ACCT 3110 Practice Case Instructions - Case will be worked individually and submitted, electronically, in typed format on April 14, 2019 by 10 pm CT in Blackboard. Students have check figures given at the end of each respective month. Students are to download the Excel worksheets to use for journal entries and t-accounts and also utilize Excel for trial balances and financial statements. Students are to complete journal entries for each month, including adjusting and closing, trial balances, and financial statements consisting of Income Statement, Statement of Retained Earnings, and Balance Sheet in classified format. The minimum chart of accounts for the Deal Cleaning Corporation practice case is the following (more or less may be used): Assets - Cash, Accounts Receivable - Regular Customers, Accounts Receivable - Warhawk Gym, Prepaid Insurance, Supplies, Cleaning Equipment, Truck and Land. Liabilities - Accounts Payable - Home Improvement, Accounts Payable - Big Sparkle, Notes Payable- Land, Notes Payable - Truck, Unearned Service Revenue Stockholder's Equity - Common Stock, Retained Earnings, Dividends - Jack Deal Revenue - Service Revenue, Sales Discounts Expenses - Auto Expense, Insurance Expense, Office Expense, Organization Expense, Rent Expense, Salary and Wage Expense . . Date November 1, 2017 Event Jack Deal created Deal's Cleaning Service Corporation and hired a lawyer to perform the incorporation for a fee of $500. The par value of the common stock will be $1 per share and 50,000 shares are authorized in the charter of incorporation. Jack purchased 20,000 shares of the corporation's common stock for $20,000 using his personal funds. The corporation will operate an office cleaning service business in Pike Road, Alabama. The business will prepare financial statements on a monthly basis and calculate depreciation/amortization at June 30 and December 31, respectively, using the straight-line method. Any fixed assets purchased during the month are treated as if purchased at beginning of month. Interest is accrued at year-end and when paid. Jack paid the lawyer the incorporation fee. The investors of the Deal's Cleaning Service appointed three individuals to the company's Board of Directors. The board will meet once every quarter to review the operations and set overall policy for the company, but it will not be involved in the day to day operations. Jack is appointed CEO of the corporation. The board appointed a clerk-secretary to assist Jack in his duties. The clerk-secretary will not receive any compensation. Jack is allowed to draw up to $1500 per month as a personal dividend but the Board will decide to pay shareholders a normal dividend. Later in the day, two other investors purchased common shares of Deal's Cleaning Service Corporation. Investor #2 purchased 2,000 shares for $2,000 and Investor #3 purchased 3,000 shares for $3,000. Deal purchased a 1-year insurance policy effective immediately. The policy is for the bonding of employees (51300 annually) and insurance for the business and temporary headquarters ($500 annually). Deal pays for the insurance policy in cash. A new investor supplied 2 acres of land in exchange for common stock and a mortgage note. The land has been appraised at 570,000 and the investor received 10,000 shares of stock and a note with a face value of $60,000. The note requires Deal's Cleaning Service to pay interest at a rate of 10% per year and the principal is due in five years. Interest is due each year on Nov 1. Deal purchases a used truck for $10,000 paying $2,000 cash and the balance in a notes payable. The terms of the note are monthly payments for 4 years with a 5% annual interest November 1, 2017 November 1, 2017 November 1, 2017 November 1, 2017 rate. Jack fills up the truck with gasoline at a cost of $47. Jack decides that the truck will be useful for 4 years with a residual value of $1000. Simple interest is used for calculation of monthly payments and is not accrued until the 1" of the month when the payment is made. November 1, 2017 Jack purchases annual insurance for truck at a cost of $600 which he paid in cash. Deal signs up 14 weekly customers at a rate of $120 per week and 8 customers who will require cleaning every 2 weeks for a rate of $150 per service. Customers are to be billed on 15th of month and at end of month with a 2% cash discount if paid within 3 days of billing, otherwise, the balance is due with 10 days of billing. Cleaning will be split between Vic and Emelia equally. Weekly and bi-weekly cleaning will commence on November 16, 2017 after November 6, 2017 Jack hires employees. After going through several interviews, Jack hires an office manager, Linda, and two cleaning staff, Emelia and Vic. The cleaning personnel will each earn $12.00 per hour and the manager will earn $800 at every payday. All employees will work an eight-hour day, 5 days per week and will be paid on the 15" and last day of the month. Employees are aware that they may have to work weekends for overtime rate at 1.5 times their hourly wages. At present, the employees will be treated as if they are contract employees and no taxes will be taken out of November 13, 2017 payroll. Employees are scheduled to begin work on November 16, 2017. Deal's Cleaning Service agrees to rent a trailer that it will use as a temporary office. The rental cost, as determined by Ferry Company, the lessor, will be $250 per month. Ferry will prorate this month's rent using a November 15 start date. Deal pays November rent. In the future, November 15, 2017 rent will be due and paid at the first of the month. November 15, 2017 Investor #2 sells 500 shares of Deal's Cleaning Service stock to his younger sister for $500. Jack hires Ingram Home Improvement Store to quickly outfit the trailer with office furniture and chairs and laptop at a cost of $1800 on account. Deal's payment terms are n/eem. The laptop is less than $600 so Jack decides to expense the laptop in accordance with current November 15, 2017 Section 179 IRS rules instead of capitalizing the asset. November 15, 2017 Jack purchases shirts for himself and company employees from Graphic Designs for $75. Deal's Cleaning Service applies for credit to Big Sparkle Company. Since this is a brand new November 15, 2017 business and has no history of operations, Big Sparkle agrees to a $5,000 limit. Jack purchases cleaning supplies from Big Sparkle Company totaling $6,200. After reaching the set credit limit, Deal paid cash for the balance of the purchase. Terms are n/somSupplies November 17, 2017 will be a prepaid expense and inventory of supplies taken at June 30 and December 31. Jack receives the company's first large corporate cleaning job cleaning the Warhawk Gym for $2,800 after a basketball game. Vic and Emelia provide cleaning that night and Warhawk Gym is billed for the service with terms of 1/10,n/com. Both Vic and Emelia work 4 hours November 17, 2017 Overtime for this job. Jack is contacted to clean up for a local church after a wedding party on November 18, 2017. Since the job was last-minute notice, Deal negotiates a $3000 fee and tells both Emelia and Vic to handle the job the same day. Since Vic needed to polish the floors, Vic works 3 hours and Emelia works 2 hours after the wedding. The church wires Deal's Cleaning Corporation's bank November 17, 2017 account $3000 the same day as the job. The church has a floor polishing machine. November 20, 2017 Jack fills up the company truck with gasoline at a cost of $39. Jack is contacted by Lane who will be hosting an Iron Bowl party at his residence on Saturday, November 25, 2017. Lane needs cleaning services on Sunday, November 26, 2017. Jack November 20, 2017 negotiates a $750 fee and Lane pays Jack on November 20, 2017. November 23, 2017 Jack gives personnel a paid holiday. Since the company does not have a leave policy in place yet, this holiday will not affect payroll at end of month. November 26, 2017 Vic and Emelia work 3 hours each to clean up after the Iron Bowl party. Jack purchases gas for the truck for $46. On the way home, Jack decides he needs to pay his own personal bills so he draws $1200 for personal use from the business. Linda calls Jack to November 27, 2017 inform him that Warhawk Gym has paid their bill within the discount period. Jack negotiates a deep cleaning of a bathtub at the home of the Smith family for that afternoon. He is paid $250 for this service. Jack purchases a special tool to complete this cleaning at Lowe's for $2000 and pays cash. Vic completes the service by 5:00 pm. Jack asks one of the store managers their opinion on the useful life of the tool and they give him an estimate of 3 years with 50 residual value. Jack determines that he will use that estimate for November 29, 2017 depreciation purposes for the tool. The office manager completes payroll for Jack's review including the overtime pay for jobs after hours for Vic and Emelia. Jack pays the office manager and cleaning crew for their time November 30, 2017 work since November 16, 2017. The office manager bills weekly and bi-weekly customers for service, pays accounts payable balances due, and completes adjusting and closing end of month journal entries and prepares a trial balance and financial statements for Jack's review. Check figures - Retained Earnings November 30, 2017 balance for balance sheet is equal to $4126 and Total Assets are $107,126 December 1, 2017 The office manager pays the beginning of the month expenses. Deal signs up 6 more weekly customers at a rate of $120 per week and 6 customers who will require cleaning every 2 weeks for a rate of $150 per service. Customer terms are same as December 1, 2017 those signed up in November. Ten of the weekly customers and 4 of the bi-weekly customers pay their balance through a December 3, 2017 bank wire deposit by the end of the day. December 4, 2017 Jack purchases $52 in gas for the truck. Jack is contacted by the church they cleaned up after the wedding on November 18, 2017. The church and Jack negotiate for Emelia and Vic to clean the church each Sunday night in December through December 24 for a rate of $400 per cleaning. The church pays the balance December 5, 2017 The remaining eight customers pay their balance from the November 30 billing through a bank December 10, 2017 wire. December 10, 2017 Vic and Emelia work 3 hours each to clean up church after evening service. Jack is contacted by the Smith family who wants a deep cleaning of all the tile in their house as well as their patio. Jack negotiates a $1420 price and Vic completes the job by end of December 13, 2017 December 15, 2017. Smith pays on 12/15/17 before Vic starts the job. December 15, 2017 Linda prepares the payroll and bills the customers per Jack's instructions. Warhawk Gym needs another cleaning after the Saturday graduation ceremonies. Jack negotiates a price of $2300 for 12/16/17 and Warhawk Gym is billed for the service with terms of 2/10,n/com. The gym asks that the floors be polished so Jack goes to Home Depot and buys equipment that costs $1200 and according to the salesman will probably last 24 months December 15, 2017 with $0 residual value. Jack pays cash. After the graduation, Vic works 5 hours and Emelia worked 3 hours on the job. Vic works December 16, 2017 longer since he has to polish the floors. December 17, 2017 Vic and Emelia work 3 hours each to clean up church after evening service and musical. Linda receives payments from 12 of the weekly customers and 8 of the biweekly customers by December 18, 2017 end of the day. up front. Jack goes to Big Sparkle to purchase supplies for S1920 on account. Jack goes by Office Depot December 19, 2017 and purchases paper, ink, and coffee for office and pays $197 in cash. Guardian Credit Union contracts with Jack to clean their office after their annual Christmas December 21, 2017 Open House on December 22, 2017. Jack receives S1500 for the job. Jack purchases gas for the company truck at $48 and draws out $1500 from the business December 22, 2017 account since he needs to buy Christmas gifts for his family as well as pay monthly bills. December 23, 2017 Vic and Emelia work 3 hours each to clean the bank office after the Christmas Open House. Vic and Emelia work 4 hours each to clean up church after evening service and candlelight December 24, 2017 service. Wax from candles was hard to remove from the carpet and choir chairs. December 25, 2017 Jack gives the office staff and cleaning crew both Christmas and the next day a paid holiday. The customers billed on December 15, 2017 that did not take the discount wire their payments December 25, 2017 to the Deal Cleaning Corporation business account. The Lane family asks Jack to send Vic out on Friday to deep clean their kitchen tile after they saw the Smith family tile after cleaning at the Smith Christmas party. Jack negotiates a price of December 28, 2017 $1750 since its last minute and asks that the bill be paid by end of month. December 29, 2017 Vic performs the job for the Lane family by 5 pm. Since December 31 is a holiday and January 1 is a holiday, Jack instructs Linda to go ahead and prepare and pay payroll (and act as if through 31"), bill customers, pays balances on accounts, performs adjusting and closing entries, and prepare monthly financials. Jack tells Linda that he has counted $2370 in supplies. Jack gives January 1 as a holiday. The Warhawk payment is December 29, 2017 also received on December 29. December 31, 2017 Check Figures are Retained Earnings $10422 and Total Assets are $114255. ACCT 3110 Practice Case Instructions - Case will be worked individually and submitted, electronically, in typed format on April 14, 2019 by 10 pm CT in Blackboard. Students have check figures given at the end of each respective month. Students are to download the Excel worksheets to use for journal entries and t-accounts and also utilize Excel for trial balances and financial statements. Students are to complete journal entries for each month, including adjusting and closing, trial balances, and financial statements consisting of Income Statement, Statement of Retained Earnings, and Balance Sheet in classified format. The minimum chart of accounts for the Deal Cleaning Corporation practice case is the following (more or less may be used): Assets - Cash, Accounts Receivable - Regular Customers, Accounts Receivable - Warhawk Gym, Prepaid Insurance, Supplies, Cleaning Equipment, Truck and Land. Liabilities - Accounts Payable - Home Improvement, Accounts Payable - Big Sparkle, Notes Payable- Land, Notes Payable - Truck, Unearned Service Revenue Stockholder's Equity - Common Stock, Retained Earnings, Dividends - Jack Deal Revenue - Service Revenue, Sales Discounts Expenses - Auto Expense, Insurance Expense, Office Expense, Organization Expense, Rent Expense, Salary and Wage Expense . . Date November 1, 2017 Event Jack Deal created Deal's Cleaning Service Corporation and hired a lawyer to perform the incorporation for a fee of $500. The par value of the common stock will be $1 per share and 50,000 shares are authorized in the charter of incorporation. Jack purchased 20,000 shares of the corporation's common stock for $20,000 using his personal funds. The corporation will operate an office cleaning service business in Pike Road, Alabama. The business will prepare financial statements on a monthly basis and calculate depreciation/amortization at June 30 and December 31, respectively, using the straight-line method. Any fixed assets purchased during the month are treated as if purchased at beginning of month. Interest is accrued at year-end and when paid. Jack paid the lawyer the incorporation fee. The investors of the Deal's Cleaning Service appointed three individuals to the company's Board of Directors. The board will meet once every quarter to review the operations and set overall policy for the company, but it will not be involved in the day to day operations. Jack is appointed CEO of the corporation. The board appointed a clerk-secretary to assist Jack in his duties. The clerk-secretary will not receive any compensation. Jack is allowed to draw up to $1500 per month as a personal dividend but the Board will decide to pay shareholders a normal dividend. Later in the day, two other investors purchased common shares of Deal's Cleaning Service Corporation. Investor #2 purchased 2,000 shares for $2,000 and Investor #3 purchased 3,000 shares for $3,000. Deal purchased a 1-year insurance policy effective immediately. The policy is for the bonding of employees (51300 annually) and insurance for the business and temporary headquarters ($500 annually). Deal pays for the insurance policy in cash. A new investor supplied 2 acres of land in exchange for common stock and a mortgage note. The land has been appraised at 570,000 and the investor received 10,000 shares of stock and a note with a face value of $60,000. The note requires Deal's Cleaning Service to pay interest at a rate of 10% per year and the principal is due in five years. Interest is due each year on Nov 1. Deal purchases a used truck for $10,000 paying $2,000 cash and the balance in a notes payable. The terms of the note are monthly payments for 4 years with a 5% annual interest November 1, 2017 November 1, 2017 November 1, 2017 November 1, 2017 rate. Jack fills up the truck with gasoline at a cost of $47. Jack decides that the truck will be useful for 4 years with a residual value of $1000. Simple interest is used for calculation of monthly payments and is not accrued until the 1" of the month when the payment is made. November 1, 2017 Jack purchases annual insurance for truck at a cost of $600 which he paid in cash. Deal signs up 14 weekly customers at a rate of $120 per week and 8 customers who will require cleaning every 2 weeks for a rate of $150 per service. Customers are to be billed on 15th of month and at end of month with a 2% cash discount if paid within 3 days of billing, otherwise, the balance is due with 10 days of billing. Cleaning will be split between Vic and Emelia equally. Weekly and bi-weekly cleaning will commence on November 16, 2017 after November 6, 2017 Jack hires employees. After going through several interviews, Jack hires an office manager, Linda, and two cleaning staff, Emelia and Vic. The cleaning personnel will each earn $12.00 per hour and the manager will earn $800 at every payday. All employees will work an eight-hour day, 5 days per week and will be paid on the 15" and last day of the month. Employees are aware that they may have to work weekends for overtime rate at 1.5 times their hourly wages. At present, the employees will be treated as if they are contract employees and no taxes will be taken out of November 13, 2017 payroll. Employees are scheduled to begin work on November 16, 2017. Deal's Cleaning Service agrees to rent a trailer that it will use as a temporary office. The rental cost, as determined by Ferry Company, the lessor, will be $250 per month. Ferry will prorate this month's rent using a November 15 start date. Deal pays November rent. In the future, November 15, 2017 rent will be due and paid at the first of the month. November 15, 2017 Investor #2 sells 500 shares of Deal's Cleaning Service stock to his younger sister for $500. Jack hires Ingram Home Improvement Store to quickly outfit the trailer with office furniture and chairs and laptop at a cost of $1800 on account. Deal's payment terms are n/eem. The laptop is less than $600 so Jack decides to expense the laptop in accordance with current November 15, 2017 Section 179 IRS rules instead of capitalizing the asset. November 15, 2017 Jack purchases shirts for himself and company employees from Graphic Designs for $75. Deal's Cleaning Service applies for credit to Big Sparkle Company. Since this is a brand new November 15, 2017 business and has no history of operations, Big Sparkle agrees to a $5,000 limit. Jack purchases cleaning supplies from Big Sparkle Company totaling $6,200. After reaching the set credit limit, Deal paid cash for the balance of the purchase. Terms are n/somSupplies November 17, 2017 will be a prepaid expense and inventory of supplies taken at June 30 and December 31. Jack receives the company's first large corporate cleaning job cleaning the Warhawk Gym for $2,800 after a basketball game. Vic and Emelia provide cleaning that night and Warhawk Gym is billed for the service with terms of 1/10,n/com. Both Vic and Emelia work 4 hours November 17, 2017 Overtime for this job. Jack is contacted to clean up for a local church after a wedding party on November 18, 2017. Since the job was last-minute notice, Deal negotiates a $3000 fee and tells both Emelia and Vic to handle the job the same day. Since Vic needed to polish the floors, Vic works 3 hours and Emelia works 2 hours after the wedding. The church wires Deal's Cleaning Corporation's bank November 17, 2017 account $3000 the same day as the job. The church has a floor polishing machine. November 20, 2017 Jack fills up the company truck with gasoline at a cost of $39. Jack is contacted by Lane who will be hosting an Iron Bowl party at his residence on Saturday, November 25, 2017. Lane needs cleaning services on Sunday, November 26, 2017. Jack November 20, 2017 negotiates a $750 fee and Lane pays Jack on November 20, 2017. November 23, 2017 Jack gives personnel a paid holiday. Since the company does not have a leave policy in place yet, this holiday will not affect payroll at end of month. November 26, 2017 Vic and Emelia work 3 hours each to clean up after the Iron Bowl party. Jack purchases gas for the truck for $46. On the way home, Jack decides he needs to pay his own personal bills so he draws $1200 for personal use from the business. Linda calls Jack to November 27, 2017 inform him that Warhawk Gym has paid their bill within the discount period. Jack negotiates a deep cleaning of a bathtub at the home of the Smith family for that afternoon. He is paid $250 for this service. Jack purchases a special tool to complete this cleaning at Lowe's for $2000 and pays cash. Vic completes the service by 5:00 pm. Jack asks one of the store managers their opinion on the useful life of the tool and they give him an estimate of 3 years with 50 residual value. Jack determines that he will use that estimate for November 29, 2017 depreciation purposes for the tool. The office manager completes payroll for Jack's review including the overtime pay for jobs after hours for Vic and Emelia. Jack pays the office manager and cleaning crew for their time November 30, 2017 work since November 16, 2017. The office manager bills weekly and bi-weekly customers for service, pays accounts payable balances due, and completes adjusting and closing end of month journal entries and prepares a trial balance and financial statements for Jack's review. Check figures - Retained Earnings November 30, 2017 balance for balance sheet is equal to $4126 and Total Assets are $107,126 December 1, 2017 The office manager pays the beginning of the month expenses. Deal signs up 6 more weekly customers at a rate of $120 per week and 6 customers who will require cleaning every 2 weeks for a rate of $150 per service. Customer terms are same as December 1, 2017 those signed up in November. Ten of the weekly customers and 4 of the bi-weekly customers pay their balance through a December 3, 2017 bank wire deposit by the end of the day. December 4, 2017 Jack purchases $52 in gas for the truck. Jack is contacted by the church they cleaned up after the wedding on November 18, 2017. The church and Jack negotiate for Emelia and Vic to clean the church each Sunday night in December through December 24 for a rate of $400 per cleaning. The church pays the balance December 5, 2017 The remaining eight customers pay their balance from the November 30 billing through a bank December 10, 2017 wire. December 10, 2017 Vic and Emelia work 3 hours each to clean up church after evening service. Jack is contacted by the Smith family who wants a deep cleaning of all the tile in their house as well as their patio. Jack negotiates a $1420 price and Vic completes the job by end of December 13, 2017 December 15, 2017. Smith pays on 12/15/17 before Vic starts the job. December 15, 2017 Linda prepares the payroll and bills the customers per Jack's instructions. Warhawk Gym needs another cleaning after the Saturday graduation ceremonies. Jack negotiates a price of $2300 for 12/16/17 and Warhawk Gym is billed for the service with terms of 2/10,n/com. The gym asks that the floors be polished so Jack goes to Home Depot and buys equipment that costs $1200 and according to the salesman will probably last 24 months December 15, 2017 with $0 residual value. Jack pays cash. After the graduation, Vic works 5 hours and Emelia worked 3 hours on the job. Vic works December 16, 2017 longer since he has to polish the floors. December 17, 2017 Vic and Emelia work 3 hours each to clean up church after evening service and musical. Linda receives payments from 12 of the weekly customers and 8 of the biweekly customers by December 18, 2017 end of the day. up front. Jack goes to Big Sparkle to purchase supplies for S1920 on account. Jack goes by Office Depot December 19, 2017 and purchases paper, ink, and coffee for office and pays $197 in cash. Guardian Credit Union contracts with Jack to clean their office after their annual Christmas December 21, 2017 Open House on December 22, 2017. Jack receives S1500 for the job. Jack purchases gas for the company truck at $48 and draws out $1500 from the business December 22, 2017 account since he needs to buy Christmas gifts for his family as well as pay monthly bills. December 23, 2017 Vic and Emelia work 3 hours each to clean the bank office after the Christmas Open House. Vic and Emelia work 4 hours each to clean up church after evening service and candlelight December 24, 2017 service. Wax from candles was hard to remove from the carpet and choir chairs. December 25, 2017 Jack gives the office staff and cleaning crew both Christmas and the next day a paid holiday. The customers billed on December 15, 2017 that did not take the discount wire their payments December 25, 2017 to the Deal Cleaning Corporation business account. The Lane family asks Jack to send Vic out on Friday to deep clean their kitchen tile after they saw the Smith family tile after cleaning at the Smith Christmas party. Jack negotiates a price of December 28, 2017 $1750 since its last minute and asks that the bill be paid by end of month. December 29, 2017 Vic performs the job for the Lane family by 5 pm. Since December 31 is a holiday and January 1 is a holiday, Jack instructs Linda to go ahead and prepare and pay payroll (and act as if through 31"), bill customers, pays balances on accounts, performs adjusting and closing entries, and prepare monthly financials. Jack tells Linda that he has counted $2370 in supplies. Jack gives January 1 as a holiday. The Warhawk payment is December 29, 2017 also received on December 29. December 31, 2017 Check Figures are Retained Earnings $10422 and Total Assets are $114255