Question

Must be done in Microsoft word!!

The goal of this graded project is to create the following financial statements for J & L Accounting, Inc.: n

Balance sheet

Income statement

Statement of retained earnings

Post-closing trial balance

The following financial statements are provided from the prior accounting period for J & L Accounting, Inc.: a) Post-closing trial balance b) Balance sheet c) Income statement d) Statement of retained earnings

J & L Accounting, Inc. Post-Closing Trial Balance December 31, 2014 BALANCE ACCOUNT TITLE DEBIT CREDIT Cash, Business Checking $20,500.00 Accounts Receivable Prepaid Rent Vehicles 48,000.00 Accumulated Depreciation, Vehicles $12,000.00 Equipment 3,600.00 Accumulated Depreciation, Equipment 600.00 Accounts Payable Common Stock 38,000.00 Retained Earnings 21,500.00 Dividends Service Revenue Advertising Expense Rent Expense Office Supplies Expense Telephone Expense Utilities Expense Depreciation Expense TOTALS $72,100.00 $72,100

J & L Accounting, Inc. Balance Sheet As of December 31, 2014 ASSETS Cash, Business Checking $20,500.00 Accounts Receivable 0.00 Prepaid Rent 0.00 Vehicles $48,000.00 Less: Accumulated Depreciation, Vehicles 12,000.00 36,000.00 Equipment 3,600.00 Less: Accumulated Depreciation, Equipment 600.00 3,000.00 TOTAL ASSETS $59,500.00 LIABILITIES Accounts Payable $0.00 TOTAL LIABILITIES $0.00 STOCKHOLDERS’ EQUITY Common Stock $38,000.00 Retained Earnings 21,500.00 TOTAL STOCKHOLDERS’ EQUITY $59,500.00 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $59,500.00

J & L Accounting, Inc. Income Statement For the Month Ending December 31, 2014 REVENUES Service Revenue $10,275.00 EXPENSES Advertising Expense $2,300.00 Rent Expense 1,000.00 Office Supplies Expense 300.00 Telephone Expense 750.00 Utilities Expense 3,200.00 Depreciation Expense 1,100.00 TOTAL EXPENSES 8,650.00 NET INCOME $1,625.00

J & L Accounting, Inc. Statement of Retained Earnings For the Month Ending December 31, 2014 Retained Earnings, December 1, 2014 $19,875.00 Add: Net Income 1,625.00 Subtotal 21,500.00 Less: Dividends 0.00 Retained Earnings, December 31, 2014 $21,500.00

Journalize the following transactions in the general journal using the following blank form (make as many copies as needed). When making journal entries, each individual journal entry’s debits should equal its credits. (The amount for a journal entry can be incorrect or the entry can be incorrect. However, the debits still have to equal the credits even though the entry is incorrect. If the journal entry is incorrect, it can be corrected later when making adjusting/correcting journal entries. For example, if the amount is supposed to be $1,100, and for some reason the amount of $1,010 is recorded, this is acceptable—although incorrect, it can be corrected later.)

The total of the debits must always equal the total of the credits for each journal entry—always. This is a fundamental GAAP that cannot be violated.

a. On January 1, 2015, a payment in cash for $12,000 is made for prepaying rent for the entire year 2015.

b. On January 4, 2015, accounting services are performed and payment is received in cash for the amount of $1,900.

c. On January 9, 2015, a payment in cash for advertising is made in the amount of $850.

d. On January 10, 2015, office supplies are purchased in the amount of $75 with cash.

e. On January 14, 2015, accounting services are performed and payment is received in cash for the amount of $2,725.

f. On January 20, 2015, the telephone bill for the amount of $660 is received and paid with cash.

g. On January 20, 2015, the utilities bill for $2,925 is received. The bill won’t be paid until it is due on February 15, 2015.

h. On January 27, 2015, accounting services are performed on account in the amount of $3,750.

i. On January 28, 2015, a payment in cash for $1,500 is made for a bill from an advertising agency

3) Post the general journal entries from the journal to the corresponding general ledger accounts, paying particular attention to the posting being made (debit or credit). Use the Post Ref. column to ensure that each line item of the journal entries is posted correctly to each general ledger account. Posting from the journal to the general ledger is nothing more than rearranging the information. If the debits equal the credits for a particular journal entry and the information is posted correctly, the total of the debits should equal the total of the credits in the general ledger.

4) Calculate the balances in the general ledger accounts.

Often, debits won’t equal credits on the trial balance because a hand-held calculator is used and the math is done only once. Using a hand-held calculator can introduce errors.

To calculate the balances in the ledger accounts, you’ll need to do the following: 1) Add the debits. 2) Add the credits. 3) Subtract the larger amount from the other, or, alternatively, keep the running balance of the amount in the account and whether it’s a debit or credit on the ledger. 5) Create an unadjusted trial balance from the balances in the general ledger accounts. (Once again, be very careful when doing the math. When calculating the totals of the debit and credit columns, they should be equal. If not, do not continue until the debits equal the credits. An error has been made and must be found and corrected from the previous steps.) See page 129 of the text for an example of an unadjusted trial balance. Use the following blank form.

6) Journalize the following adjusting journal entries in the general journal, being sure that the debits equal the credits:

a. Calculate and make the adjustment for the amount of pre-paid rent that has been used.

b. Make an adjusting journal entry in the amount of $1,000 for depreciation of the vehicles.

c. Make an adjusting journal entry in the amount of $100 for depreciation of the equipment.

7) Post the adjusting journal entries to the respective general ledger accounts, again being sure that the postings are to the correct debit or credit side and that the Post Ref. column is used.

8) Calculate the new balances in the general ledger accounts. Create an adjusted trial balance from the balances in the general ledger accounts.

9) Create the income statement for J & L Accounting, Inc. using the information from the adjusted trial balance. Use the following blank form to create the income statement. Its format should be the same as the format used for the statement provided at the beginning of the project for the prior accounting period.

10) Create the closing journal entries in the general journal to close the revenue, expense, and dividend accounts to the retained earnings account, paying attention to debits equaling credits.

11) Post the closing journal entries to the respective general ledger accounts.

12) Calculate the balances in the general ledger accounts.

13) Create a post-closing trial balance from the balances in the general ledger accounts using the same blank form that was provided in step 5 when you created the unadjusted trial balance. The post-closing trial balance should be in the same format as the post-closing trial balance provided at the beginning of the project for the prior accounting period. Make sure the math is correct and that the debit column is equal to the credit column. If not, don’t continue until the error has been found.

14) Create the balance sheet for J & L Accounting, Inc. using the information from the post-closing trial balance. If the debits equal the credits from the previous work and the closing entries were made properly, then the accounting equation should balance on the balance sheet. If the assets don’t equal the liabilities plus stockholders’ equity, an error has been made that needs to be corrected. The balance of the accounting equation is another fundamental GAAP principle that can’t be violated. Use the following form to create the balance sheet. Its format should be the same as the format of the statement provided at the beginning of the project for the prior accounting period.

Create the statement of retained earnings for J & L Accounting, Inc. using the ending balance from the statement of retained earnings from the prior period and the net income from the income statement for the January accounting period. (No dividends were paid out during the month of January.)

Answer 1

Debit Credit Date Account title & explanation 2015 1-Jan Prepaid Rent Cash, Business Checking (To record rent paid in advance) 12,000 12,000 1,900 4-Jan Cash, Business Checking Service Revenue (To record services performed) 1,900 13 14 15 850 9-Jan Advertising expense Cash, Business Checking (To record advertising expense) 850 16 17 18 19 10-Jan Supplies Expense Cash, Business Checking (To record purchase of Office Supplies) 75 20 2,725 14-Jan Cash, Business Checking Service Revenue (To record services performed) 2,725 660 27 20-Jan Telephone expense Cash, Business Checking (To record telephone expense) 660

30 2,925 31 20-Jan Utilities expense Accounts Payable (To record utility Bill) 2,925 32 3,750 27-Jan Accounts Receivable Service Revenue (To record services performed) 3,750 37 1,500 38 39 28-Jan Advertising expense Cash, Business Checking (To record advertising expense) 1,500

3 3) Post the general journal entries from the journal to the corresponding general ledger accounts, paying particular attention to the posti 4 4) Calculate the balances in the general ledger accounts. 5 7) Post the adjusting journal entries to the respective general ledger accounts 6 11) Post the closing journal entries to the respective general ledger accounts. 7 8 9 Cash, Business Checking 10 Date Account Post Ref. Debit ($) Credit ($) Balance 11 Beg. Balance 20500 1-Jan Prepaid Rent 12000 8500 4-Jan Service Revenue 1900 10400 9-Jan Advertising expense 850 9550 10-Jan Office Supplies 75 9475 14-Jan Service Revenue 2725 12200 20-Jan Telephone Expense 660 11540 28-Jan Advertising expense 1500 10040 12 13 Post Ref. Debit ($) Credit ($) Balance 20 Accounts Receivable 21 Date Account 22 Beg. Balance 27-Jan Service Revenue 24 23 3750 3750

Post Ref. Debit ($) Credit ($) Balance 26 Prepaid Rent 27 Date Account 28 Beg. Balance 29 1-Jan Prepaid Rent 30 Adj. Rent expense 12000 12000 11000 1000 31 Account Post Ref. Debit ($) Credit ($) 32 33 Vehicles 34 Date 35 Beg. Balance 36 37 Balance 48000 38 Post Ref. Debit ($) Credit ($) Balance 12000 13000 1000 39 Accumulated Depreciation, Vehicles 40 Date Account 41 Beg. Balance 42 Adj. Depreciation expense 43 44 45 Equipment 46 Date Account 47 Beg. Balance 48 Post Ref. Debit ($) Credit ($) Balance 3600

Post Ref. Debit ($) Credit ($) 51 Accumulated Depreciation, Equipment 52 Date Account 53 Beg. Balance 54 Adj. Depreciation expense 600 700 100 Post Ref. Debit ($) Credit ($) 57 Accounts Payable Date Account 59 Beg. Balance 60 20-Jan Utilities expense Balance 0 2925 2925 61 62 Account Post Ref. Debit ($) Credit ($) 63 Common Stock Date 65 Beg. Balance 66 Balance 38000 67 Post Ref. Debit ($) Credit ($) 69 Retained Earnings 70 Date Account 71 Beg. Balance 72 Clos. Income Summary 73 Clos. Income Summary 74 Clos. Dividend 8375 Balance 21500 29875 21765 21765 8110

77 Account Post Ref. Debit ($) | Credit ($) | Balance 76 Dividends Date 78 Beg. Balance 79 Clos. Retained Earnings CO SE Post Ref. Debit ($) Credit ($) Balance 83 Service Revenue 84 Date Account 85 Beg. Balance 4-Jan Cash, Business Checking 14-Jan Cash, Business Checking 27-Jan Accounts Receivable 89 Clos. Income Summary 1900 2725 3750 1900 4625 8375 8375 90 Post Ref. Debit ($) Credit ($) Balance 91 Advertising Expense 92 Date Account 93 Beg. Balance 9-Jan Cash, Business Checking 28-Jan Cash, Business Checking 96 Clos. Income Summary 94 850 95 850 2350 1500 2350 97

Post Ref. Debit ($) Credit ($) Balance 1000 1000 10000 Post Ref. / Debit ($) | Credit ($) Balance 98 Rent Expense 99 Date Account 100 Beg. Balance 101 Adj. Prepaid Rent 102 Clos. Income Summary 103 104 Office Supplies Expense 105 Date Account 106 Beg. Balance 107 10-Jan Cash, Business Checking 108 Clos. Income Summary 109 110 Telephone Expense 111 Date Account 112 Beg. Balance 113 20-Jan Cash, Business Checking 114 Clos. Income Summary 75 75 0 Post Ref. Debit ($) | Credit ($) Balance 660 660 660 115 Post Ref. Debit ($) 1 Credit ($) Balance 116 117 Utilities Expense 118_ Date Account 119 Beg. Balance 120 20-Jan Accounts Payable 121 Clos. Income Summary 122 2925 2925 2925

Debit ($) Credit ($) Balance 124 Depreciation Expense 125 Date Account Post Ref. 126 Beg. Balance 127 Adj. Accumulated Depreciation - Vehicle 128 Adj. Accumulated Depreciation - Equipment 129 Clos. Income Summary ated Depreciation -vehicleent - 1000 100 1000 1100 1100

2 5) Create an unadjusted trial balance from the balances in the general ledger accounts. 12000 J & L Accounting, Inc. Unadjusted Trial Balance For the month ending January 31, 2015 Account title Debit Credit Cash, Business Checking 10040 Accounts Receivable 3750 Prepaid Rent 12000 Vehicles 48000 Accumulated Depreciation, Vehicles Equipment 3600 Accumulated Depreciation, Equipment Accounts Payable Common Stock Retained Earnings Dividends 0 Service Revenue Advertising Expense 2350 Rent Expense Office Supplies Expense Telephone Expense Utilities Expense 2925 Depreciation Expense Total 83400 600 2925 38000 21500 8375 75 660 83400