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Ace Lawn Care Module 2 Mini Practice Problem

Jim has asked you to prepare financial statements for his first month of operation. The following information relates to the month of May, 2014. (Round all calculations to the nearest whole dollar)

1. On May 2, Jim signed a 1 year, 6% note for $3,000 associated with the purchase of a used truck for the business. The interest will be due with the principle of the note. 2. On May 2, Jim purchased a used truck for $5,000 to use for the lawn care business. He estimates a trade-in value of $500 at the end of the estimated five-year life of the truck.

3. On May 5, Jim purchased a lawn mower for $300 and an aerator for $500. He estimates $0 salvage value for both pieces of equipment and an estimated two-year life for both.

4. On May 6, Jim writes a $600 check for a six month insurance policy that expires October 31, 2014. Instructions: 1. Using the chart of accounts provided, and the Excel template provided with this assignment, record the adjustments in the Worksheet, calculate the adjusted trial balance and complete the worksheet. 2. Prepare the Income Statement, Statement of Owners Capital and Balance Sheet for Ace Lawn Care for May, 2014 3. Prepare journal entries, in good form, to record the May adjusting entries. Explanations are optional. Start with Page 3 of the General Journal for the adjusting entries. 4. Post the journal entries to general ledger accounts. There are already transactions in the ledger for the month, you are adding to those transactions. 5. Prepare and post the closing entries for May, 2014. Start with Page 4 of the General Journal for the closing entries 6. Prepare a post-closing trial balance as of May 31, 2014, for Ace Lawn Care. Ace Lawn Care Chart of Accounts Classification Account Number Account Name ASSETS 101 Cash 110 Accounts Receivable 120 Supplies 130 Prepaid Insurance 150 Equipment 155 Accumulated Depreciation Equipment LIABILITIES 201 Accounts Payable 220 Notes Payable 225 Interest Payable OWNERS EQUITY 301 Owners Capital 305 Owners Drawing 310 Income Summary REVENUES 401 Lawn Service Revenue EXPENSES 620 Supplies Expense 630 Fuel Expense 640 Repair and Maintenance Expense 650 Advertising Expense 660 Insurance Expense 670 Depreciation Expense 680 Interest Expense

WORKSHEET Trial Balance Adjustments Adjusted Trial Balance Income Statement Debit Debit Debit Debit Credit Credit Credit Credit Totals Net Income L Totals Balance Sheet Debit Credit

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