Morrison Accounting Services was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business:
June 2
Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock. (Capital Stock)
June 5
Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days. (Computer; Cash; Accounts Payable)
June 8
Signed a two-year promissory note (Note Payable) at the bank and received cash of $20,000.
June 15
Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days. (Accounts Receivable; Service Revenue)
June 17
Paid a $900 bill from the local newspaper for advertising for the month of June. (Advertising Expense)
June 23
Received the amounts billed to clients for services performed during the first half of the month.
June 28
Received and paid gas, electric, and water bills (Utilities Expense). The total amount is $2,700.
June 29
Received the landlordâs bill for $2,200 for rent on the office space the Morrison leases. The bill is payable by the 10th of the following month. (Rent Expense; Rent Payable)
June 30
Paid salaries and wages for June. (Salaries Expense) The total amount is $5,670.
June 30
Billed $18,400 to clients for the second half of June.
June 30
Declared and paid dividends in the amount of $6,000. (Dividends)
Prepare journal entries on the books of Morrison Accounting Services to record the transactions entered into during the month. Ignore depreciation expense and interest expense (weâll get to that later in the semester.)
Prepare a trial balance in good form at June 30. List the accounts in the following order: assets, liabilities, ownersâ equity, revenue, expenses, dividends. (You will find it helpful to set-up and post to T-accounts; the T-accounts are not required to be turned in for grading.)
Prepare the following financial statements in good form:
Income statement for the month of June
Statement of retained earnings for the month of June
Classified balance sheet at June 30.
Morrison Accounting Services was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business:
| June 2 | Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock. (Capital Stock) |
| June 5 | Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days. (Computer; Cash; Accounts Payable) |
| June 8 | Signed a two-year promissory note (Note Payable) at the bank and received cash of $20,000. |
| June 15 | Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days. (Accounts Receivable; Service Revenue) |
| June 17 | Paid a $900 bill from the local newspaper for advertising for the month of June. (Advertising Expense) |
| June 23 | Received the amounts billed to clients for services performed during the first half of the month. |
| June 28 | Received and paid gas, electric, and water bills (Utilities Expense). The total amount is $2,700. |
| June 29 | Received the landlordâs bill for $2,200 for rent on the office space the Morrison leases. The bill is payable by the 10th of the following month. (Rent Expense; Rent Payable) |
| June 30 | Paid salaries and wages for June. (Salaries Expense) The total amount is $5,670. |
| June 30 | Billed $18,400 to clients for the second half of June. |
| June 30 | Declared and paid dividends in the amount of $6,000. (Dividends) |
Prepare journal entries on the books of Morrison Accounting Services to record the transactions entered into during the month. Ignore depreciation expense and interest expense (weâll get to that later in the semester.)
Prepare a trial balance in good form at June 30. List the accounts in the following order: assets, liabilities, ownersâ equity, revenue, expenses, dividends. (You will find it helpful to set-up and post to T-accounts; the T-accounts are not required to be turned in for grading.)
Prepare the following financial statements in good form:
Income statement for the month of June
Statement of retained earnings for the month of June
Classified balance sheet at June 30.
Related questions
| The following transactionsoccurred during July: |
| 1. | Received $1,200 cash for servicesperformed during July. |
| 2. | Received $6,400 cash from theissuance of common stock to owners. |
| 3. | Received $600 from a customer aspayment for services performed during June. |
| 4. | Billed $4,100 to customers forservices performed on account in July. |
| 5. | Borrowed $2,900 from the bankand signed a promissory note. |
| 6. | Received $1,600 from a customerfor services to be performed during August. |
What is the amount of revenue that will be reported on theincome statement for the month ended July 31? |
| Byte of Accounting, Inc. Create a generalJournal | |
| Transaction | Description of transaction |
| 01. | June 1: Byte of Accounting, Inc. issued2,580 shares of its common stock to Jeremy after $26,780 in cashand computer equipment with a fair market value of $40,300 werereceived. |
| 02. | June 1: Byte of Accounting, Inc. issued1,968 shares of its common stock after acquiring from Courtney$35,100 in cash, computer equipment with a fair market value of$15,080 and office equipment with a fair value of $988. |
| 03. | June 1: Byte of Accounting,Inc. acquired $72,800 in cash from Kai and issued 2,800 shares ofits common stock. |
| 04. | June 2: A down payment of $33,000 in cashwas made on additional computer equipment that was purchased for$165,000. A five-year note was executed by Byte for thebalance. |
| 05. | June 4: Additional office equipmentcosting $700 was purchased on credit from Discount ComputerCorporation. |
| 06. | June 8: Unsatisfactory office equipmentcosting $140 was returned to Discount Computer for credit to beapplied against the outstanding balance owed by Byte. |
| 07. | June 10: Byte paid $25,250 on the balanceit owed on the June 2 purchase of computer equipment. |
| 08. | June 14: A one-year insurance policycovering its computer equipment was purchased by Byte for $5,136 incash. The effective date of the policy was June 16. |
| 09. | June 16: Computer consultation revenue of$6,000 was received. |
| 10. | June 16: Byte purchased a building and theland it is on for $125,000, to house its repair facilities and tostore computer equipment. The lot on which the building is locatedis valued at $20,000. The balance of the cost is to be allocated tothe building. Byte made a cash down payment of $12,500 and executeda mortgage for the balance. The mortgage is payable in eight equalannual installments beginning July 1. |
| 11. | June 17: Cash of $7,600 was paid for rentfor June, July, August and September. Put the total amount into thePrepaid Rent account. |
| 12. | June 17: Received a bill of $375 from thelocal newspaper for advertising. |
| 13. | June 21: Billed various miscellaneouslocal customers $4,600 for consulting services performed. |
| 14. | June 21: A fax machine for the office waspurchased for $775 cash. |
| 15. | June 21: Accounts payable in the amount of$560 were paid. |
| 16. | June 22: Paid the advertising bill thatwas received on June 17. |
| 17. | June 22: Received a bill for $1,090 fromComputer Parts and Repair Co. for repairs to the computerequipment. |
| 18. | June 22: Paid salaries of $985 toequipment operators for the week ending June 18. |
| 19. | June 23: Cash in the amount of $3,685 wasreceived on billings. |
| 20. | June 23: Purchased office supplies for$530 on credit. Record the purchase as an increase to theassets. |
| 21. | June 28: Billed $5,280 to miscellaneouscustomers for services performed to June 25. |
| 22. | June 29: Cash in the amount of $5,001 wasreceived for billings. |
| 23. | June 29: Paid the bill received on June22, from Computer Parts and Repairs Co. |
| 24. | June 29: Paid salaries of $985 toequipment operators for the week ending June 25. |
| 25. | June 30: Received a bill for the amount of$815 from O & G Oil and Gas Co. |
| 26. | June 30: Paid a cash dividend of $0.15 pershare to the three shareholders of Byte. [IMPORTANT NOTE: Thenumber of shares of capital stock outstanding can be determinedfrom the first three transactions.] |
| Adjusting Entries - Round to two decimalplaces. | |
| 27. | The rent payment made on June 17 was forJune, July, August and September. Expense the amount associatedwith one month's rent. |
| 28. | A physical inventory showed that only$214.00 worth of office supplies remained on hand as of June30. |
| 29. | The annual interest rate on the mortgagepayable was 8.25 percent. Interest expense for one-half monthshould be computed because the building and land were purchased andthe liability incurred on June 16. |
| 30. | Information relating to the prepaidinsurance may be obtained from the transaction recorded on June 14.Expense the amount associated with one half month's insurance. |
| 31. | A review of Byteâs job worksheets showthat there are unbilled revenues in the amount of $5,500 for theperiod of June 28-30. |
| 32. | The fixed assets have estimated usefullives as follows: |
| Building - 31.5 years | |
| Computer Equipment - 5.0 years | |
| Office Equipment - 7.0 years | |
| Use the straight-line method ofdepreciation. Management has decided that assets purchased during amonth are treated as if purchased on the first day of the month.The buildingâs scrap value is $500. The office equipment has ascrap value of $350. The computer equipment has no scrap value.Calculate the depreciation for one month. | |
| 33. | A review of the payroll records show thatunpaid salaries in the amount of $591 are owed by Byte for threedays, June 28 - 30. |
| 34. | The note payable relating to the June 2,and 10 transactions is a five-year note, with interest at the rateof 12 percent annually. Interest expense should be computed basedon a 360 day year. |
| [IMPORTANT NOTE: The original note on thecomputer equipment purchased on June 2 was $132,000. OnJune 10, eight days later, $25,250 was repaid. Interest expensemust be | |
| calculated on the $132,000 for eight days.In addition, interest expense on the $106,750 balance of the loan($132,000 less $25,250 = $106,750) must be calculated for the 20days remaining in the month of June.] | |
| 35. | Income taxes are to be computed at therate of 25 percent of net income before taxes. |
| [IMPORTANT NOTE: Since the income taxesare a percent of the net income you will want to prepare the IncomeStatements through the Net Income Before Tax line. The worksheetcontains all of the accounts and their balances which you can thentransfer to the appropriate financial statement.] | |
| Closing Entries | |
| 36. | Close the revenue accounts. |
| 37. | Close the expense accounts. |
| 38. | Close the income summary account. |
| 39. | Close the dividends account. |
