Complete accounting cycle

For the past several years, Jeff Horton has operated a part-time consulting business from his home. As of April 1, 2016, Jeff decided to move to rented quarters and to operate   the business, which was to be known as Rosebud Consulting, on a full-time basis. Rosebud Consulting entered into the following transactions during   April:

Apr. 1. The following assets were received from Jeff Horton in exchange for common stock: cash, $20,000; accounts receivable, $14,700; supplies, $3,300; and office equipment, $12,000. There were no liabilities  received.

1.     Paid three months’ rent on a lease rental contract, $6,000.

2.     Paid the premiums on property and casualty insurance policies, $4,200.

4.     Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $9,400.

5.     Purchased additional office equipment on account from Smith Office Supply Co.,

$8,000.

6.     Received cash from clients on account, $11,700.

10.  Paid cash for a newspaper advertisement,  $350.

12.  Paid Smith Office Supply Co. for part of the debt incurred on April 5, $6,400.

12.  Recorded services provided on account for the period April 1–12, $21,900.

14.  Paid receptionist for two weeks’ salary,  $1,650.

Record the following transactions on Page 2 of the    journal:

17.     Recorded cash from cash clients for fees earned during the period April 1–16,

$6,600.

18.     Paid cash for supplies, $725.

20.  Recorded services provided on account for the period April 13–20, $16,800.

24.  Recorded cash from cash clients for fees earned for the period April 17–24,

$4,450.

26.     Received cash from clients on account, $26,500.

27.     Paid receptionist for two weeks’ salary, $1,650.

29.     Paid telephone bill for April, $540.

30.     Paid electricity bill for April, $760.

30. Recorded cash from cash clients for fees earned for the period April 25–30, $5,160.

30.  Recorded services provided on account for the remainder of April, $2,590.

30.   Paid dividends, $18,000.

Instructions

1.     Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.)

 

11	Cash	31	Common Stock
12	Accounts Receivable	32	Retained Earnings
14	Supplies	33	Dividends
15	Prepaid Rent	41	Fees Earned
16	Prepaid Insurance	51	Salary Expense
18	Office Equipment	52	Supplies Expense
19	Accumulated  Depreciation	53	Rent Expense
21	Accounts Payable	54	Depreciation  Expense
22	Salaries Payable	55	Insurance Expense
23	Unearned Fees	59	Miscellaneous Expense

2.     Post the journal to a ledger of four-column accounts.

3.     Prepare an unadjusted trial balance.

4.     At the end of April, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6).

a.    Insurance expired during April is $350.

b.   Supplies on hand on April 30 are $1,225.

c.    Depreciation of office equipment for April is $400.

d.   Accrued receptionist salary on April 30 is $275.

e.    Rent expired during April is $2,000.

f.    Unearned fees on April 30 are $2,350.

5.     (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet.

6.     Journalize and post the adjusting entries. Record the adjusting entries on Page 3 of the journal.

7.     Prepare an adjusted trial balance.

8.     Prepare an income statement, a retained earnings statement, and a balance sheet.

9.     Prepare and post the closing entries. Record the closing entries on Page 4 of the journal. (Income Summary is account #34 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry.

10.     Prepare a post-closing trial balance.

The unadjusted trial balance of PS Music as of July 31, 2016, along with the adjustment data for the two months ended July 31, 2016, are shown in Chapter 3. Based upon the adjustment data, the following adjusted trial balance was prepared:

 

 

 

PS Music Adjusted Trial Balance

July 31, 2016

Debit Balances

Credit Balances

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              9,945

Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                    4,150

Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   275

Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   2,475

Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   7,500

Accumulated Depreciation—Office Equipment . . . . . . . . . . . . . . . . . . . . . .                                                                                50

Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                        8,350

Wages Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                          140

Unearned Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                         3,600

Common Stock  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                        9,000

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                1,750

Fees Earned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                   21,200

Music Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 3,610

Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 2,940

Office Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   2,550

Advertising Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                    1,500

Equipment Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                      1,375

Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   1,215

Supplies Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                        925

Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                        225

Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                             50

Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 1,855                                         

42,340                        42,340

                                         

Instructions

1.     (Optional) Using the data from Chapter 3, prepare an end-of-period spreadsheet.

2.     Prepare an income statement, a retained earnings statement, and a balance sheet.

3.     Journalize and post the closing entries. The retained earnings account is #33 and the income summary account is #34 in the ledger of PS Music. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry.

4.     Prepare a post-closing trial balance.