ASSIGNMENT 19 d. $30 worth of office supplies has been used in January. e. $80 in salaries payable has accrued, although the salary will actually be paid in February. Steps in Accounting Cycle: 1. Journalize and post all daily transactions, beginning with the December 1 transaction. 2. Prepare trial balance. 3. Prepare worksheet. 4. Prepare financial statements. 5. Journalize and post adjusting entries. 6. Journalize and post closing entries. 7. Prepare post-closing trial balance. 8. Journalize and post reversing entries. Complete all the steps in the accounting cycle for Penelope Francis, Branding Specialist. Remember that the last three steps in the accounting cycle are done only once a year; however, for purposes of this assignment, complete them all because Penelope's year end is December 31 even though she just started her business on December 1. Problem 19-1: Complete all the steps in the accounting cycle. On December 1, XXX1, Penelope opens her own dental hygiene practice. During the month of December, she has the following transactions: December 1 Penelope opens her own dental hygiene practice with an investment of $20,000 from her personal savings account. December 2 Penelope pays $4,500 for 3 months' rent (December XXX1 through February XXX2) in advance for a fully equipped office with telephone service. December 3 Penelope purchases uniforms for $150 in cash (Uniform Expense). December 4 She pays $2,400 in cash for one year's liability insurance (December XXX1 through November XXX2). December 5 She purchases medical supplies for $1,500 in cash (Medical Supplies). December 6 Income from fees received in cash for the week totals $100. December 9 Penelope purchases $300 worth of office supplies (billing forms and calling cards) for cash from Office Max (Office Supplies). December 13 Penelope pays her bookkeeper/secretary $200 salary in cash. December 13 She bills the Beverly School (Beverly) $400 for services rendered (4 lectures and demonstrations on oral hygiene). December 13 Income from fees received during the week in cash totals $300. December 16 Penelope pays $85 in cash for telephone expense. December 17 She pays an accountant $500 to design an accounting system for her business (Accounting and Legal Expense). December 18 She purchases embossed toothbrushes to give away to patients for $100 (Promotion Expense). December 20 She pays the bookkeeper/secretary $200 salary in cash. December 20 She withdraws $1,000 in cash for personal expenses. December 20 Income from fees received in cash for the week totals $400. December 24 Penelope pays the monthly maintenance charge of $500 in cash. December 27 She pays her bookkeeper/secretary $200 salary in cash. December 27 Income from fees received in cash for the week totals $400. The following adjustment information is provided on December 31st: a. An inventory shows $1,300 worth of medical supplies in house. b. One month's prepaid rent (for January) has expired. c. One month's insurance coverage (for January) has expired. Problem 19-1 Journal Entries Problem 19-1 (continued) Journal Entries GENERAL JOURNAL Page 1 ACCOUNTS AND EXPLANATION Daily Entries REF. DEBIT CREDIT GENERAL JOURNAL Page 2 ACCOUNTS AND EXPLANATION Daily Entries (continued) REF. DEBIT CREDIT XXX1 Dec. 1 Opened practice as dental hygienist Paid for telephone and internet services Paid rent for December through February Paid for accounting system set-up TUTTITUTI Purchased uniforms Purchased toothbrushes, picks, and floss Paid one year of liability insurance coverage Paid weekly salary for bookkeeper/secretary 20 Purchased medical supplies Penelope withdrew cash for personal use Fee income for week ending December 6 Fee income for week ending January 20 Purchased office supplies Paid monthly maintenance charge Paid weekly salary for bookkeeper/secretary Paid weekly salary for bookkeeper/secretary Billed Beverly for lectures and demonstrations Fee income for week ending January 27 T T Fee income for week ending December 13 | Note: After completing the journal entries, post them to the general ledger accounts on pages 10-14. Then come back to the following page 4 and prepare the Trial Balance from the General Ledger account balances. Problem 19-1 Trial Balance (Unadjusted) Income Statement Debit Credit Balance Sheet Debit Credit Accounts Cash Account Receivable - Beverly Medical Supplies Prepaid Rent Prepaid Insurance Office Supplies P. Francis, Capital P. Francis, Drawing Income from Fees Salary Expense Telephone and Internet Expense Uniform Expense Accounting and Legal Expense Promotion Expense Maintenance Expense Totals Problem 19-1 (continued) Worksheet Penelope Francis, Branding Specialist Worksheet For the Month Ended December 31, XXX1 Trial Balance | Adjustments Adiusted Trial Balance | Debit Credit Debit Credit Debit Credit 9,565 400 1.500 4,500 2,400 300 20.000 1,000 1,600 600 85 150 500 100 500 21,600 21,600 Note: Check your Trial balance totals against the Trial Balance totals included on the Worksheet on the next page. Note: Now prepare the worksheet, entering the trial balance amounts from in the first two columns of the worksheet. Note: In this assignment, the company has a net loss. The net loss is added back to the smaller of the two Income Statement totals and the smaller of the two Balance Sheet columns, which is the inner two columns Note: Using the worksheet on the previous page (page 5), complete the Income Statement, Statement of Owner Equity, and the Balance Sheet (classified/report form). Problem 19-1 (continued) Income Statement Problem 19-1 (continued) Balance Sheet Penelope Francis, Branding Specialist Balance Sheet December 31, XXX1 Note: Using the worksheet Adjustments columns on page 5, journalize the adjusting entries in the General Journal below. Then post them to the General Ledger Accounts on pages 10- 14. Problem 19-1 (continued) Statement of Owner Equity Problem 19-1 (continued) Adjusting Entries Problem 19-1 (continued) Closing Entries GENERAL JOURNAL Page 3 ACCOUNTS AND EXPLANATION Adjusting Entries REF. DEBIT CREDIT GENERAL JOURNAL Page 4 ACCOUNTS AND EXPLANATION Closing Entries ACCOUNTS AND EXPLANATION REF. DEBIT CREDIT XXX1 Dec. 31 XXX1 Dec. 31 To adjust medical supplies To close the income account 31 To record expired rent expense 31 To record expired liability insurance To adjust office supplies T To close expense accounts | 31 To record accrued salaries To transfer net loss I T o close drawing account II Note: Using the worksheet Adjusted Trial Balance columns on page 5, journalize the closing entries in the General Journal below. Then post them to the General Ledger Accounts on pages 10-14. Then prepare Post-Closing Trial Balance using form on next page (page 10). Problem 19-1 (continued) Closing Entries Note: Last, using the Adjustments column of the worksheet on page 5 or the adjusting entry for salaries in the General Journal on page 8, journalize the Reversing Entry. Then post it to the appropriate general ledger accounts on pages 10-14. GENERAL JOURNAL Page 3 ACCOUNTS AND EXPLANATION Closing Entries DATE REF. DEBIT CREDIT XXX1 Dec. 31 Remember, reversing entries are just the reverse of any accrued expense or accrued revenue adjusting entries; and they are dated the first day of the next year. Reversing entries are not mandatory; they are optional. The reason they are done is that they make follow-up entries easier that must be done in the new year and thus save time. To close the income account Problem 19-1 (continued) Reversing Entries GENERAL JOURNAL Page 5 ACCOUNTS AND EXPLANATION Reversing Entry DATE XXX2 Jan. 1 To reverse accrued salary expense adjustment To close expense accounts To transfer net loss To close drawing account Problem 19-1 (continued) Post-Closing Trial Balance