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Joe’s Snow PlowingCompany has the following transactions for theyear:

December 1 – Issued 10,000 shares of capital stock for $100,000to start a snow plowing business.

December 1 - Paid a one year insurance premium costing$7,200.

December 1 - Purchased a snow plow costing $42,000. Paid cash of$22,000 and signed a 3 year, 6% note for the balance. Interest isto be paid annually. The balance of the note will be paid at theend of its term. It is estimated that the snow plow last 4 yearsand will have a $6,000 value after 4 years.

December 3 – Purchased $8,000 of supplies on credit. Picked upthe supplies on the same day.

December 10 - Paid gas expense of $2,000.

December 12 - Purchased supplies costing $1,800 on credit.Picked up the supplies on the same day.

December 18 – Plowed 18 driveways totaling $32,000 and billedcustomers.

December 23 – Plowed 3 driveways and billed customers$1,800.

December 28 - Received $22,000 from customers for drivewaysplowed in #7..

December 28 – Ordered supplies costing $8,000 to be delivered inJanuary.

December 31 - Paid for supplies purchased in #6.

Paid employees $6,000 wages.

December 31 - Received $5,000 for a snow plowing job to be donein January next year.

December 31 - Paid a $0.25 per share dividend.

Required:

1. Prepare journal entries for the abovetransactions.

2. Post the above transactions to the ledger (use TAccounts).

3. Prepare a Trial Balance.

4. Prepare adjusting entries in journal format and postto the ledger (T Accounts). Following additional information isprovided:

Supplies on Hand December 31 was $4,000.

Wages owed but not paid on December 31 was$2,000.

Hint: Plus adjusting entries for depreciation, insuranceand interest.

5. Prepare an Adjusted Trial Balance.

6. Prepare an Income Statement, Statement of RetainedEarnings and a Balance Sheet.

7. Prepare closing entries in journal format and post tothe ledger (T Accounts).

8. Prepare a Post-Closing Trial Balance.

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Deanna Hettinger
Deanna HettingerLv2
28 Sep 2019

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Assignment Details

Final Project Overview

Throughout this course, you have learned various components ofaccounting. These components work hand-in-hand to create theaccounting cycle – the process of recording, summarizing andreporting transactions. The final project will provide you theopportunity to apply the skills covered in this course through thecompletion of the accounting cycle. In addition, you will be ableto demonstrate your understanding through analysis of the completedinformation. This project will be completed in two parts in Units 3and 5.

Final Project Data

On December 1, 2015 John Trap created a new travel agency, TrapAdventures, Inc. providing exclusive adventure trips. The followingtransactions occurred during December 2015.

(NOTE: There are no beginning balances – this is a newcompany.)

Dec 1

John Trap invested $60,000 cash in the company for commonstock.

2

Purchase office equipment for $17,500 cash.

2

The company rented furnished office space by paying $18,000 cashfor the first six months (December 2015 - May 2016) rent.

3

The company purchased $1,500 of office supplies on account.

10

The company paid $3,600 cash for the premium on a 12-monthinsurance policy.

14

The company paid $10,750 cash for two weeks' salaries earned byemployees.

24

The company collected $54,000 cash on commissions from airlineson tickets obtained for customers.

28

The company paid $12,125 cash for two weeks' salaries earned byemployees.

29

The company paid $350 cash for minor repairs to the company'scomputer.

30

The company paid $450 cash for this month's telephone bill.

30

Dividends of $3,000 cash were paid.


Adjustment Data:

One month's insurance coverage has expired.

The company occupied the office space for the month ofDecember.

At the end of the month, $600 of office supplies are stillavailable.

This month's depreciation on the computer equipment is $325.

Employees earned $525 of unpaid and unrecorded salaries as ofmonth-end.

Final Project Requirements

Using the spreadsheet found here and information above, completethe following:

Journal entries to record the transactions that occurred duringthe month of December.

Prepare an unadjusted trial balance.

Record journal entries for the summarized transactions for2010 (e.g. items 1 - 10 below)
Susie’s Catering Service, a corporation, began business onJanuary 1, 2009. At the end of Year 1, December 31, 2009, thecompany’s post-closing trial balance appeared as follows:

a/c # Account name Balance
100 Cash 38,500
105 Accounts Receivable 4,000
110 Supplies 2,200
115 Prepaid Insurance 1,800
160 Equipment 15,000
165 A/D-Equipment (3,000)
Total Assets 58,500
200 Accounts Payable 6,300
205 Notes Payable (short-term) 3,000
210 Wages Payable 1,200
215 Interest Payable 0
220 Income Taxes Payable 700
225 Advances from Customers 2,200
250 Notes Payable (long-term) 9,000
300 Contributed Capital 12,000
305 Retained Earnings 24,000
Total Liabilities & Owners' Equity 58,500
310 Dividends Declared 0
400 Service Revenue 0
505 Depreciation Expense 0
510 Wages Expense 0
515 Insurance Expense 0
520 Supplies Expense 0
600 Interest Expense 0
650 Income Tax Expense 0

A summary of transactions (1 – 10) which occurred during 2010 areas follows (to be entered into the “general journal” at December30, 2010):

(1). Earned revenue of $125,000 of which $102,400 had beencollected in cash with $22,600 still due from customers. Thisamount does not include the balance in the “Advances fromCustomers” account which will be considered in transaction<8.

(2). Purchased equipment for $2,400 cash.

(3). Issued 1,000 additional shares of stock and received $7,000cash.

(4). Paid cash wages of $56,200, of which $1,200 was payment on thebeginning of the year Wages Payable balance, with the remaining$55,000 paid for work performed during the current year.

(5). Purchased supplies costing $3,000 for future use during theyear. $600 of these purchases remain unpaid for at the end of theyear [i.e. $2,400 was paid in cash with $600 still open on accountto vendors]

(6). Collected the entire Accounts Receivable balance that existedat the beginning of the year.

(7). Paid off all of the beginning Accounts Payable balance.

(8). Near the end of the year received a $1,650 deposit from acustomer for services to be performed next year.

(9). Declared and paid a cash dividend of $9,500.

(10). Paid the “Income Taxes Payable” balance that existed at thebeginning of the year.

On January 2, 2004, Tameka Essendoh opened the Essendoh Tailor and Alterations Service. She invested $9,000 in the venture and set up a bank account in the company's name. Also on that day, she rented a small area in a laundry and cleaning shop at a cost of $300 per month; all utilities were provided by the building owner. On January 3, 2004, she purchased tailoring equipment (sewing machines, pressing machines, and other equipment) which had an expected life of 5 years and cost $5,600. She paid $2,600 in cash; the balance was on account. She agreed to pay the balance in four quarterly payments of $750 each, with payments due on April 4, July 5, and October 5, 2004; the final payment was due on January 5, 2005. On January 4, 2004, Tameka purchased furniture which had an expected life of 10 years and cost $3,000. She paid $1,000 in cash and agreed to pay the balance on March 3, 2005. Tameka decided to pay herself a monthly salary of $2,000, with the payment for each month to be made on the first business day of the following month. The first payment, for January, was made on February 2.

During 2004, Tameka received cash of $28,000 for services rendered. Her cash outlays during the year for equipment and furniture were as follows:

Tailoring equipment (down payment of $2,600, plus

three quarterly payments totaling $2,250) $4,850

Furniture 1,000

$5,850

On December 31, 2004, Tameka decided to get married and join her husband in another city. Samatha Dewbury, who had previous tailoring experience, learned that Tameka was leaving the city and discussed with Tameka the possibility of purchasing her shop. Tameka prepared and gave to Samatha the following income statement for the year and balance sheet as of December 31.

ESSENDOH TAILOR AND ALTERATIONS SERVICE

Income Statement

for Year 2004

Income

Cash Received From Tailoring and Alterations $28,000

Additional Cash Invested in June, 2004 3,000

Total Income $31,000

Cash Expenses

Tailoring Supplies 1,000

Insurance 1,200

Salary Withdrawn by Tameka Essendoh 22,000

Rent 3,900

Repairs to Equipment 100

Advertising 400

Office Supplies and Postage 250

Membership in Organization of Tailor Shops 100

Telephone 520

Subcontract of Tailoring Services for Rush Jobs 500

Miscellaneous Expenses 500

Total Expenses 30,470

Net Income for Year $ 530

ESSENDOH TAILOR AND ALTERATIONS SERVICE

Balance Sheet

December 31, 2004

Assets Owner's Equity

Cash $3,680 Tameka Essendoh, Capital $9,130

Tailoring Equipment 4,850

Furniture 1,000

Total Assets $9,530 Total Liabilities and Equity $9,130

Additional Information: After some negotiation about the purchase price, the parties agreed that Samatha would purchase the business according to the following conditions.

1. The purchase price would be an amount equal to twice the net income for 2004, computed under generally accepted accounting principles and standards.

2. Samatha would assume all liabilities of the business. The balance of the purchase price would be paid in cash by Samatha.

3. Because the two parties were unsure that the statements were exactly in accord with generally accepted accounting principles and standards, they have asked you to review the statements and make whatever changes are necessary.

Assume that you discover the following additional information in your review:

1. The insurance premiums paid covered a period of 2 years, beginning January 2, 2004.

2. On December 31, 2004, amounts owed by customers who had picked up tailoring work totaled $235.

3. Unused tailoring supplies on hand on December 31, 2004, were estimated to have cost $120. Unused office supplies on that date cost $60.

4. There is an unpaid bill of $280 for November and December advertising.

5. The rent expense includes payments for 2004 and for January 2005.

Required:

1. Prepare an Excel-based income statement for 2004 and balance sheet as of December 31, 2004, based on generally accepted accounting principles.

2. Compute the amount of cash to be paid by Samatha for the business.

3. Using the buyer's viewpoint, evaluate this approach to establishing the sales price of the business.

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