Accounting cycle project. see attachment. 45$

Page 1 of 19 Business 1A Accounting Cycle Project Name: ______________________________ On October 1, 2013, Adrian Lopez launched a computer services company, Success Systems, which is organized as a corporation and provides consulting services, computer system installations, and custom program development. Lopez adopts the calendar year for reporting purposes and expects to prepare the company's first set of financial statements on December 31, 2013. A list of business transactions for the months of October to December: Oct. 1 Adrian Lopez invested $55,000 cash, a $20,000 computer system, and $8,000 of office equipment in the company in exchange for its common stock. 2 The company paid $3,300 cash for four months' rent. (Hint: Debit Prepaid Rent for $3,300.) 3 The company purchased $1,420 of computer supplies on credit from Harris Office Products. 5 The company paid $2,220 cash for one year's premium on a property and liability insurance policy. (Hint: Debit Prepaid Insurance for $2,220.) 6 The company billed Easy Leasing $4,800 for services performed in installing a new Web server. 8 The company paid $1,420 cash for the computer supplies purchased from Harris Office Products on Oct 3 10 The company hired Lyn Addie as a part-time assistant for $125 per day, as needed. 12 The company billed Easy Leasing another $1,400 for services performed. 15 The company received $4,800 cash from Easy Leasing as partial payment on its account. 17 The company paid $805 cash to repair computer equipment that was damaged when moving it. 20 The company paid $1,940 cash for advertisements published in the local newspaper. 22 The company received $1,400 cash from Easy Leasing on its account. 28 The company billed IFM Company $5,208 for services performed. 31 The company paid $875 cash for Lyn Addie's wages for seven days' work. 31 The company paid $3,600 cash in dividends. Nov. 1 The company reimbursed Adrian Lopez in cash for business automobile mileage allowance (Lopez logged 1,000 miles at $0.32 per mile). 2 The company received $4,633 cash from Liu Corporation for computer services performed. 5 The company purchased computer supplies for $1,125 cash from Harris Office Products. 8 The company billed Gomez Co. $5,668 for services performed. 13 The company received notification from Alex's Engineering Co. that Success Systems' bid of $3,950 for an upcoming project is accepted. 18 The company received $2,208 cash from IFM Company as partial payment of the October 28 bill. 22 The company donated $250 cash to the United Way in the company's name. 24 The company completed work for Alex's Engineering Co. and sent it a bill for $3,950. 25 The company sent another bill to IFM Company for the past-due amount of $3,000. 28 The company reimbursed Adrian Lopez in cash for business automobile mileage (1,200 miles at $0.32/mile) 31 The company paid $1,750 cash for Lyn Addie's wages for 14 days' work. 31 The company paid $2,000 cash in dividends. Dec. 2 Paid $1,025 cash to Hillside Mall for Success Systems' share of mall advertising costs. 3 Paid $500 cash for minor repairs to the company's computer. 4 Received $3,950 cash from Alex's Engineering Co. for the receivable from November. 10 Paid cash to Lyn Addie for six days of work at the rate of $125 per day. 14 Notified by Alex's Engineering Co. that Success Systems' bid of $7,000 on a proposed project has been accepted. Alex's paid a $1,500 cash advance to Success Systems. 15 Purchased $1,100 of computer supplies on credit from Harris Office Products. 16 Sent a reminder to Gomez Co. to pay the fee for services recorded on November 8. 20 Completed a project for Liu Corporation and received $5,625 cash. 22-26 Took the week off for the holidays. 28 Received $3,000 cash from Gomez Co. on its receivable. 29 Reimbursed A. Lopez for business automobile mileage (600 miles at $0.32 per mile). 31 The business paid $1,500 cash for dividends. Page 2 of 19 Requirements: Step 1: Journalize each of the business recordable transactions for the months of October to December in the General Journal starting on page 3. You may omit explanations of the transactions. Skip a line between eah set of journal entries. (Hint: Enter 'No Entry required' OR do not make journal entries for non-recordable business tranactions) Step 2: Post from General Journal to General Ledger for all affected accounts on pages 7 to 13. Company Chart of Account: Account Cash Accounts Receivable Computer Supplies Prepaid Insurance Prepaid Rent Office Equipment Accumulated Depreciation- Office Equpment Computer Equipment Accumulated Depreciation- Computer Equiment Accounts Payable Wages Payable Unearned Computer Services Revenue Common Stock No. 101 106 126 128 131 163 164 167 168 201 210 236 307 Account Retained Earnings Dividends Computer Service Revenue Depreciation Expense- Office Equipment Depreciation Expense- Computer Equipment Wages Expense Insurance Expense Rent Expense Computer Supplies Expense Advertising Expense Mileage Expense Miscellaneous Expenses Repair Expense - Computer Income Summary No. 318 319 403 612 613 623 637 640 652 655 676 677 684 901 Step 3: Prepare the Trial Balance on page 14. Step 4: The following additional facts are collected for use in making adjusting entries on December 31 prior to preparing financial statements for the company's first three months. Journalize the following adjusting journal entries in the General Journal on page 6 and then post them to the General Ledger Accounts. The December 31 inventory count of computer supplies shows $580 still available. Three months have expired since the 12-month insurance premium was paid in advance. As of December 31, Lyn Addie has not been paid for four days of work at $125 per day. The computer system, acquired on October 1, is expected to have a four-year life with no salvage value. The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value. Three of the four months' prepaid rent has expired. Step 5: Prepare the Adjusted Trial Balance on page 15. Step 6: Prepare the 3 Financial Statements on December 31 on pages 16 to 17. (Hint: Use a 3 month period for Income Statement and Statement of Retained Earnings; use a date for the Balance Sheet) Step 7: Journalize the closing journal entries in the General Journal on page 6 and then post to the General Ledger Accounts. Step 8: Prepare the Post-Closing Trial Balance on page 18. Step 9: Using the completed financial statements from Step 7, Analyze questions found on page 19. Page 3 of 19 General Journal Date Account Titles J1 REF. Debit Credit Page 4 of 19 General Journal Date Account Titles J2 REF. Debit Credit Page 5 of 19 General Journal Date Account Titles J3 REF. Debit Credit Page 6 of 19 General Journal Date Account Titles J4 REF. Debit Credit Page 7 of 19 General Ledger Accounts: Cash Account No. 101 Date Explanation Ref. Debit Credit Balance Page 8 of 19 Accounts Receivable Account No. 106 Date Explanation Ref. Debit Credit Balance Computer Supplies Account No. 126 Date Explanation Ref. Debit Credit Balance Prepaid Insurance Account No. 128 Date Explanation Ref. Debit Credit Balance Page 9 of 19 Repaid Rent Account No. 131 Date Explanation Ref. Debit Credit Balance Office Equipment Account No. 163 Date Explanation Ref. Debit Credit Balance Accumulated Depreciation - Office Equipment Account No. 164 Date Explanation Ref. Debit Credit Balance Computer Equipment Account No. 167 Date Explanation Ref. Debit Credit Balance Accumulated Depreciation - Computer Equipment Account No. 168 Date Explanation Ref. Debit Credit Balance Page 10 of 19 Accounts Payable Account No. 201 Date Explanation Ref. Debit Credit Balance Wages Payable Account No. 210 Date Explanation Ref. Debit Credit Balance Unearned Computer Services Revenue Account No. 236 Date Explanation Ref. Debit Credit Balance Common Stock Account No. 307 Date Explanation Ref. Debit Credit Balance Retained Earnings Account No. 318 Date Explanation Ref. Debit Credit Balance Page 11 of 19 Dividends Account No. 319 Date Explanation Ref. Debit Credit Balance Computer Service Revenue Account No. 403 Date Explanation Ref. Debit Credit Balance Decpreciation Expense - Office Equipment Account No. 612 Date Explanation Ref. Debit Credit Balance Depreciation Expense - Computer Equipment Account No. 613 Date Explanation Ref. Wages Expense Debit Credit Balance Account No. 623 Page 12 of 19 Date Explanation Ref. Debit Credit Balance Insurance Expense Account No. 637 Date Explanation Ref. Debit Credit Balance Rent Expense Account No. 640 Date Explanation Ref. Debit Credit Balance Computer Supplies Expense Account No. 652 Date Explanation Ref. Debit Credit Balance Advertising Expense Account No. 655 Date Explanation Ref. Debit Credit Balance Page 13 of 19 Mileage Expense Account No. 676 Date Explanation Ref. Debit Credit Balance Miscellaneous Expense Account No. 677 Date Explanation Ref. Debit Credit Balance Repair Expense - Computer Account No. 684 Date Explanation Ref. Debit Credit Balance Income Summary Account No. 901 Date Explanation Ref. Debit Credit Balance Page 14 of 19 Step 3: Prepare a trial balance (don't forget the 3 lines heading at the top and totals at the bottom) Do not list accounts that have no (zero) balances. _______________________________________ _______________________________________ _______________________________________ Page 15 of 19 Step 5: Prepare an adjusted trial balance (don't forget the 3 lines heading at the top and totals at the bottom). Do not list accounts that have no (zero) balances. _______________________________________ _______________________________________ _______________________________________ Page 16 of 19 Step 6: For all 3 financial statements, use proper headings and format, start with Income Statement, followed by Statement of Retained Earnings, then the Balance Sheet _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ Page 17 of 19 _______________________________________ _______________________________________ _______________________________________ Assets Liabilities and Owners' Equity Page 18 of 19 Step 8: Prepare a post-closing trial balance (don't forget the 3 lines heading at the top and totals at the bottom). Do not list accounts that have no (zero) balances. _______________________________________ _______________________________________ _______________________________________ Page 19 of 19 Step 9: Using the completed financial statements, Analyze the following questions. Write in your answers in the space provided. A. Using the prepared Balance Sheet, determine the amounts of current assets: __________________ noncurrent assets: __________________ current liabilities: __________________ noncurrent liabilities: __________________ B. Using appropriate financial statements, calculate the ratios below (must show all calculations; express the ratios as percentages rounded to the nearest tenth): Return on Assets (remember this is a brand new company, the previous year's total assets were 0): Debt Ratio: Profit Margin: C. Assume that the industry averages are as follows: Return on Assets is 16.5%, Debt Ratio is 45.0%, and Profit Margin is 37.6%. For each ratio you calculated in part B, explain (1) how the company is doing compared to the industry and (2) what does each ratio mean/what does it show? Return on Assets (remember this is a brand new company, the previous year's total assets were 0): Debt Ratio: Profit Margin: End of Project