Question

1. Sanchez Computer Center, continued.
At the end of September, Tony took a complete inventory of his supplies and found the following:
 5 dozen ¼" screws at a cost of $8.00 a dozen  2 dozen ½" screws at a cost of $5.00 a dozen  2 cartons of computer inventory paper at a cost of $14 a carton  3 feet of coaxial cable at a cost of $4.00 per foot
After speaking to his accountant, he found that a reasonable depreciation amount for each of his longterm assets is as follows:
 Computer purchased July 5, 201X Depreciation $33 a month  Office equipment purchased July 17, 201X Depreciation $10 a month  Computer workstations purchased Sept. 17, 201X Depreciation $20 a month
Tony uses the straight-line method of depreciation and declares no salvage value for any of the assets. If any long-term asset is purchased in the first 15 days of the month, he will charge depreciation for the full month. If an asset is purchased on the 16th of the month, or later, he will not charge depreciation in the month it was purchased.
August and September’s rent has now expired.
Tasks
Use your trial balance from the completed problem previously and the adjusting information given here to complete the worksheet for the three months ended September 30, 201X. From the worksheets, prepare the financial statements.
Tony decided to end the Sanchez Computer Center’s first year as of September 30, 201X. Following is an updated chart of accounts.
Chart of Accounts
Assets Revenue
1000 Cash 4000 Service Revenue
1020 Accounts Receivable Expenses
1025 Prepaid Rent 5010 Advertising Expense
1030 Supplies 5020 Rent Expense
1080 Computer Shop Equipment 5030 Utilities Expense
1081 Accum. Depr. C. S. Equip. 5040 Phone Expense
1090 Office Equipment 5050 Supplies Expense
1091 Accum. Depr. Office Equip. 5060 Insurance Expense
Liabilities 5070 Postage Expense
2000 Accounts Payable 5080 Depr. Exp. C. S. Equip.
Owner’s Equity 5090 Depr. Exp. Office Equip.
3000 T. Freedman, Capital
3010 T. Freedman, Withdrawals   
3020 Income Summary
  
Complete the following:
a. Journalize the adjusting entries.
b. Post the adjusting entries to the ledger.
c. Journalize the closing entries.
d. Post the closing entries to the ledger.
e. Prepare a post-closing trial balance.
  
2. As the bookkeeper of Parker’s Plowing, you have been asked to complete the entire accounting cycle for Parker from the following information.
201X
Jan. 1 Parker invested $14,000 cash and $9,000 worth of snow equipment into the plowing company.
Jan. 1 Paid rent for five months in advance for garage space, $3,500.
Jan. 4 Purchased office equipment on account from Liliis Corp., $12,600.
Jan. 6 Purchased snow supplies for $500 cash.
Jan. 8 Collected $15,000 from plowing local shopping centers.
Jan. 12 Parker Muroney withdrew $5,000 from the business for his own personal use.
Jan. 20 Plowed Holiday Co. parking lots, payment not to be received until March, $7,000.
Jan. 26 Paid salaries to employees, $1,400.
Jan. 28 Paid Liliis Corp. one-half amount owed for office equipment.
Jan. 29 Advertising bill received from Carter Co. but will not be paid until March, $600.
Jan. 30 Paid telephone bill, $200.
Use the following chart of accounts.
Chart of Accounts
Assets Owner Equity
111 Cash 311 Parker Muroney, Capital
112 Accounts Receivable 312 Parker Muroney, Withdrawals
114 Prepaid Rent 313 Income Summary
115 Snow Supplies Revenue
121 Office Equipment 411 Plowing Fees
122 Accumulated Depreciation, Office Equipment Expenses
123 Snow Equipment 511 Salary Expense
124 Accumulated Depreciation, Snow Equipment 512 Advertising Expense
Liabilities 513 Telephone Expense
211 Accounts Payable 514 Rent Expense
212 Salaries Payable 515 Snow Supplies Expense
516 Depreciation Expense, Office Equipment
517 Depreciation Expense, Snow Equipment

From the following transactions as well as additional data, please complete the entire accounting cycle for Parker’s Plowing (use the chart of accounts above) for 201X.
Jan. 1 Parker invested $10,000 cash and $12,000 worth of snow equipment into the plowing company.
Jan. 1 Paid rent for six months in advance for garage space, $6,000.
Jan. 4 Purchased office equipment on account from Lumen Corp., $12,600.
Jan. 6 Purchased snow supplies for $800 cash.
Jan. 8 Collected $14,000 from plowing local shopping centers.
Jan. 12 Parker Muroney withdrew $4,000 from the business for his own personal use.
Jan. 20 Plowed Alton Co. parking lots, payment not to be received until May, $1,500.
Jan. 26 Paid salaries to employees, $1,900.
Jan. 28 Paid Lumen Corp. one-half amount owed for office equipment.
Jan. 29 Advertising bill received from Washington Co. but will not be paid until May, $700.
Jan. 30 Paid telephone bill, $130.
Adjustment Data
a. Snow supplies on hand, $700.
b. Rent expired, $1,000.
c. Depreciation on office equipment, $210: ($12,600/5 yr = $2,520/12 mo. = $210).
d. Depreciation on snow equipment, $200: ($12,000/5 yr = $2,400/12 mo. = $200).
e. Accrued salaries, $380.
  
3. Todd Silver is the purchasing agent for Moore Co. One of his suppliers, Gem Co., offers Todd a free vacation to France if he buys at least 75% of Moore’s supplies from Gem Co. Todd, who is angry because Moore Co. has not given him a raise in over a year, is considering the offer. Write your recommendation to Todd.
4. Using the trial balance in Figure 18, and adjustment data of Kyler’s Moving Co., prepare
a. A worksheet for the month of January.
b. An income statement for January, a statement of owner’s equity for January, and a balance sheet as of January 31, 201X.
Adjustment Data to Update Trial Balance
a. Insurance expired, $450.
b. Moving supplies on hand, $400.
c. Depreciation on moving truck, $350.
d. Wages earned but unpaid, $180.
  
Kyler’s Moving Co.
Trial Balance
January 31, 201X
Debits Credits
A. Cash 11,000.00
B. Prepaid Insurance 1,800.00
C. Moving Supplies 1,000.00
D. Moving Truck 16,000.00
E. Accumulated Depreciation, Moving Truck 5,500.00
F. Accounts Payable 2,700.00
G. K. Hilton, Capital 19,228.00
H. K. Hilton, Withdrawal 1,300.00
I. Revenue from Moving 8,300.00
J. Wages Expense 3,150.00
K. Rent Expense 775.00
L. Advertising Expense 703.00
Totals 35,728.00 35,728.00

Answer 1

Kyler's Moving Co. Adjusting Enteries Debit in $ Credit in $ Trans. Particulars Insurance Expense a/c 450 Dr. a. To Prepaid Insurance 450 (Insurance expensed) Supplies Expense a/c To Supplies |(Supplies expensed) 1000 - 400 = 600 b. Dr. 600 600 Depreciation Expense a/c Dr. 350 C. To Accum. Depre - Moving Truck 350 (To record depreciation) d. Wages Expense a/c Dr. 180 To Wages Payable 180 (Wages accrued) Statement of Income For the period ending 31.1.201X Revenue from Moving 8300 Less: 3330 Wages Expense Rent Expense 775 Advertising Expense 703 Insurance Expense 450 Supplies Expense 600 6208 Depreciation Expense 350 Net Income 2092 Statement of Owner's Equity For the period ending 31.1.201XX K. Hilton, Capital 19228 Net Income 2092 21320 K. Hilton, Withdrawal -1300 20020

Worksheet For the period ending 31.1.201X Adjustments Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Unadjusted Adjusted Particulars Cash 11000 11000 Prepaid Insurance 1800 450 1350 Moving Supplies 1000 600 400 Moving Truck Accum. Depre - Moving Truck 16000 16000 5500 350 5850 Accounts Payable 2700 2700 Wages Payable 180 180 Hilton, Capital 19228 19228 K. Hilton, Withdrawal 1300 1300 Revenue from Moving 8300 8300 180 Wages Expense 3150 3330 Rent Expense 775 775 Advertising Expense 703 703 450 Insurance Expense 450 Supplies Expense 600 600 Depreciation Expense 350 350 Totals 35728 36258 35728 1580 1580 36258

Balance sheet As at 31.1.201X Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Current Assets Current Liabilities Accounts Payable Cash 11000 2700 Prepaid Insurance 1350 Wages Payable 180 2880 Moving Supplies 400 12750 Non Current Assets Moving Truck Owner's Equity 16000 10150 K. Hilton, Capital 20020 Accum. Depre - Moving Truck -5850 22900 Total Liabilities & Equity Total Assets 22900

Parker's Plowing Journal Enteries Debit in $ Credit in $ Particulars Date Cash a/c 10000 1.1.201X Dr. Snow Equipment a/c To Parker Muroney, Capital Dr. 12000 22000 (Capital Invested) Prepaid Rent a/c To Cash 1.1.201X Dr. 6000 6000 (6 months rent paid in advance) Office Equipment a/c 4.1.201X Dr. 12600 To Accounts Payable 12600 (Office Equipment purchased) Snow Supplies a/c 6.1.201X Dr. 800 To Cash 800 (Snow supplies purchased in cash) 8.1.201X Cash a/c Dr. 14000 To Plowing Fees 14000 (Revenue from plowing) 12.1.201x Parker Muroney, Withdrawals a/c Dr. 4000 To Cash 4000 (Personal drawings) 20.1.201X Accounts Receivable a/c Dr. 1500 To Plowing Fees (Revenue from plowing) 1500 26.1.201X Salary Expense a/c Dr. 1900 To Cash 1900 (Salaries paid) 28.1.201X Accounts Payable a/c Dr. 6300 To Cash 6300 (Creditors paid) 29.1.201X Advertising Expense a/c To Accounts Payable Dr. 700 700 (Advertising expense on account) 30.1.201X Telephone Expense a/c Dr. 130 To Cash 130 (Telephone Expense paid)

Adjusting Enteries Debit in $ Credit in $ Particulars Trans. Snow Supplies Expense a/c To Snow Supplies Dr. 100 a. 100 |(Supplies expensed) 800 - 700 = 100 Rent Expense a/c b. Dr. 1000 To Prepaid Rent 1000 |(Rent expensed) Depreciation Expense, Office Equipment a/c Dr. Accumulated Depreciation, Office Equipment 210 C. 10 Depreciation Expense, Snow Equipment a/c To Accumulated Depreciation, Snow Equipment d. Dr. 200 200 Salary Expense a/c Dr. 380 e. To Salary Payable 380 (Salary accrued)

Worksheet For the period ending 31.1.201X Adjustments Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Unadjusted Adjusted Particulars Cash 4870 4870 Accounts Receivable 1500 1500 1000 Prepaid Rent 6000 5000 Snow Supplies 700 800 100 Office Equipment 12600 12600 Accum. Depre.- Office Equip. Snow Equipment 210 210 12000 12000 Accum. Depre.- Snow Equip. 200 200 Accounts Payable 7000 7000 Salaries Payable 380 380 Parker Muroney, Capital Parker Muroney, Withdrawals Plowing Fees Salary Expense 22000 22000 4000 4000 15500 15500 380 2280 1900 Advertising Expense 700 700 Telephone Expense 130 130 Rent Expense 1000 1000 Snow Supplies Expense 100 100 Depreciation Expense, Off Equip. 210 210 200 Depreciation Expense, Snow Equip. 200 Totals 44500 44500 1890 1890 45290 45290 Statement of Income For the period ending 31.1.201X Plowing Fees 15500 Less: Salary Expense 2280 Advertising Expense 700 Telephone Expense 130 Rent Expense 1000 Snow Supplies Expense 100 Depreciation Expense, Off Equip. 210 Depreciation Expense, Snow Equip. 200 4620 Net Income 10880 Statement of Owner's Equity For the period ending 31.1.201X Parker Muroney, Capital 22000 Net Income 10880 32880 Parker Muroney, Withdrawals -4000 28880

Balance sheet As at 31.1.201X Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Cash Current Liabilities 4870 Accounts Payable Salaries Payable Accounts Receivable 1500 7000 Prepaid Rent 5000 380 7380 Snow Supplies 700 12070 Non Current Assets Office Equipment 12600 Accum. Depre.- Office Equip. -210 12390 w Equipment Owner's Equity 11800 Parker Muroney, Capital Sr 12000 Accum. Depre.- Snow Equip. -200 28880 36260 Total Liabilities & Equity Total Assets 36260