0 0 Jim Arnold's Photography Studio You have reached the end of the first section of this book. The following problem is designed to review and reinforce your knowledge of accounting for a service business, Jim Arnold has been a photographer since his graduation from high school several years ago. On July 1, 20X1, 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 Photos Chart of Accounts Assets Owner's Equity 111 Cash 311 Jim Arnold, Capital 112 Accounts Receivable 312 Jim Arnold, Drawing 113 Office Supplies 313 Income Summary 114 Photography Supplies 115 Revenue Prepaid Insurance 411 Photography Revenue 121 Office Equipment 121.1 Accumulated Depreciation Office 412 Vending Machine Revenue Equipment Expenses 122 Photography Equipment 511 Salaries Expense 122.1 Accumulated Depreciation 512 Advertising Expense Photography Equipment 513 Rent Expense 123 Furniture and Fixtures 514 Repairs Expense 123.1 Accumulated Depreciation - Furniture 515 Insurance Expense and Fixtures 516 Office Supplies Expense 517 Photography Supplies Expense Liabilities 518 211 Accounts Payable Depreciation Expense-Office Equipment 519 Depreciation Expense Photography 212 Notes Payable 213 Salaries Payable Equipment 520 Depreciation Expense-Furniture and Fixtures 521 Utilities Expense 522 Miscellaneous Expense Jim completed the following transactions during the first month of operations: 20X1 Jul. 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 July rent, $1,700. 1 Paid for a newspaper ad, $500. 2 Purchased office equipment on account, $6,750. 2 Paid property insurance for the upcoming year, $3,600. 3 Purchased a computer system and software, $3,200, by issuing a note payable. 5 Paid for promotional handouts, $150. 6 Paid miscellaneous expenses, $175, 7 Paid salaries of employecs, $1,400. 7 Recorded week's cash receipts for photo work, $1,350. Jul. 8 Paid for carpet deaning fa miscellaneous expense), $75. 9 Recorded photo work done for a customer on account, $855. 9 Purchased additional photography supplies on account, 53,200. 10 Purchased additional photography equipment for cash, $3.500. 10 Entered 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, 11 Purchased furniture for the lobby area, $1,700. Paid cash in full, 12 Paid cash for the inscallation of overhead lighting fixtures, $900. 15 Recorded second weck's cash receipts for photo work, $2.170. 15 Paid weekly salaries, $1,400. 17 Jim withdrew cash for personal use, $800. 18 Paid for TV ad. $710. 19 Paid for repair to equipment, $80. 19 Collected $500 for the photo work done on account on July 9. 22 Recorded third week's cash receipts for photo work, $2,045. 22 Paid weekly salaries, $1,400. 23 Did a special wedding photo session for a customer on credit, $550. 28 Recorded fourth week's cash receipts for photo work, $1.995. 29 Paid salaries of employees, $1,400. 30 Paid water bill for July, $75. 30 Paid electric bill for July, $1,095. 31 Made a $500 payment on the note for the computer purchased on July 3. 31 Made a payment for the office equipment purchased on account, $2.000. 31 Made a payment on the photography supplies purchased on account, $1,000 31 Wrote a business check to pay for Jim's home phone bill, $310. 31 Southsicle Food Vendors reported a total of $2,800 of vending machine sales for July. Ten percent of these sales is $280. Since $200 had already been received and recorded in July, Jin was owed $80. Received the $80 check. Directions: 1. Open an account in the ledger for cach account shown in the chart of accounts. 2. Journalize each of the transactions for July, beginning on page 1 of the general journal 3. Post che 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 follows: (a) Office supplies on hand. $850. (1) 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 ollice equipment, $190. (1) Depreciation of photography cquipment, $275. Depreciation of furniture and fixtures, $75. 6. Prepare an income statement for the month ended July 31. 7. Prepare a statement of owner's cquity for the month ended July 31. 8. Prepare a balance sheet as of July 31. 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. Arnold's Photos Work Sheet For Month Ended July 31, 20X1 Adjustments Debit Credit Account Title Trial Balance Debit Credit Adjusted Trial Balance Debit Credit Income Statement Debit Credit Balance Sheet Debit Credit Arnold's Photos Post-Closing Trial Balance July 31, 20X1 ACCOUNT TITLE DEBIT CREDIT Arnold's Photos Income Statement For Month Ended July 31, 20x1 Arnold's Photos Statement of Owner's Equity For Month Ended July 31, 20x1 Arnold's Photos Balance Sheet July 31, 20x1 Assets