William Gail opened his automobile cleaning service G-Force Auto Detailing, specializing in interior cleaning of automobiles. The end-of-year unadjusted trial balance contained the following accounts at June 30, 2020. G-Force Auto Detailing Trial Balance as at June 30, 2020 Dr $ Cr $ Cash 157,000 Accounts Receivable 74,000 Office Supplies 24,000 Prepaid Insurance 48,000 Prepaid Rent 54,000 Furniture & Fixtures

William Gail opened his automobile cleaning service “G-Force Auto Detailing”, specializing in interior cleaning of automobiles. The end-of-year unadjusted trial balance contained the following accounts at June 30, 2020. G-Force Auto Detailing Trial Balance as at June 30, 2020 Dr $ Cr $ Cash 157,000 Accounts Receivable 74,000 Office Supplies 24,000 Prepaid Insurance 48,000 Prepaid Rent 54,000 Furniture & Fixtures 600,000 Accumulated Depreciation: Furniture & Fixtures 195,000 Cleaning Equipment 312,000 Accumulated Depreciation: Cleaning Equipment Accounts Payable 85,000 Wages Payable Interest Payable 18,000 Unearned Service Fees 49,000 Long-Term Loan 300,000 William Gail, Capital 375,000 William Gail, Withdrawals 28,000 Service Fees Earned 565,000 Rent Expense 81,000 Wages Expense 145,000 Telephone Expense 15,000 Office Supplies Expense Insurance Expense Depreciation Expense – Furniture & Fixtures Depreciation Expense – Cleaning Equipment Utilities Expense 31,000 Interest Expense 18,000 _ _____ Total 1,587,000 1,587,000 Additional data at June 30, 2020:

 a) An inventory count shows that office supplies costing $10,000 are on hand at June 30, 2020. 

b) Rent was paid on April 1, 2020 for the 6-months to September 30, 2020 

c) A premium of $48,000 for a one-year insurance policy was paid on April 30, 2020 

d) The Furniture & Fixtures is being depreciated over 8 years on the straight-line method of depreciation, down to a residue of $80,000. 

e) The cleaning equipment was acquired on February 1, 2020 and is being depreciated over 4 years on the fixed instalment method of depreciation, down to a residue of $81,600. 

f) Accrued but unrecorded and uncollected service fees earned total $19,000. 

g) The long-term loan bears interest of 8% per annum. The unadjusted Interest Expense account equals to the amount accrued for the first three quarters of the 2020 fiscal year. The accrued interest for the last quarter has not yet been paid nor recorded. 

h) At June 30, 2020, $28,000 of the previously unearned service fees had been earned. 

i) Wages earned by employees but not paid amounted to $7,000 at June 30, 2020. 

Additional Data: $60,000 of the Long-Term Loan is due for payment on October 1, 2020.

Required:

i) Prepare the necessary year-end adjusting journal entries for G-Force Auto Detailing on June 30, 2020. [Narrations are not required] 

ii) Use the adjusting entries in (i) above to complete the adjustments and adjusted trial balance columns in the Partial Work Sheet provided, (identifying each adjustment by letter).  

iii) From the adjusted trial balance prepared in part (ii) above, prepare an income statement and a statement of owner’s equity for the year ended June 30, 2020 and a classified balance sheet as at that date. [List expenses in decreasing order of their amount, starting with the largest] 

iv) Compute G-Force Auto Detailing current ratio, debt ratio, net income percentage and return on owner’s equity at June 30, 2020. 

Expert Answer

(i) Before beginning adjusting entry examples for Printing Plus, lets consider some rules governing adjusting entries: Every adjusting entry will have at least one income statement account and one bal View the full answer