Can someone review my excel file and tell me where I'm going wrong? I've attached the additional info from the textbook. I thought everything was fine until I got to my Balance Sheet. Please help!
Accounting Cycle Project Solid Footing 12e Project is Activated >SAVING YOUR PROJECT -- Immediately after Activation Save your project in a file- that Save your project by following these directions - - -uses - - -your - - -name - - - -as- the file name. The file the form: LastNameFirstName-ACP For example, Mary Smith would s with the file name SmithMary-ACP Excel 365, Excel 2019, and Excel 2016 Windows, follow these dire - Click File (top left) - Click Save As (in list on left) - Click This PC (or click Computer) - Click C:> Solid Footing 12e (center of screen) As you work on your project, be sure to your enter file often. - Insave File name: LastNameFirstName-ACP - Save as type: must be Excel Macro-Enabled Workbook Instructions: - Click Save You will be recording the July 2019 transactions for Lenny's Lawn Service, Inc. After recording the July transactions you will be preparing a Pre-Closing Trial Balance, Income Statement, Statement of Stockholders' Equity, Balance Sheet, and Post-Closing Trial 2013 Balance. Excel Windows, follow these directions: - Click File (top left) - Click Save As (in list on left) - Click Computer (or click This PC) _ July 2019 transactions and Additional Information -- Trans tab - Click Solid Footing 12e (under Current Folder) - In File name: enter LastNameFirstName-ACP _ Chart of Accounts with Account Numbers and Account Names --- Save Chartas Accts tab type: must be Excel Macro-Enabled Workbook Click Save _ General Journal pages -- Journal tab You are given the following: _ General Ledger -- GL Assets, GL Liab-Equity, GL Rev-Exp tabs 2010 Windows, follow _ Forms for the July 31, 2019: Pre-Closing Trial Balance (Trial BalExcel tab), Income Statement and these directions: - Click File (top left) Calculation of Retained Earnings (IS & RE tab), Balance Sheet (BalSht tab), and - Click Save As (in list on left) Post-Closing Trial Balance (Post Close TB tab) - In File name: enter LastNameFirstName-ACP - Save as type: must be Excel Macro-Enabled Workbook - Click Save To Complete Your Workbook do the following: _ Print the July Transactions (click the Trans tab and then click the Printer Icon) Use YOUR Transaction sheets -- do not use another student's sheets _ Print the Chart of Accounts (click the Chart Accts tab and then click the Printer Icon) _ Record the July transactions in the General Journal. Click the Journal tab and record your entries directly into the General Journal. Look at the July 1 Notes Payable transaction, which has already been entered, for an example of how to make your entries. Do not put the "X" in the Posted column at this time. Use the printed Chart of Accounts as a reference source for the Account Numbers and Account Names that are available in Lenny's accounting system. _ To make posting from the General Journal to the General Ledger easier, it is recommended that you print the General Journal -- click the Journal tab and then click the Printer Icon. _ Post the entries from the printed General Journal to the General Ledger accounts. Click the GL Assets, GL Liab-Equity, and GL Rev-Exp tabs to find the accounts to be posted. Record your postings directly into the General Ledger. As you post an amount to an account be sure to enter the General Journal Page # into the Journal Page # column. See the first posting to the Cash account for an example. After you post an amount to a General Ledger account, then hand write an "X" in the Posted column of the printed General Journal. This will help you keep track of which entries you have posted. _ Enter the "X"s, which you hand wrote on your General Journal pages, into the General Journal. Click the Journal tab and enter the "X"s in the Posted column Pg. 2 _ Determine the required adjusting entries as of July 31, 2019. The information needed for the adjusting entries is on the page titled "Additional Information". This is the second page that printed when you printed the Trans tab. Click the Journal tab and record your adjusting entries in the General Journal. Use the printed Chart of Accounts as a reference source for the Account Numbers and Account Names that are available in Lenny's accounting system. Put your adjusting entries on Page # 4 of the General Journal. _ Post the adjusting entries from the General Journal to the General Ledger accounts. Click the GL Assets, GL Liab-Equity, and GL Rev-Exp tabs to find the accounts to be posted. As you post an amount to an account be sure to enter the General Journal Page # into the Journal Page # column. After you post an amount to a General Ledger account, click back on the Journal tab and enter an "X" in the Posted column of the General Journal. _ Print Lenny's General Ledger by: clicking the GL Assets tab and then clicking the Printer icon, clicking the GL Liab-Equity tab and then clicking the Printer icon, and clicking the GL Rev-Exp tab and then clicking the Printer icon. _ Using the printed General Ledger, enter the ending account balances into the July 31, 2019 Pre-Closing Trial Balance. Click the Trial Bal tab and enter the amounts into the Pre-Closing Trial Balance. Print the July 31, 2019 Pre-Closing Trial Balance by clicking the Printer icon. _ Using the printed July 31, 2019 Pre-Closing Trial Balance, prepare the July 2019 Income Statement. Click the IS & RE tab and enter the amounts into the Income Statement. _ Using the printed General Ledger and the Net Income amount, prepare the July 2019 Statement of Stockholders' Equity. Click the IS & RE tab and enter the amounts into the Statement of Stockholders' Equity. _ Using the printed July 31, 2019 Pre-Closing Trial Balance and the Retained Earnings amount from the Statement of Stockholders' Equity, prepare the July 31, 2019 Balance Sheet. Click the BalSht tab and enter the amounts into the Balance Sheet. _ Prepare the closing entries. Click the Journal tab and enter the closing entries into the General Journal. Place your closing entries on Page # 5 of the General Journal. _ Post the closing entries from the General Journal to the General Ledger accounts. Click the GL Liab-Equity, and GL Rev-Exp tabs to find the accounts to be posted. As you post an amount to an account be sure to enter the General Journal Page # into the Journal Page # column. After you post an amount to a General Ledger account, click back on the Journal tab and enter an "X" in the Posted column of the General Journal. _ Click the Post Close TB tab and prepare the July 31, 2019 Post-Closing Trial Balance. Your project is complete! Your instructor will provide you with directions on how to submit your project. Lenny's Lawn Service, Inc. - Transactions - Additional Information July 2019 Transactions Date July 1 Description of the Transaction Borrow $35,000.00 from 1st Bank by signing a 24 month note. (As an example of how to journalize and post a transaction -- this transaction has already been entered into the General Journal and posted to the General Ledger.) July 1 Receive $80,050.00 cash from new investors, and issue $80,050.00 of Common Stock to them. July 1 Purchase $45,900.00 of new mowing equipment, paying cash to the mower dealer. July 1 Pay $500.00 cash for the July truck rental. July 3 Invoice a new customer $2,695.00 for a completed mowing job -- customer will pay in 10 days. July 5 The Board of Directors declares a cash dividend. The total amount of the dividend is $22,500.00 The Date of Record is set as July 15. The Date of Payment is set as July 31. July 7 Pay the employees $6,000.00 for work performed during the 1st week of July. July 10 Complete a mowing job for a new customer -- customer pays $6,500.00 cash for the job. July 12 Collect $3,500.00 cash from the golf course for special rush mowing job completed on May 31. July 14 Pay the employees $7,500.00 for work performed during the 2nd week of July. July 15 Purchase $1,180.00 of supplies from the mower dealer. The supplies are consumed immediately. Lenny's will pay the mower dealer for the supplies in about 2 weeks. July 15 Collect $2,695.00 on account. The cash that is received is from the new customer for the job that was completed on July 3. July 17 One of the original mowers purchased in January of 2018 broke down and is repaired by the mower dealer. The cost of the Mower Repair job is $645.00. Lenny's will pay the mower dealer in 30 days. July 19 Purchase for cash $21,000.00 of supplies. These supplies will be consumed over the next 12 months. July 20 Collect $30,000.00 from the property management company for work performed in June. July 21 Pay the employees $6,850.00 for work performed during the 3rd week of July. July 23 Receive a $22,500.00 advance payment from the university. The advance payment is for 6 months of work which will be performed from August 1, 2019 to January 31, 2020. July 25 Complete a special mowing job for the golf course. The total price for the mowing job is $3,300.00. The golf course pays $500.00 cash on this date and will pay the remainder on August 25. July 27 Complete a mowing job for a new customer -- customer pays $3,800.00 cash for the job. July 27 Pay $1,180.00 cash to the mower dealer for the supplies purchased on account on July 15. July 28 Pay the employees $5,300.00 for work performed during the 4th week of July. July 31 Invoice the property management company $19,300.00 for July mowing work. The property management company will pay the invoice on the 20th of next month. July 31 Pay the cash dividend which was declared on July 5. Additional Information Equipment: The $48,000.00 beginning balance in the Equipment account relates to the mowing equipment which was purchased on January 2, 2018. For information related to this mowing equipment see Page 70 in the Solid Footing book. This equipment continues to be used and should be depreciated for the month of July. The following information relates to the new equipment which was purchased on July 1, 2019: The new equipment was placed into service on July 1, 2019 and should be depreciated for the month of July. The estimated useful life of the new equipment is 5 years. At the end of 5 years, the new equipment will have no future value and will be scrapped. The new equipment will be depreciated using the straight-line method. Supplies: At the end of July there are $21,400.00 supplies on-hand. Mowing Service at the University: The monthly mowing service was provided to the university per the contract signed on April 1, 2019. For information on the contract with the university and the related advance payment, see Pages 95 and 98 in the Solid Footing book. Wages Due the Employees: Bank Loan: The last wage payment was made to the employees on July 28, 2019. The employees worked on July 29, 30, and 31. For these three days of work the employees earned $2,575.00 of wages. These three days of wages will be paid to the workers during the first week of August. The interest on the loan from 1st Bank will be paid every three months. The first interest payment to the bank will be made on September 30, 2019. Lenny's calls the bank on July 31 and the bank indicates that the interest on the loan for July is $785.00. Lenny's Lawn Service, Inc. - Chart of Accounts Account # 100 105 110 150 155 200 205 210 215 220 250 300 305 400 500 505 510 515 520 550 Account Name Assets: Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Liabilities: Accounts Payable Wages Payable Interest Payable Unearned Revenue Dividends Payable Note Payable Equity: Common Stock Retained Earnings Revenues: Service Revenue Expenses: Supplies Expense Mower Repair Expense Wages Expense Truck Rental Expense Depreciation Expense Interest Expense Margaret Felli Lenny's Lawn Service, Inc. - General Journal Page # 1 2019 Account Month-Day Number 7-1 100 250 Account Name Cash Notes Payable Posted X Debit Credit 35,000.00 35,000.00 X Borrowed on Note Payable 7-1 7-1 7-1 7-3 7-5 7-7 7-10 7-12 7-14 7-15 7-15 100 Cash X 300 Common Stock X 150 Equipment X 100 Cash X 515 Truck Rental Expenses X 100 Cash X 105 Accounts Receivable X 400 Service Revenue X 305 Retained Earnings X 220 Dividend Payable X 510 Wages Expense 100 Cash X 100 Cash X 400 Service Revenue X 100 Cash X 105 Accounts Receivable X 205 Wages Expense X 100 Cash X 110 Supplies X 200 Accounts Payable X 100 Cash X 105 Accounts Receivable X 80,050.00 80,050.00 45,900.00 45,900.00 500.00 500.00 2,695.00 2,695.00 22,500.00 22,500.00 6,000.00 6,000.00 6,500.00 6,500.00 3,500.00 3,500.00 7,500.00 7,500.00 1,180.00 1,180.00 2,695.00 2,695.00 Lenny's Lawn Service, Inc. - General Journal Page # 2 2019 Account Month-Day Number 7-17 505 Mower Repair Expense X 200 Accounts Payable X 110 Supplies 100 Cash X 100 Cash X 105 Accounts Receivable 510 Wages Expense X 100 Cash X 100 Cash X 215 Unearned Revenue X 100 Cash X 105 Accounts Receivable X 400 Service Revenue 100 Cash X 400 Service Revenue X 200 Accounts Payable X 100 Cash X 510 Wages Expense X 100 Cash X 105 Accounts Receivable X 400 Service Revenue X 220 Dividends Payable X 100 Cash X 7-19 7-20 7-21 7-23 7-25 7-27 7-27 7-28 7-31 7-31 Account Name Posted Debit Credit 645.00 645.00 21,000.00 21,000.00 30,000.00 30,000.00 6,850.00 6,850.00 22,500.00 22,500.00 500.00 2,800.00 3,300.00 3,800.00 3,800.00 1,180.00 1,180.00 5,300.00 5,300.00 19,300.00 19,300.00 22,500.00 22,500.00 Lenny's Lawn Service, Inc. - General Journal Page # 3 2019 Account Month-Day Number 7-31 520 Depreciation Expenses X 155 Accumulated Depreciation 3 520 Depreciation Exepnses 3 155 Accumulated Depreciation 3 500 Supplies Expense 3 110 Supplies 3 215 Unearned Revenue (contract) 3 400 Service Revenue 3 510 Wages Expenses 3 205 Wages Payable 3 550 Interest Expenses 3 210 Interest Payable 7-31 7-31 7-31 7-31 7-31 Account Name Posted Debit Credit 765.00 765.00 1,000.00 1,000.00 5,155.00 5,155.00 8,000.00 8,000.00 2,575.00 2,575.00 785.00 785.00 Lenny's Lawn Service, Inc. - General Journal Page # 4 2019 Account Month-Day Number Account Name Posted Debit Credit Lenny's Lawn Service, Inc. - General Journal Page # 5 2019 Account Month-Day Number Account Name Posted Debit Credit Margaret Felli Lenny's Lawn Service, Inc. - General Ledger Account # 100 Cash 2019 Journal Month-Day Page # 7-1 Beginning Balance 7-1 1 7-1 1 7-1 1 7-1 1 7-7 1 7-10 1 7-12 1 7-14 1 7-15 1 7-19 2 7-20 2 7-21 2 7-23 2 7-25 2 7-27 2 7-27 2 7-28 2 7-31 2 Account # 105 Credit 38,250.00 35,000.00 80,050.00 45,900.00 500.00 6,000.00 6,500.00 3,500.00 7,500.00 2,695.00 21,000.00 30,000.00 6,850.00 22,500.00 500.00 3,800.00 1,180.00 5,300.00 22,500.00 Balance 38,250.00 73,250.00 153,300.00 107,400.00 106,900.00 100,900.00 107,400.00 110,900.00 103,400.00 106,095.00 85,095.00 115,095.00 108,245.00 130,745.00 131,245.00 135,045.00 133,865.00 128,565.00 106,065.00 Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Accounts Receivable 2019 Journal Month-Day Page # 7-1 Debit Beginning Balance 7-3 1 7-12 1 7-15 1 7-20 2 7-25 2 7-31 2 Debit Credit 33,500.00 2,695.00 3,500.00 2,695.00 30,000.00 2,800.00 19,300.00 Balance 33,500.00 36,195.00 32,695.00 30,000.00 0.00 2,800.00 22,100.00 Dr Dr Dr Dr Dr Dr Dr Margaret Felli Lenny's Lawn Service, Inc. - General Ledger Account # 110 Supplies 2019 Journal Month-Day Page # 7-1 Beginning Balance 7-15 2 7-19 2 7-31 3 Account # 150 2019 Journal Page # Beginning Balance 7-1 1 Account # 155 4,375.00 1,180.00 21,000.00 5,155.00 Balance 4,375.00 5,555.00 26,555.00 21,400.00 Dr Dr Dr Dr Debit Credit 48,000.00 45,900.00 Balance 48,000.00 Dr 93,900.00 Dr Accumulated Depreciation 2019 Journal Month-Day Page # 7-1 Credit Equipment Month-Day 7-1 Debit Beginning Balance 7-31 3 7-31 3 Debit Credit 18,000.00 1,000.00 765.00 Balance 18,000.00 Cr 19,000.00 Cr 19,765.00 Cr Margaret Felli Lenny's Lawn Service, Inc. - General Ledger Account # 200 Accounts Payable 2019 Journal Month-Day Page # 7-1 1 7-27 2 7-27 2 Account # 205 Journal Month-Day Page # Debit 2 2019 Journal Page # Debit Credit 0.00 785.00 Beginning Balance 7-31 Cr Cr Cr Cr Balance 0.00 Cr 2,575.00 Cr Balance 0.00 Cr 785.00 Cr Unearned Revenue 2019 Journal Month-Day Page # 7-1 0.00 1,180.00 1,825.00 645.00 Interest Payable Month-Day Account # 215 Credit 0.00 2,575.00 Beginning Balance 7-31 7-1 1,180.00 Balance Wages Payable 2019 Account # 210 Credit 0.00 1,180.00 645.00 Beginning Balance 7-15 7-1 Debit Debit 8,000.00 22,500.00 Beginning Balance 7-23 2 7-31 3 Credit 8,000.00 Balance 8,000.00 Cr 30,500.00 Cr 22,500.00 Cr Margaret Felli Lenny's Lawn Service, Inc. - General Ledger Account # 220 Dividends Payable 2019 Journal Month-Day Page # 7-1 1 7-31 2 Account # 250 2019 Journal Page # Journal Page # Debit Credit 50,000.00 80,050.00 Beginning Balance 7-1 1 Balance 0.00 Cr 35,000.00 Cr Balance 50,000.00 Cr 130,050.00 Cr Retained Earnings 2019 Journal Month-Day Page # 7-5 0.00 Cr 22,500.00 Cr 0.00 Cr Common Stock 2019 Account # 305 Credit 0.00 35,000.00 1 Month-Day 7-1 Debit Beginning Balance 7-1 7-1 22,500.00 Balance Note Payable Month-Day Account # 300 Credit 0.00 22,500.00 Beginning Balance 7-5 7-1 Debit Debit Credit 48,125.00 Beginning Balance 22,500.00 Balance 48,125.00 Cr 25,625.00 Cr Margaret Felli Lenny's Lawn Service, Inc. - General Ledger Account # 400 Service Revenue 2019 Journal Page # Month-Day 7-1 Debit 0.00 2,695.00 6,500.00 3,300.00 3,800.00 19,300.00 8,000.00 Beginning Balance 7-3 1 7-10 1 7-25 2 7-31 2 7-31 2 7-31 Account # 500 2019 Journal Page # Beginning Balance 7-31 3 Account # 505 2019 7-17 0.00 2,695.00 9,195.00 12,495.00 16,295.00 35,595.00 43,595.00 Cr Cr Cr Cr Cr Cr Cr Debit Credit 0.00 5,155.00 Balance 0.00 Dr 5,155.00 Dr Mower Repair Expense Journal Page # Month-Day 7-1 Balance Supplies Expense Month-Day 7-1 Credit Beginning Balance 2 Debit Credit 0.00 645.00 645.00 Balance 0.00 Dr 645.00 Dr 0.00 Dr Margaret Felli Lenny's Lawn Service, Inc. - General Ledger Account # 510 Wages Expense 2019 Journal Page # Month-Day 7-1 Beginning Balance 7-7 1 7-14 1 7-21 2 7-28 2 7-31 2 Debit Credit 0.00 6,000.00 7,500.00 6,850.00 5,300.00 2,575.00 28,225.00 Account # 515 2019 Journal Page # Beginning Balance 7-1 1 Debit Credit 0.00 500.00 500.00 Account # 520 2019 Journal Page # Beginning Balance 7-31 3 7-31 3 Account # 550 Journal Page # Month-Day 7-31 Dr Dr Dr Dr Dr Dr Balance 0.00 Dr 500.00 Dr 0.00 Dr Debit Credit 0.00 1,000.00 765.00 Balance 0.00 Dr 1,000.00 Dr 1,765.00 Dr Interest Expense 2019 7-1 Dr Depreciation Expense Month-Day 7-1 0.00 6,000.00 13,500.00 20,350.00 25,650.00 28,225.00 0.00 Truck Rental Expense Month-Day 7-1 Balance Beginning Balance 3 Debit Credit 0.00 785.00 785.00 Balance 0.00 Dr 785.00 Dr 0.00 Dr 4a10 Margaret Felli Lenny's - July 31, 2019 Pre-Closing Trial Balance Account # Account Name Debit Credit 106,065.00 22,100.00 21,400.00 93,900.00 100 Cash 105 Accounts Receivable 110 Supplies 150 Equipment 155 Accumulated Depreciation 200 Accounts Payable 205 Wages Payable 210 Interest Payable 215 Unearned Revenue 220 Dividends Payable 250 Note Payable 300 Common Stock 305 Retained Earnings 400 Service Revenue 500 Supplies Expense 505 Mower Repair Expense 510 Wages Expense 515 Truck Rental Expense 520 Depreciation Expense 550 Interest Expense Do NOT copy cells from the Gene 19,765.00 645.00 2,575.00 785.00 22,500.00 0.00 35,000.00 130,050.00 25,625.00 43,595.00 5,155.00 645.00 28,225.00 500.00 1,765.00 785.00 Totals 280,540.00 CAUTION Enter amounts into the Pre-Closin by typing in the amounts. 280,540.00 Margaret Felli Lenny's Lawn Service, Inc. Income Statement CAUTION Enter amounts into the Financial Statements by typing in the amounts. Do NOT copy cells from the General Ledger or Pre-Closing Trial Balance. for the Month Ended July 31, 2019 Service Revenue $43,595.00 Operating Expenses: Supplies Mower Repair Wages Truck Rental Depreciation (5,155.00) (645.00) (28,225.00) (500.00) (1,765.00) Total Operating Expenses Income from Operations Note the new line item on Lenny's Income Statement Income from Operations. This is Lenny's income from the normal operations of the lawn mowing business. Interest Expense, which is not a cost of operating the business but rather a cost of financing the business, is shown below Income from Operations. Interest Expense is subtracted from Income from Operations to arrive at Net Income. (36,290.00) 7,305.00 Interest Expense (785.00) Net In $6,520.00 Lenny's Lawn Service, Inc. Statement of Stockholders' Equity for the Month Ended July 31, 2019 Beginning Balance July 1, 2019 Issue Common Stock Net Income Dividends Ending Balance July 31, 2019 Common Stock $50,000.00 80,050.00 $130,050.00 Retained Earnings $48,125.00 6,520.00 0.00 Total $98,125.00 80,050.00 6,520.00 0.00 $54,645.00 $184,695.00 This is the first time you have prepared a formal Statement of Stockholders' Equity for Lenny's. This statement shows what caused the change in Common Stock and in Retained Earnings from July 1, 2019 to July 31, 2019. Note that the Retained Earnings column on the statement looks different than the calculation you have been doing each month to determine the Retained Earnings amount needed for the Balance Sheet. Beginning Balance is the starting amount. In previous Retained Earnings calculations, you used Current Balance as the starting amount. Beginning Balance is the starting point for this calculation, because Dividends is shown as a line item (a deduction) in the Retained Earnings column. The Ending Balance in the Retained Earnings column is the balance needed for the Balance Sheet. Margaret Felli Lenny's Lawn Service, Inc. Balance Sheet CAUTION Enter amounts into the Balance Sheet by typing in the amounts. Do NOT copy cells from the General Ledger or Pre-Closing Trial Balance. as of July 31, 2019 Assets Current Assets: Cash Accounts Receivable Supplies $106,065.00 22,100.00 21,400.00 Total Current Assets Property & Equipment: Equipment Accumulated Depreciation 149,565.00 93,900.00 (19,765.00) Property & Equipment, net 74,135.00 Total Assets $223,700.00 Liabilities & Stockholders' Equity Current Liabilities: Accounts Payable Wages Payable Interest Payable Unearned Revenue $645.00 2,575.00 785.00 22,500.00 Total Current Liabilities Long-Term Liabilities: Note Payable 26,505.00 Total Liabilities 61,505.00 Stockholders' Equity: Common Stock Retained Earnings 35,000.00 130,050.00 48,125.00 Total Stockholders' Equity 178,175.00 Total Liabilities & Stockholders' Equity $239,680.00 Note the following three new sub-totals appearing on Lenny's Balance Sheet: Total Current Assets is a total of those assets, which will turn-into cash during the next 12 months or be consumed during the next 12 months. The comparison of Total Current Assets to Total Current Liabilities gives some indication of Lenny's liquidity -that is, its ability to pay its bills in the short-term. Property & Equipment, net is the amount of Fixed Asset cost, which remains to be depreciated in future accounting periods. Total Current Liabilities is a total of those liabilities that will require payment in the next 12 months. In the case of Unearned Revenue, this current liability will be "paid-off" by Lenny's delivering mowing services to the university. Margaret Felli Lenny's - July 31, 2019 Post-Closing Trial Balance Account # Account Name Debit 100 Cash 105 Accounts Receivable 110 Supplies 150 Equipment 155 Accumulated Depreciation 200 Accounts Payable 205 Wages Payable 210 Interest Payable 215 Unearned Revenue 220 Dividends Payable 250 Note Payable 300 Common Stock 305 Retained Earnings 400 Service Revenue 500 Supplies Expense 505 Mower Repair Expense 510 Wages Expense 515 Truck Rental Expense 520 Depreciation Expense 550 Interest Expense CAUTION Enter amounts into the Post-Closi typing in the amounts. Credit Do NOT copy cells from the Gene Totals 0.00 0.00 70 SOLID FOOTING Chapter 7 - Adjusting Entries Now that all of January's transactions have been entered, it is time to prepare adjusting entries, Step 3 in the Accounting Cycle. By reviewing the ending account balances, you determine that the only adjusting entry required at the end of January is for depreciation. The following is a discussion about depreciation and the required depreciation adjusting entry. PROPERTY, PLANT, & EQUIPMENT and THE DEPRECIATION ADJUSTING ENTRY The Accumulated Depreciation account is one of the accounts that will require an adjusting entry at the end of each accounting period. Before discussing the Accumulated Depreciation account, let's first discuss the long-term asset accounts that are related to Accumulated Depreciation. Companies buy many types of long-term assets. Long-term assets are assets a company will keep and use for more than one year. Most long-term assets purchased by a company are of the Property, Plant, & Equipment type. Lenny's lawn mowing equipment is an example of a Property, Plant, & Equipment asset. Property, Plant, & Equipment assets are also called Fixed Assets. Observe on the screen that Lenny's has a $48,000 balance in its Equipment account. This equipment was purchased over a year ago, on January 2, 2018, when Lenny's started in business. At that time, Lenny's estimated: The lawn mowing equipment would last for four years (48 months). At the end of the four years, the equipment would have no future value and would be scrapped. Therefore, for each month that Lenny's uses the lawn mowing equipment, 1/48th of the equipment's service life is used up. If the balance in the Equipment account is reduced by 1/48th of its original cost each month; then by the end of four years, the balance in the Equipment account will be zero. The calculation of the monthly reduction amount is: Equipment Cost = Monthly reduction in Equipment account = $1,000 per month Months of Useful Life $48,000 48 months The $1,000 is called the monthly depreciation. Depreciation is the process of allocating the cost of Property, Plant, & Equipment to the accounting periods in which these assets are used. There are many different ways to calculate the amount of depreciation. The above method is called the straight-line depreciation method because the amount of depreciation is the same each accounting period. Only the straight-line depreciation method will be used in this book. SOLID FOOTING 95 Chapter 8 Adjusting Entries Continued Unearned Revenue Liabilities - Accrued Assets LENNY's APRIL TRANSACTIONS In this chapter, you will continue to use the workbook that you used in the last chapter entitled 03-Lenny's Lawn Service. If this workbook is not open on your computer, do the following: Open the workbook 03-Lenny's Lawn Service Enable Macros Click the April tab. You should see Screen 8 A in the upper left corner of the screen. RECEIVE ADVANCE PAYMENT TRANSACTION On April 1, Lenny's signs a contract to perform lawn services for a new customer. The new customer is a university in the Tampa area. The contract Lenny's signs with the university stipulates that Lenny's will be paid an $8,000 monthly fee for the lawn services. As part of the contract agreement, the university agrees to pay the first four months of services in advance; thus Lenny's receives $32,000 cash from the university on April 1. Click Advance Pmt. The $32,000 debit to the Cash account records the increase in cash that results from the advance payment. The credit portion of this entry is to the Unearned Revenue liability account. The Unearned Revenue account records the university's $32,000 claim to Lenny's assets. A liability account is increased because Lenny's has a future obligation to perform $32,000 of services for the university, and as of April 1, Lenny's has not earned any of the $32,000. The Unearned Revenue liability account is just like any other liability account. It records the claim to assets of someone (in this case, the university) who is not an owner of the business. The one thing that does make the Unearned Revenue account different from most other liability accounts is that the Unearned Revenue liability will be \"paid-off\" by Lenny's providing services to the universitynot by Lenny's paying cash to the university. 98 SOLID FOOTING Chapter 8 - Adjusting Entries Continued APRIL's UNEARNED REVENUE ADJUSTING ENTRY On April 1, when Lenny's signed the contract with the university, Lenny's was paid $32,000 in advance for the first four months of services. During the month of April, Lenny's performed the lawn services for the university. The timeline below shows the period of service covered by the $32,000 Lenny's received on April 1. You can see from the timeline that on April 1, Lenny's owed the university $32,000 of services. The original $32,000 entry into the Unearned Liability account reflected Lenny's $32,000 liability for future services to the university. The timeline also shows the period of time and the dollar amount of services the university is still due as of the end of April. As of April 30, Lenny's owes the university three months of service. Each month of service has a value of $8,000; thus Lenny's owes the university $24,000 of future services as of April 30. Because the balance in the Unearned Revenue account tracks Lenny's liability for future services to the university, the April 30 balance in the Unearned Revenue account should be $24,000. Unearned Revenue Timeline $32,000 April 1 April 30 May 31 1 June 30 2 July 31 3 $24,000 "T" Account Analysis for Asset and Liability Accounts Account Name Unearned Revenue Debit Credit (1) What is the current balance? (3) What adjustment is required to adjust from the current balance to the should be balance? (2) What should be the balance? 32,000 8,000 24,000