114 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 Amold'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 Photography Supplies 115 Prepaid Insurance Revenue 121 Office Equipment 411 Photography Revenue 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 Liabilities Photography Supplies Expense 518 211 Accounts Payable Depreciation Expense-Office Equipment 212 Notes Payable 519 Depreciation Expense--Photography Equipment 213 Salaries Payable 520 Depreciation Expense - Furniture and Fixtures 521 Utilities Expense 522 Miscellaneous Expenso Jim completed the following transactions during the first month of operations: 20X1 inmanalular $20.000 in 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, 53,600. 3. Purchased a computer system and software, $3,200, by issuing a nore payable. 5. Paid for promotional handouts, $150. 6 Paid miscellaneous expenses, $175. 7 Paid salaries of employees, 51.400. 7 Recorded week's cash receipts for photo work, $1,350, Jul. 8 Paid for carpet cleaning (a miscellaneous expense), $75. 9 Recorded photo work done for a customer on account, $855. 9 Purchased additional photography supplies on account. $3,200. 10 Purchased addicional photography equipinent 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 ud. $710. 19 Paid for repair to equipment. $80. 19 Collected $500 for the photo work done an 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, 575. 30 Paid electric bill for July, $1.095, 31 Made a $500 payment on the more 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. 8310 31 Southside Food Vendors reported a total of $2.800 of vending machine sales Fur July Te percent of these sales is $280. Since $200 had already been received and recorded in July, lin was wed SRO, Received the $80 check Directions: 1. Open an account in the ledger for cach account shown in the chart of accounts 2. Journalize cach of the transactions for July, beginning on page 1 of the general journal. 3. Post the journal entries to the ledger 4. Prepare a uial balance of the ledger in the first two colusrins of a 16-column work sheet. 5. Complete the 10 column work sheet. Assume for the purposes of this problem that Jim las 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) Solaries unpaid, two days of a five-day week: weekly salaries are $1,400 te) Depreciation of ollice equipment, $190, Depreciation of photography equipment, $275, e) 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. Joumalize adjusting entries froin che coinplexed worksheet. 10. Journalve closing entries. 11. Post adjusting and closing entries to the edge 12. Prepare a post-closing trial balance Jim Arnold's Photography Studio 2. General Journal Pa P.R Debit Account Title Date Credit 17.21 2 3 4 5 5 7 8 1 14 15 16 17 18 19 20 21 22 23 ACCOUNT Tim Arnold, Capital MCCOUNT NO DATE TEM PR DENT CREDIT DER Paradigm Publishing, Inc Comprehensive Review Problem Add header ACCOUNT im Arnold, Drawing MCCOUNT NO BALA DATE ITEM PR OOT CREDIT DER ACCOUNT Income Summary ACCOUNT NO DATE ILM DAT CHOUT DT Photography Revenue NOCOUNT NO DATE FILM PH GIDO CODO PEET 11 Jim Arnold Part 2 Jim Arnold WinAmol Part 4 MA ACDOUNT Salaries Expense ACCOUNT NO. DAT MM PR DERIE CREDIT DER Parti Paradigm Publishing, Inc. Comprehensive Review Problemi Add header ACCOUNT Advertising Expense ACCOUNT NO. DATE ITEM POR DEBIT CREDIT BALA DEBIT 20 ACCOUNT Rent Expense ACCOUNT NO DATE ITEM DEBIT CREDO BALA DEBIT ACCOUNT Repairs Expense ACCOUNT NO. PALA MEM WWW DENT ACCOUNT Depreciation Expense-Photography Equipment MOCOUNT NO. DATE ITEM PR DEM CREDIT BALA DEBIT 20 ACCOUNT Depreciation Expense Furniture and Fixtures ACCOUNT NO DATE ITEM PR DEBIT CREDIT BALA DEBIT 20 hal ACCOUNT Utilities Expense ACCOUNT NO BALA DATE ITEM P.R DEBIT CREDIT DEBIT JO ACCOUNT Miscellaneous Expense ACCOUNT NO BALA DATE ITEM PR DEBIT CREDIT DET 2011 V Arnold's Photos Work Sheet For Month Ended July 21, 20X1 Adjustments TH Adisted of met Since Sheet Crede Det Cred Credit 22,570 Dis 22,570 Amold's Photos Income Statement For Month Ended July 31, 20X1 7 Arnold's Photos Statement of Owner's Equity For Month Ended July 31, 20X1 Add header Arnold's Photos Balance Sheet July 31, 20X1 Assets Arnold's Photos Post-Closing Trial Balance July 31, 20x1 ACCOUNT TITLE DEBIT CREDIT --+