Problem 1 -
For the past several years, Steffy Lopez has operated a part-time consulting business from his home. As of July 1, 2018, Steffy decided to move to rented quarters and to operate the business, which was to be known as Diamond Consulting, on a full-time basis. Diamond Consulting entered into the following transactions during July:
Jul. 1 The following assets were received from Steffy Lopez in exchange for common stock: cash, $13,500; accounts receivable, $20,800; supplies, $3,200; and office equipment, $7,500. There were no liabilities received.
1 Paid two months' rent on a lease rental contract, $4,800.
2 Paid the premiums on property and casualty insurance policies, $4,500.
4 Received cash from clients as an advance payment for services to be provided, and recorded it as unearned fees, $5,500.
5 Purchased additional office equipment on account from Office Station Co., $6,500.
6 Received cash from clients on account, $15,300.
10 Paid cash for a newspaper advertisement, $400.
12 Paid Office Station Co. for part of the debt incurred on July 5, $5,200.
12 Recorded services provided on account for the period July 1-12, $13,300.
14 Paid receptionist for two weeks' salary, $1,750.
Record the following transactions on Page 2 of the journal:
Jul. 17 Recorded cash from cash clients for fees earned during the period July 1-17, $9,450.
18 Paid cash for supplies, $600.
20 Recorded services provided on account for the period July 13-20, $6,650.
24 Recorded cash from cash clients for fees earned for the period July 17-24, $4,000.
26 Received cash from clients on account, $12,000.
27 Paid receptionist for two weeks' salary, $1,750.
29 Paid telephone bill for July, $325.
31 Paid electricity bill for July, $675.
31 Recorded cash from cash clients for fees earned for the period July 25-31, $5,200.
31 Recorded services provided on account for the remainder of July, $3,000.
31 Paid dividends, $12,500.
Required:
1. Journalize each transaction in a two-column journal starting on Page 1, referring to the chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.)
2. Post the journal to a ledger of four-column accounts. Add the appropriate posting reference to the journal.
3. Prepare an unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete requirements (5) and (6).
A. Insurance expired during July is $375.
B. Supplies on hand on July 31 are $1,525.
C. Depreciation of office equipment for July is $750.
D. Accrued receptionist salary on July 31 is $175.
E. Rent expired during July is $2,400.
F. Unearned fees on July 31 are $2,750.
5. (Optional) On your own paper or spreadsheet, enter the unadjusted trial balance on an end-of-period work sheet and complete the work sheet.
6. A. Journalize the adjusting entries on page 3 of the journal. Adjusting entries are recorded on July 31. Refer to the Chart of Accounts for exact wording of account titles.
B. Post the adjusting entries, inserting balances in the accounts affected.
7. Prepare an adjusted trial balance.
8. A. Prepare an income statement for the month ended July 31, 2018. Be sure to complete the statement heading. If a net loss has been incurred, enter that amount as a negative number using a minus sign. Refer to the Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. You will not need to enter colons (:) on the income statement.
B. Prepare a retained earnings statement for the month ended July 31, 2018. Be sure to complete the statement heading. Negative amount should be indicated by the minus sign. Refer to the Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. If an amount is zero, enter "0".
C. Prepare a balance sheet as of July 31, 2018. Be sure to complete the statement heading. Fixed assets must be entered in order according to account number. Refer to the Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. You will not need to enter colons (:) or the word "Less" on the balance sheet; they will automatically insert where necessary. Negative amount should be indicated by the minus sign.
9. A. Journalize the closing entries on page 4 of the journal. Refer to the Chart of Accounts for exact wording of account titles.
B. Post the closing entries, inserting balances in the accounts affected. Leave the ITEM column BLANK for each row. If the account balance is zero (0) after closing entries are posted, enter a zero (0) in the account's normal balance column.
10. Prepare a post-closing trial balance.
Problem 2 -
Foxy Investigative Services is an investigative services firm that is owned and operated by Shirley Vickers. On November 30, 2018, the end of the fiscal year, the accountant for Foxy Investigative Services prepared an end-of-period spreadsheet, a part of which follows:
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Foxy Investigative Services End-of-Period Spreadsheet For the Year Ended November 30, 2018
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~
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Adjusted Trial Balance
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Account Title
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~
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Dr.
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Cr.
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~
|
|
|
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Cash
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~
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25,000
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|
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Accounts Receivable
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~
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68,400
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|
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Supplies
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~
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4,400
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|
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Prepaid Insurance
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~
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2,500
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|
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Building
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~
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437,000
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|
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Accumulated Depreciation-Building
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~
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42,400
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Accounts Payable
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~
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11,400
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Salaries Payable
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~
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3,800
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Unearned Rent
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~
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2,500
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Common Stock
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~
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|
80,000
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Retained Earnings
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~
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293,600
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Dividends
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~
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11,700
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|
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Service Fees
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~
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712,850
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Rent Revenue
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~
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11,700
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Salaries Expense
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~
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524,000
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|
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Rent Expense
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~
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46,800
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Supplies Expense
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~
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10,300
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Depreciation Expense-Building
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~
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8,400
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Utilities Expense
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~
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7,950
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Repairs Expense
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~
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3,500
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Insurance Expense
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~
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2,500
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Miscellaneous Expense
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~
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5,800
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|
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~
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1,158,250
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1,158,250
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Required:
1. A. Prepare an income statement for the year ended November 30, 2018. If a net loss has been incurred, enter that amount as a negative number using a minus sign. Be sure to complete the statement heading. Use the list of Labels and Amount Descriptions for the correct wording of text items other than account names. You will not need to enter colons (:) on the income statement. Refer to the Chart of Accounts for exact wording of account titles.
B. Prepare a retained earnings statement for the year ended November 30, 2018. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. Be sure to complete the statement heading. Use the list of Labels and Amount Descriptions for the correct wording of text items. Refer to the Chart of Accounts for exact wording of account titles. Refer to the lists of Labels and Amount Descriptions for exact wording of the answer choices for text entries other than account names.
C. Prepare a balance sheet as of November 30, 2018. Fixed assets must be entered in order according to account number. Be sure to complete the statement heading. You will not need to enter colons (:) or the word "Less" on the balance sheet; they will automatically insert where necessary. Refer to the Chart of Accounts for exact wording of account titles. Refer to the lists of Labels and Amount Descriptions for exact wording of the answer choices for text entries other than account names. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
2. Based upon the end-of-period spreadsheet, journalize the closing entries. Refer to the Chart of Accounts for exact wording of account titles.
3. If Retained Earnings had instead decreased $36,000 after the closing entries were posted, and the dividends remained the same, what would have been the amount of net income or net loss? If required, use a minus sign to indicate a net loss.
Problem 3 -
The unadjusted trial balance of Lakota Freight Co. at March 31, 2018, the end of the year, follows:
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Lakota Freight Co. UNADJUSTED TRIAL BALANCE March 31, 2018
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ACCOUNT TITLE
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DEBIT
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CREDIT
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1
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Cash
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12,000.00
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|
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2
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Supplies
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30,000.00
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3
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Prepaid Insurance
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3,600.00
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4
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Equipment
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110,000.00
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|
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5
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Accumulated Depreciation-Equipment
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25,000.00
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6
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Trucks
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60,000.00
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7
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Accumulated Depreciation-Trucks
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15,000.00
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8
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Accounts Payable
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4,000.00
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9
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Common Stock
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26,000.00
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10
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Retained Earnings
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70,000.00
|
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11
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Dividends
|
15,000.00
|
|
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12
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Income Summary
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|
|
|
13
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Service Revenue
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160,000.00
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|
14
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Wages Expense
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45,000.00
|
|
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15
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Rent Expense
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10,600.00
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|
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16
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Truck Expense
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9,000.00
|
|
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17
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Miscellaneous Expense
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4,800.00
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|
|
18
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Totals
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300,000.00
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300,000.00
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The data needed to determine year-end adjustments are as follows:
A. Supplies on hand at March 31 are $7,500.
B. Insurance premiums expired during year are $1,800.
C. Depreciation of equipment during year is $8,350.
D. Depreciation of trucks during year is $6,200.
E. Wages accrued but not paid at March 31 are $600.
Required:
1. For each account listed in the trial balance, enter the balance in the appropriate Balance column of a four-column account and select the check mark in the Post. Ref. column.
2. (Optional) On your own paper or spreadsheet, enter the unadjusted trial balance on an end-of-period work sheet and complete the work sheet.
3. a. Journalize the adjusting entries on Page 26 of the journal. Adjusting entries are recorded on March 31. Refer to the Chart of Accounts for exact wording of account titles.
b. Post the adjusting entries to the ledger, inserting balances in the accounts affected.
4. Prepare an adjusted trial balance.
5. a. Prepare an income statement for the year ended March 31, 2018. If a net loss has been incurred, enter that amount as a negative number using a minus sign. Be sure to complete the statement heading. You will not need to enter colons (:) on the income statement. Refer to the Chart of Accounts for exact wording of account titles. Refer to the lists of Labels and Amount Descriptions for exact wording of the answer choices for text entries other than account names.
b. Prepare a retained earnings statement for the year ended March 31, 2018. Be sure to complete the statement heading. Refer to the Chart of Accounts for exact wording of account titles. Refer to the lists of Labels and Amount Descriptions for exact wording of the answer choices for text entries other than account names. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
c. Prepare a balance sheet as of March 31, 2018. Be sure to complete the statement heading. Fixed assets must be entered in order according to account number. You will not need to enter colons (:) or the word "Less" on the balance sheet; they will automatically insert where necessary. Refer to the Chart of Accounts for exact wording of account titles. Refer to the lists of Labels and Amount Descriptions for exact wording of the answer choices for text entries other than account names. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
6. a. Journalize the closing entries on page 27 of the journal. (Note: Complete the adjusted trial balance, the income statement, the retained earnings statement, and the balance sheet BEFORE completing part 6. a.)
b. Post the closing entries, inserting balances in the accounts affected. Leave the ITEM column BLANK for each row except when entering an account balance in the first row. In that case, enter the word Balance in the ITEM column in the first row. If the account balance is zero (0) after closing entries are posted, enter a zero (0) in the account's normal balance column. If the account balance is zero (0), enter a zero (0) in the account's normal balance column.
7. Prepare a post-closing trial balance.