Jim Arnold has been a photographer since his graduation from high school several years ago. On February 1, 2011, he decided to open his own photography firm called Arnold’s Photos. To start his accounting system, Jim developed the chart of accounts shown below.
Arnold’s Photo Studio. Chart of Accounts
ASSETS
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OWNER’S EQUITY
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111 Cash (Bank)
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311 Jim Arnold, Capital (Equity) (Invest)
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112 Accounts Receivable (A/R)
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312 Jim Arnold, Drawing (Equity) (Divest)
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113 Office Supplies (Other Current Assets)
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313 Income Summary (Equity) (Closure)
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114 Photography supplies (Other Current Asset)
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313 Retained Earnings (Equity) (+ to Capital)
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115 Prepaid Insurance (Other Current Asset)
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REVENUE
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121 Office Equipment (Fixed Asset)
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411 Photography Revenue (Income)
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121.1 Accumulated Depreciation- Office Equipment (Fixed Asset)
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412 Vending Machine Revenue (Income)
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122 Photography Equipment (Fixed Asset)
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EXPENSES (SAME TYPE FOR ALL)
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122.1 Accumulated Depreciation-Photography Equipment (Fixed Asset)
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511 Salaries Expenses (EXP)
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123 Furniture Fixtures (Fixed Asset)
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512 Advertising Expenses (EXP)
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123.1 Accumulated Depreciation- Furniture and Fixtures (Fixed Asset)
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513 Rent Expense (EXP)
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514 Repairs Expense (EXP)
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LIABILITIES
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515 Insurance Expense (EXP)
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211 Accounts Payable (A/P)
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516 Office Supplies Expense (EXP)
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212 Notes Payable (Other Current Liability)
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517 Photography Supplies Expense (EXP)
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213 Salaries Payable (Other Current Liability)
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518 Depreciation Exp- Off. Equipment (EXP)
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519 Depreciation Expense- Photography Equipment (EXP)
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520 Depreciation Expense- Furniture and Fixtures (EXP)
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521 Utilities Expense (EXP)
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522 Miscellaneous Expense (EXP)
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Jim completed the following transaction during the first month of operations:
February 2011
1 Jim invested $40,000 cash and photography equipment valued at $20,000 in the business
1 Purchased office supplies for cash, $1,300.
1 Purchased photography supplies on account, 6,700.
1 Paid rent, $1,700.
1 Paid for a newspaper ad, $500.
2 Purchased office equipment on account, $6,700.
3 Paid property insurance for the upcoming year, $3,600.
4 Purchased a computer a computer system and software, $3,200, by issuing a note payable.
5 Paid for proportional handouts, $150.
6 Paid miscellaneous expenses, $175.
7 Paid salaries of employees, $1,400.
8 Recorded week’s cash receipts for photo work, $10,350.
9 Paid for carpet cleaning (a miscellaneous expense), $75
9 Recorded photo work done for a customer on account, $1,885.
10 Purchased additional photography supplies on account, $3,200.
10 Purchased additional photography equipment for cash, $3,500.
11Entered into a contract with Southside Food Vendors to place vending machines in the waiting room. Jim is to receive 10% of all sales, with a minimum of $200 monthly. Received $200 as an advance payment.
12 Purchased furniture for the lobby area, $1,700. Paid cash in full.
13 Paid cash for the installation of overhead lightning fixtures, $900.
15 Recorded second week’s cash receipts for photo work, $12,170.
15 Paid second week salaries, $1,400.
16 Jim withdrew cash for personal use, $800.
17 Paid for a TV ad , 710.
18 Paid for repair to equipment, $80
19 Collected $500 for the photo work done on account on February 9
22 Recorded third week’s cash receipts for photo work, $12,045.
22 Paid weekly salaries, $1,400.
23 Did a special wedding photo session for a customer on credit, $2,550
28 Recorded third week’s cash receipts for photo work, $9,995.
28 Paid salaries of employees, $1,400.
28 Paid water bill for February, $70.
28 Paid electric bill for February, $1,095.
28 Made a $500 payment on the note for the computer purchased on February 3.
28 Made a payment for the office equipment purchased on account, $2,000.
28 Made a payment on the photography supplies purchased on account, $1,000.
28 Wrote a business check to pay for Jim’s home phone bill, $310.
28 Southside Food Vendors reported a total of $2,800 of vending machine sales for February. Ten percent of these sales is $280. Since $200 has already been received and recorded in February, Jim was owed $80. Received the $80 check.
Directions:
1. Open an account in the ledger for each account shown in the chart of accounts.
2. Journalize each of the transactions for February, beginning on page 1 of the general journal.
3. Post the journal entries to the ledger.
4. Prepare a trial balance of the ledger in the first two columns of a 10-column work sheet.
5. Complete the 10-column work sheet. Assume for the purposes of this problem that Jim has a one-month accounting period. Data for adjustments are as follow:
a) Office supplies on hand $850
b) Photography supplies on hand $5,550
c) Insurance expired, $300.
d) Salaries unpaid, two days of a five day week; weekly salaries are $1,400
e) Depreciation of office equipment $190
f) Depreciation of photography equipment $275
g) Depreciation of furniture and fixtures $75
6. Prepare an income statement for the month ended on February 28
7. Prepare a statement of owner’s equity for the month ended on February 28
8. Prepare a balance sheet as of February 28.
9. Journalize adjusting entries from the completed work sheet
10. Journalize closing entries
11. Post adjusting and closing entries to the ledger
12. Prepare a post-closing trial balance.
TUTORIAL PREVIEW
CRP I
Jim Arnold's Photography Studio
2.
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General Journal
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Page 1
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Date
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Account Title
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P.R.
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Debit
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Credit
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1
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20X1
Jul. |
1
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Cash
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111
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40,000
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1
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2
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Photography equipment
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122
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20,000
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2
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3
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Jim Arnold, Capital
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311
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60,000
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3
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4
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Invested cash and photography equipment.
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4
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5
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5
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6
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1
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Office supplies
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113
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1,300
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6
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