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Assume that you are starting a new business, (your name)Accounting Services, with a new partner, John Papadop. John has had some clients and business activity to bring and you are leaving a position at a larger firm. Youve decided for liability purposes to set yourself up as a small corporation. You agree to set up shop at the start of December to allow yourselves time to get ready for the upcoming tax and audit (busy) season. As mentioned above, your partner has some existing clients that will now be clients of your new firm.

The chart of accounts for (your name) Accounting Services is listed below. Follow the instructions to complete the accounting records for the month of December.

_____________ ACCOUNTING SERVICES

Chart of Accounts

ASSETS
101	Cash
111	Accounts Receivable
119	Allowance for Doubtful Accounts
121	Supplies Inventory
131	Prepaid Rent
134	Prepaid Insurance
141	Equipment
142	Accumulated Depreciation - Equipment
LIABILITIES
202	Accounts Payable
203	Note Payable
211	Unearned Revenues
OWNERS EQUITY
301	Common Stock
309	Retained Earnings
REVENUE
410	Fees Income
EXPENSES
511	Salaries Expense
514	Utilities Expense
517	Supplies Expense
520	Rent Expense
523	Depreciation Expense Equipment
526	Insurance Expense
529	Advertising Expense
532	Telephone Expense
535	Maintenance Expense
540	Bad Debt Expense

REQUIRED:

1. Analyze each transaction below and record it in the general journal.

2. Post the transactions for the general ledger accounts.

3. Prepare a trial balance.

4. Analyze the following information to determine/calculate adjustments:

a. Supplies were used during the month. An inventory

taken on December 31 showed supplies of $680 on hand.

b. Rent expired for the month of December (see December 2nd rent transaction).

c. Insurance expired insurance for the month (see December 9th transaction).

d. The equipment brought into the business on December 1st has a useful life of 15 years and no (zero) residual value. The first adjustment for depreciation for the new equipment will be recorded next month (January).

e. You and your partner estimated on December 31st that $312 of the receivable balance will not be collected (hint: see page 420 for entry this is a bonus markif your entry is correct).

5. Journalize and post the adjusting entries based on part 4 above.

6. Prepare an adjusted trial balance.

7. Prepare a single step income statement for the month.

8. Prepare a statement of shareholders equity.

9. Prepare a classified statement of financial position.

10. Journalize and post the closing entries.

11. Prepare a post closing trial balance.

This should match the last 5 digits of your student ID

TRANSACTIONS:

December

1 You contribute $34.263 for 100 shares of common stock in the new company.

John Papadops contribution to the business is $2,180 due on existing customer receivable accounts, $10,200 of new equipment. He receives 100 shares of common stock for this contribution.

Paid $9,900 for next 6 months of rent by issuing Cheque 1008.

2 Purchase supplies for $1,500. Cheque 1009.

7 Provided services for $6,322 in cash and $745 on credit during the first week of December.

9 Purchased a one-year insurance policy for $4,800; issued Cheque 1010 to pay the full amount in advance.

11 Collected a total of $395 on account from credit customer (related to December 7 sales ignore subsidiary ledger).

12 Issued Cheque 1011 for $431 to pay for advertising on the local radio station during the month.

13 Collected a total of $500 on account from credit customers during the second week of December (ignore subsidiary ledger).

14 Returned some supplies that were damaged for a cash refund of $40.

15 Provided services for $8,500 in cash and $400 on credit during the second week of December.

18 Purchased supplies for $800 from Fellowes, Inc. received Invoice 3284, payable in 30 days.

19 Provided services for the $3,890 in cash and $2,560 on credit during the third week of December.

20 Collected a total of $750 on account from credit customers during the third week of December (ignore subsidiary ledger).

21 Issued Cheque 1012 for $1,390 to pay for maintenance work on the office equipment.

22 Issued Cheque 1013 for $164 to pay for December advertisements in the local newspaper.

23 Received the monthly telephone bill (current month usage) for $234 and paid it with Cheque 1014.

23 Collected a total of $1,560 on account from credit customers during the fourth week of December (ignore subsidiary ledger).

25 Driving through town you notice that one of your new customers, a used book store, has put up an OUT OF BUSINESS sign in its window and the building is empty. You look and notice that the business still owes you $450 for work youve completed and invoiced you dont expect that this amount will ever be collected. (Note: the Allowance Method is used to account for bad debt see pages 421/422).

26 Sent Cheque 1016 for $235 in payment of the monthly bill for utilities.

27 Provided services for $5,890 in cash and $675 on credit during the fourth week of December.

28 Issued Cheques 1017-1022 for $5,886 to pay the monthly salaries of the regular employees and three part-time workers.

30 Issued Cheque 1023 for $415 to pay for cleaning services (i.e. Maintenance Expense) for the month.

30 Purchased additional equipment for $6,000 from Master Equipment Company; issued Cheque 1024 for $1,300 and negotiated a loan (i.e. Note Payable) for the remainder. The equipment has a five-year life and no salvage value.

30 Received advance payment for tax work for new clients in the amount of $2,725.

30 Provided services for $545 in cash and $325 on credit on December 30.

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