

Mar. 3

Paid wages of $65,400

Apr. 1

Billed customers for services in the amount of $230,000

Apr. 11

Paid $30,000 toward the purchase of February 7

May 1

Purchased a $24,000 insurance policy, recorded as prepaid insurance

June 6

Collected $210,000 on accounts receivable

June 9

Paid wages of $130,600

June 15

Paid $30,200 for fuel costs

June 20

Paid $12,500 for lodging costs incurred by crew

June 30

Paid $120,000 of interest and $80,000 to reduce the balance of the

note payable

Aug. 1

Billed customers for services provided in the amount of $812,000

Sept. 3

Collected $715,000 on accounts receivable

Sept. 16

Purchased $25,000 of supplies on account

Sept. 25

Paid $61,200 for fuel costs

Oct. 20

Paid $8,100 for lodging costs incurred by crew

Nov. 3

Paid wages of $125,900

Dec. 15

Collected $100,000 as deposits from customers who contracted for

20X8 harvesting services
Declared and paid a $25,000 dividend to shareholders

Dec. 31

I-04.05

Fernandez Corporation uses the following accounts:

Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
Accumulated
Depreciation
Accounts Payable
Interest Payable
Unearned Revenue
Notes Payable
Capital Stock
Retained Earnings
Dividends
Revenues
Wage Expense
Fuel Expense
Lodging Expense
Insurance Expense
Supplies Expense
Interest Expense
Depreciation Expense
Income Summary
(a Journalize the listed transactions.
)
(b Post the transactions to the appropriate general ledger accounts.
)
(c) Prepare a trial balance as of December 31.
(d Journalize and post adjusting entries based on the following additional information.
)
The equipment had 25-year life, with no salvage value.
Supplies on hand at year end amount to $20,000.
At year end, $115,000 of additional interest is due on the note payable.
The insurance policy covered a 12-month period commencing on May 1.
At year end, Fernandez had provided $30,000 of unbilled services to customers.
services will be billed in early 20X8.

These

I-04.05

(e Prepare an adjusted trial balance as of December 31.

)
(f) Prepare an income statement and statement of retained earnings for 20X7, and a classified
balance sheet as of the end of the year.
(g Journalize and post closing entries.
)
(h Prepare a post-closing trial balance as of December 31.
)

Name:
Date:

GENERAL JOURNAL
Date
Jan. 1

I-04.05(a)

Section:

Page 1

Accounts
Cash

Debit

Credit

2,500,000

Capital Stock

2,500,000

Investors provided $2,500,000 of cash

in exchange for stock of Fernandez
Corporation

Jan. 1

Equipment

4,000,000

Cash

1,000,000

Notes Payable

3,000,000

Purchased combines and trucks in

exchange for $1,000,000 cash and a
$3,000,000 note payable

Feb. 7

Supplies

40,000

Accounts Payable

40,000

Purchased $40,000 of supplies on

account that will be needed during
the upcoming harvest

Mar. 3

Wage Expense

65,400

Cash

65,400

Paid wages of $65,400

Apr. 1

Accounts Receivable
Revenues
Billed customers for services in the
amount of $230,000

230,000
230,000

Name:
Date:

I-04.05(a)

Section:

GENERAL JOURNAL
Date
Apr. 11

Page 2
Accounts

Debit

Accounts Payable

Credit

30,000

Cash

30,000

Paid $30,000 toward the purchase of

February 7

May 1

Prepaid Insurance

24,000

Cash

24,000

Purchased a $24,000 insurance policy,

recorded as prepaid insurance

June 6

Cash

210,000

Accounts Receivable
Collected $210,000
receivable

June 9

210,000
on

Wage Expense

accounts

130,600

Cash

130,600

Paid wages of $130,600

June 15

Fuel Expense
Cash
Paid $30,200 for fuel costs

30,200
30,200

Name:
Date:

I-04.05(a)

Section:

GENERAL JOURNAL
Date
June 20

Page 3
Accounts

Debit

Lodging Expense

12,500

Cash
Paid $12,500 for
incurred by crew

June 30

Credit
12,500

lodging

costs

Interest Expense

120,000

Notes Payable

80,000

Cash

200,000

Paid $120,000 of interest and $80,000

to reduce the balance of the note
payable

Aug. 1

Accounts Receivable

812,000

Revenues

812,000

Billed customers for services provided

in the amount of $812,000

Sept. 3

Cash

715,000

Accounts Receivable
Collected $715,000
receivable

715,000
on

accounts

Sept. 16 Supplies
Accounts Payable
Purchased $25,000 of supplies on
account

25,000
25,000

Name:
Date:

I-04.05(a)

Section:

GENERAL JOURNAL
Date

Page 4
Accounts

Sept. 25 Fuel Expense

Debit

Credit

61,200

Cash

61,200

Paid $61,200 for fuel costs

Oct. 20

Lodging Expense

8,100

Cash

8,100

Paid $8,100 for lodging costs incurred

by crew

Nov. 3

Wage Expense

125,900

Cash

125,900

Paid wages of $125,900

Dec. 15

Cash

100,000

Unearned Revenue

100,000

Collected $100,000 as deposits from

customers who contracted for 20X8
harvesting services

Dec. 31

Dividends
Cash
Declared and paid a $25,000 dividend
to shareholders

25,000
25,000

Name:
Date:

Section:

I-04.05(a)

Name:
Date:

I-04.05(b,d,g)

Section:

CASH
Date

Description

Debit

Credit
-

Balance

Jan. 1

Balance forward

Jan. 1

Journal Page 1

Jan. 1

Journal Page 1

1,000,000

1,500,000

Mar. 3

Journal Page 1

65,400

1,434,600

Apr. 11

Journal Page 2

30,000

1,404,600

May 1

Journal Page 2

24,000

1,380,600

June 6

Journal Page 2

June 9

Journal Page 2

130,600

1,460,000

June 15

Journal Page 2

30,200

1,429,800

June 20

Journal Page 3

12,500

1,417,300

June 30

Journal Page 3

200,000

1,217,300

Sept. 3

Journal Page 3

Sept. 25

Journal Page 4

61,200

1,871,100

Oct. 20

Journal Page 4

8,100

1,863,000

Nov. 3

Journal Page 4

125,900

1,737,100

Dec. 15

Journal Page 4

Dec. 31

Journal Page 4

2,500,000

2,500,000

210,000

1,590,600

715,000

1,932,300

100,000

1,837,100
25,000

1,812,100

Name:
Date:

I-04.05(b,d,g)

Section:

ACCOUNTS RECEIVABLE
Date

Description

Jan. 1

Balance forward

Apr. 1

Journal Page 1

June 6

Journal Page 2

Aug. 1

Journal Page 3

Sept. 3

Journal Page 3

Debit

Credit
-

Balance
-

230,000

230,000

210,000
812,000

20,000
832,000

715,000

117,000

SUPPLIES
Date

Description

Debit

Credit
-

Balance

Jan. 1

Balance forward

Feb. 7

Jounrnal Page 1

40,000

40,000

Sept. 16

Jounrnal Page 3

25,000

65,000

PREPAID INSURANCE
Date

Description

Jan. 1

Balance forward

May 1

Journal Page 2

Debit

Credit
-

24,000

Balance
-

24,000

Name:
Date:

I-04.05(b,d,g)

Section:

EQUIPMENT
Date

Description

Jan. 1

Balance forward

Jan. 1

Journal Page 1

Debit

Credit
-

Balance
-

400,000

400,000

ACCUMULATED DEPRECIATION
Date
Jan. 1

Description

Debit

Balance forward

Credit
-

Balance
-

ACCOUNTS PAYABLE
Date

Description

Jan. 1

Balance forward

Feb. 7

Journal Page 1

Apr. 11

Journal Page 2

Sept. 16

Journal Page 3

Debit

Credit
-

Balance
-

400,000

400,000

30,000

370,000
25,000

395,000

INTEREST PAYABLE
Date
Jan. 1

Description
Balance forward

Debit

Credit
-

Balance
-

Name:
Date:

I-04.05(b,d,g)

Section:

UNEARNED REVENUE
Date

Description

Jan. 1

Balance forward

Dec. 15

Journal Page 4

Debit

Credit
-

Balance
-

100,000

100,000

NOTES PAYABLE
Date

Description

Jan. 1

Balance forward

Jan. 1

Journal Page 1

June 30

Journal Page 3

Debit

Credit
-

Balance
-

3,000,000

3,000,000

80,000

2,920,000

CAPITAL STOCK
Date

Description

Jan. 1

Balance forward

Jan. 1

Journal Page 1

Debit

Credit
-

Balance
-

2,500,000

2,500,000

Credit

Balance

RETAINED EARNINGS
Date
Jan. 1

Description
Balance forward

Debit
-

Name:
Date:

I-04.05(b,d,g)

Section:

DIVIDENDS
Date
Dec. 31

Description
Journal Page 4

Debit

Credit

25,000

Balance
25,000

REVENUES
Date

Description

Debit

Credit

Balance

Apr. 1

Journal Page 1

230,000

230,000

Aug. 1

Journal Page 3

812,000

1,042,000

WAGE EXPENSE
Date

Description

Debit

Credit

Balance

Mar. 3

Journal Page 1

65,400

65,400

June 9

Journal Page 2

130,600

196,000

Nov. 3

Journal Page 4

125,900

321,900

FUEL EXPENSE

Name:
Date:

I-04.05(b,d,g)

Section:

Date

Description

Debit

Credit

Balance

June 15

Journal Page 2

30,200

30,200

Sept. 25

Journal Page 4

61,200

91,400

LODGING EXPENSE
Date

Description

Debit

Credit

Balance

June 20

Journal Page 3

12,500

12,500

Oct. 20

Journal Page 4

8,100

20,600

INSURANCE EXPENSE
Date

Description

Debit

Credit

Balance

Debit

Credit

Balance

Debit

Credit

Balance

SUPPLIES EXPENSE
Date

Description

INTEREST EXPENSE
Date
June 30

Description
Journal Page 3

120,000

120,000

Name:
Date:

I-04.05(b,d,g)

Section:

DEPRECIATION EXPENSE
Date

Description

Debit

Credit

Balance

Description

Debit

Credit

Balance

INCOME SUMMARY
Date

Name:
Date:

I-04.05(c)

Section:

FERNANDEZ CORPORATION
Trial Balance
December 31, 20X7
Debits
Cash

Accounts Receivable

Credits

1,812,100
117,000

Prepaid Insurance

24,000

Equipment

4,000,000

Accounts Payable

395,000

Unearned Revenue

100,000

Notes Payable

2,920,000

Capital Stock

2,500,000

Dividends

25,000

Revenues

1,042,000

Wage Expense

321,900

Fuel Expense

91,400

Lodging Expense

20,600

Interest Expense

120,000
$

6,532,000

6,957,000

Name:
Date:

I-04.05(d)

Section:

GENERAL JOURNAL
Date

Page 5
Accounts

Debit

Credit

Name:
Date:

I-04.05(e)

Section:

FERNANDEZ CORPORATION
Adjusted Trial Balance
December 31, 20X7
Debits

Credits

Name:
Date:

I-04.05(f)

Section:

FERNANDEZ CORPORATION
Income Statement
For the Year Ending December 31, 20X7
Revenues
$

Expenses
$

Net income

FERNANDEZ CORPORATION
Statement of Retained Earnings
For the Year Ending December 31, 20X7
Beginning retained earnings
Plus: Net income

Less: Dividends
Ending retained earnings

Name:
Date:

I-04.05(f)

Section:

FERNANDEZ CORPORATION
Balance Sheet
December 31, 20X7
Assets
Current assets
$

Property, plant & equipment

$

Total assets

Liabilities
Current liabilities
$

Long-term liabilities
Total liabilities

Stockholders' equity
$

Total stockholders' equity

Total liabilities and equity

Name:
Date:

I-04.05(g)

Section:

GENERAL JOURNAL
Date

Page 6
Accounts

Debit

Credit

Name:
Date:

I-04.05(h)

Section:

FERNANDEZ CORPORATION
Post-Closing Trial Balance
December 31, 20X7
Debits

Credits