An Adjusted Trial Balance for a Sole Proprietorship Is Given

question 204

Multiple Choice

An adjusted trial balance for a sole proprietorship is given below.There were no new capital contributions during the year. $$\begin{array} { | l | r | r | } \hline & { \text { Debit } } & \text { Credit } \\\hline \text { Cash } & \$ 14,000 & \\\hline \text { Accounts Receivable } & 5,000 & \\\hline \text { Prepaid Rent } & 800 & \\\hline \text { Merchandise Inventory } & 26,000 & \\\hline \text { Accounts Payable } & & \$ 4,200 \\\hline \text { Salaries Payable } & & 1,500 \\\hline \text { Notes Payable } & & 600 \\\hline \text { Lorenzo, Capital } & &8,000 \\\hline \text { Lorenzo, Withdrawals } &1,000 & \\\hline \text { Sales Revenue } & & 98,500\\\hline \text { Cost of Goods Sold } & 23,000& \\\hline \text { Salaries Expense } & 19,000 & \\\hline \text { Rent Expense } & 15,000 & \\\hline \text { Selling Expense } & 8,400 & \\\hline \text { Supplies Expense } & \underline { 600 }\\\hline \text { Total } & \$ 112,800 & \$ 112,800 \\\hline\end{array}$$ What will be the final balance in the company's Lorenzo,Capital account after recording the closing
Entries?

• A) $39,500
• B) $40,500
• C) $31,000
• D) $7,000

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Definitions:

Partial Equity Method

An accounting technique used for investments, where only a portion of the investment's change in net assets is recorded.

Noncontrolling Interest

A stake in a company that is not large enough to exert control over its operations, often reflected in consolidated financial statements.

Equipment Undervalued

A situation where the book value of equipment is less than its current market value or replacement cost.

Acquisition Method

An accounting approach used for consolidating the financial statements of two companies when one acquires control of the other.