Service Business Accounting CycleWells’ Consulting ServicesThis project will give you an o...

Service Business Accounting Cycle

Wells’ Consulting Services

This project will give you an opportunity to apply your knowledge of accounting principles and procedures by handling all the accounting work of Wells’Consulting Services for the month of January 2017.

INTRODUCTION Assume that you are the chief accountant for Wells’ Consulting Services. During January, the business will use the same types of records and procedures that you learned about in Chapters 1 through 6. The chart of accounts for Wells’ Consulting Services has been expanded to include a few new accounts. Follow the instructions to complete the accounting records for the month of January.

INSTRUCTIONS

1. Open the general ledger accounts and enter the balances for January 1, 2017. Obtain the necessary figures from the postclosing trial balance prepared on December 31, 2016, which appears on page 166.

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2. Analyze each transaction and record it in the general journal. Use page 3 to begin January’s transactions.

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3. Post the transactions to the general ledger accounts.

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4. Prepare the Trial Balance section of the worksheet.

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5. Prepare the Adjustments section of the worksheet.

a. Compute and record the adjustment for supplies used during the month. An inventory taken on January 31 showed supplies of $4,200 on hand.

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b. Compute and record the adjustment for expired insurance for the month.

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c. Record the adjustment for one month of expired rent of $4,000.

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d. Record the adjustment for depreciation of $183 on the old equipment for the month. The first adjustment for depreciation for the new equipment will be recorded in February.

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6. Complete the worksheet.

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7. Prepare an income statement for the month.

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8. Prepare a statement of owner’s equity.

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9. Prepare a balance sheet using the report form.

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10. Journalize and post the adjusting entries.

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11. Journalize and post the closing entries.

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12. Prepare a postclosing trial balance.

Analyze: Compare the January 31 balance sheet you prepared with the December 31 balance sheet shown on page 167.

a. What changes occurred in total assets, liabilities, and the owner’s ending capital?

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b. What changes occurred in Cash and Accounts Receivable accounts?

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c. Has there been an improvement in the firm’s financial position? Why or why not?