The accounting cycle problem for this assignment is in an attached Word document . It will include:
1. Preparing a general journal of adjusting journal entries.
2. Preparing and completing a ten-column worksheet using Excel. ( Seee Appendix 3C for an example)
3. Based on worksheet calculations, preparing a multiple-step income statement, balance sheet, and statement of retained earnings in accordance with generally accepted accounting principles. Include headings, titles, dating, and formatting in good form.
4. Preparing the closing entries.
5. Bonus Points – Up to 6 bonus points can be earned on this assignment. Prepare the reversing journal entries at period end. Partial credit can be earned on this part of the assignment.
ACCOUNTING CYCLE PROBLEM
The following is a trial balance and certain other information relating to Mr. I. Spend Freely, a financial consultant operating as a corporation.
I. SPEND FREELY, FINANCIAL CONSULTANT
TRIAL BALANCE
DECEMBER 31, 2016
Debit Credit
Cash $ 31,500
Accounts receivable 49,600
Allowance for doubtful accounts $ 750
Supplies Inventory 1,960
Prepaid insurance 1,100
Furniture & Equipment 25,000
Accumulated depreciation – equipment 6,250
Notes payable 7,200
Common stock 20,000
Retained earnings 15,010
Service revenue 100,000
Rent expense 9,750
Salaries and wages expense 28,500
Utilities expense 1,080
Office expense 720
$149,210 $149,210
The following information is available as of December 31, 2016.
Fees were received in advance from clients and treated as revenue: $6,000
Services performed for clients that were not recorded by 12/31/16 or paid by clients: $4,900
Bad debt expense for the year: $1,430
Insurance premiums expired during the year: $480
Equipment is being depreciated at 10% per year.
Mr. Freely gave the bank a 90-day note on December 1, 2016 for $7,200. The note has an interest rate of 10% annually.
Rent on the building is $750 per month. The rent for all of 2016 and January, 2017 has been paid.
Office salaries and wages earned but unpaid as of 12/31/16: $2,510
Mr. Freely withdrew dividends of $17,000 during the year. The dividends were debited to retained earnings at the time the disbursements were made.
Assume the corporation has no income tax liability.
Required:
From the trial balance and other information given, please prepare the following as of December 31, 2016.
Adjusting entry general journal
10-column worksheet (use of MSExcel required on this part of the problem)
Income statement
Statement of retained earnings
Balance sheet
Closing entry general journal
Extra Credit – Worth 6 additional points
Prepare the reversing entries.