Accounting Cycle Problem 1 Fall 2017

As of January 1, 2017, Will Watkins decided to open and operates a consulting business, Efficiency Consulting, Inc.,on a full-time basis.Therefore, Efficiency Consulting is a brand new business as of 1/1 and engaged in the following transactions during January:

Jan 1.The business received a cash investment of $10,000 from Will.The company issued 2,000 shares of $4 par common stock.

Jan 1. Paid two months' rent on a lease rental contract, $4,800.

Jan 2. Paid the six-month premiums on property and casualty insurance policies $3,600.

Jan 4. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees $3,250.

Jan 5. Purchased office equipment from Office Station Co. at a cost of $1850 by paying $400 down and signing a note payable, 5%, 90-day, for the remainder.

Jan 6. Received cash from clients on account $1,800.

Jan 10. Paid cash for a Facebook advertisement $1,625.(miscellaneous expense)

Jan 12. Recorded services provided on account for the period Jan. 112 $6,500.

Jan 15. Recorded cash from cash clients for fees earned during the period Jan. 115 $5,040.

Jan 16. Paid part-time receptionist for two weeks' salary $2,800.

Jan 18. Paid cash for supplies $1,000.

Jan 20. Recorded services provided on account for the period Jan.1320 $4,900.

Jan 25. Recorded cash from cash clients for fees earned for the period Jan.1625 $5,140.

Jan 26. Received cash from clients on account $3,450.

Jan 27. Paid part-time receptionist for two weeks' salary $2,800.

Jan 30. Paid utilities bill for January $760.(miscellaneous expense).

Jan 31. Recorded cash from cash clients for fees earned for the period Jan.2631 $3,990.

Jan 31. Recorded services provided on account for the remainder of January $1,420.

Jan 31. Paid dividends $780.

EFFICIENCY CONSULTING CHART OF ACCOUNTS:

-11.Cash -12.Accounts Receivable -14.Supplies -15.Prepaid Rent -16.Prepaid Insurance -18.Office Equipment -19.Accumulated Depreciation

-21.Accounts Payable -22.Salaries Payable -23.Deferred Fees Revenue -24.Interest Payable -25.Notes Payable -31.Common stock, $4 par

-32.Additional Paid in Capital -33.Retained earnings -34.Dividends -41.Fees earned -51.Salary expense -52.Rent expense -53. Supplies expense

-54.Depreciation expense -55.Insurance expense -56.Interest expense -59.Miscellaneous expense

INSTRUCTIONS:

1.Set up a T account ledger based upon the Chart of Accounts.

2. Journalize each January transaction in the general journal.

3. Post each entry from the journal to the ledger

4. Create an unadjusted trial balance on an end-of-period spreadsheet (worksheet) and complete the worksheet using the following adjustment data:

a.Insurance coverage expired during January $600.

b.Supplies on hand on Jan.31 $850.

c.Depreciation of office equipment for the month $200.

d.Accrued salary expense for receptionist at Jan.31 $420.

e.Rent expired during January $2,400.

f.Deferred fees revenueas of January31 $1,750.

g.Record accrued interest on note.Assume 360-day year.Round amount to nearest cent.

5. Use the completed end-of-period spreadsheet to journalize and post adjusting entries.

6. Use the completed end-of-period spreadsheet to prepare required end-of-month financial statements:statement of net income and comprehensive income, statement of shareholders' equity, classified balance sheet, and statement of cash flows by the indirect method.(NOTE:There were no other comprehensive income gains or losses in the current year.)

7. Journalize and post necessary closing entries. The company uses the temporary income summary account.

8. Create a post-closing trial balance.