Carl Davis hired your team to keep the business records of Davis Consulting. Davis Consulting performs systems consulting and has begun selling software. The transactions are kept using the accrual method of accounting. The company uses the perpetual inventory system to account for software inventory. Davis Consulting completed the following transactions during the first 6 months of 20X1:

Jan. 1 Owner contributed $20,000 cash in exchange for capital. Jan. 4 Paid monthly office rent, $500, check #205. Jan. 6 Purchased office furniture on account, $3,900. The furniture should last for five years; salvage value is $900. Jan. 6 Purchased office supplies on account, $400. Feb. 1 Purchased 80 units software inventory on account, $1,680, plus freight-in, $80. Feb. 2 Paid monthly office rent, $500, check #206. Feb. 2 Paid cash for a computer, $2,700. This equipment is expected to remain in service for five years; salvage value is $900, check #207. Feb. 13 Performed consulting service for a client on account, $1,500. Feb. 21 Hired an administrative assistant to be paid $2,100 on the 20th day of each month. The secretary begins work immediately. Feb. 28 Paid utilities expenses, $200, check #208. Feb. 28 Received $1,800 in advance for client service to be performed in the future. Mar. 1 Sold 40 software units on account, $2,000. Mar. 2 Prepaid five months office rent, $2,375, check #209. Mar. 4 Performed service for a client and received cash of $1,000. Mar. 5 Paid $400 on account for the office supplies purchased on Jan. 6, check #210. Mar. 7 Collected $300 on account for the consulting services performed on Feb. 13. Mar. 14 Davis withdrew cash of $1,500. Mar. 20 Paid employee salaries, $2,100, check #211. Apr. 2 Purchased 240 units software inventory on account, $6,240. Apr. 20 Paid employee salaries, $2,100, check #212. Apr. 30 Paid utilities, $200, check #213. May 5 Sold 120 units software for cash, $6,000. May 10 Paid on account, $1,760, for the office furniture purchased on Jan. 4, check #214. May 20 Paid employee salaries, $2,100, check #215. May 30 Collected $1,500 on account for inventory sold on Mar. 1. Jun. 4 Completed a consulting engagement and received cash of $7,800. Jun. 11 Purchased office supplies on account, $300. Jun. 14 Consulted with a client for a fee of $1,000 on account. Jun. 20 Paid utilities, $200, check #216. Jun. 20 Paid employee salaries, $2,100, check #217. Jun. 29 Paid $3,900 on account, check #218.

At June 30, 20X1, the business gathers the following information for the adjusting entries: a) Four months of prepaid rent expired at the end of June. b) Accrue salaries payable as of June 30 (10 days accrued, not paid). c) Accrued service revenue, $600. d) Earned $600 of the service revenue collected in advance on February 28. e) Office supplies on hand totals $200. f) Depreciation is recorded for the computer (5 months) and the furniture (6 months). g) Physical count of software inventory, 145 units. Requirements: 1. Prepare perpetual inventory records for 20X1 for Davis using the LIFO inventory costing method. (Note: You must calculate the cost of goods sold on March 1 and May 5 from the information in the inventory schedule.) 2. Journalize the transactions (explanations are required) but not the adjusting entries yet (you will prepare adjusting entries in #4). 3. Post the journal entries to the ledgers showing dates, account numbers, and account balances. 4. Prepare the year-end bank reconciliation using the bank statement below. 5. Journalize AND post any transactions required from the bank reconciliation. 6. Journalize AND post the adjusting entries. 7. Prepare the Adjusted Trial Balance for the 6 months ended June 30, 20X1. 8. Prepare the financial statements for Davis Consulting for the 6 months ended June 30, 20X1 using the Adjusted Trial Balance. Required financial statements include: a. Multi-step Income Statement (list Service Revenue underneath gross profit and ignore classifying the expenses as selling and administrative) b. Statement of Owners Equity c. Classified Balance Sheet 9. Journalize AND post the closing entries. 10. Prepare a post-closing trial balance. Make sure these figures agree with your balances in your General Ledger.

Bank Statement for June 30, 20X1 Beginning Balance, January 1, 20X1 20,000 Deposits and other Credits: Feb. 29 EFT customer 1,800 Mar . 7 EFT customer 1,000 Mar . 10 EFT customer 300 May 6 EFT customer 6,000 Jun. 1 EFT customer 1,500 Jun. 22 EFT customer 500 Jun. 29 interest 22 11,122 Checks and other Debits: Jan. 7 ck#205 500 Feb. 5 ck#206 500 Feb. 5 ck#207 2,700 Mar . 3 ck#208 200 Mar . 5 ck#209 2,375 Mar . 8 ck#210 400 Mar . 14 withdrawal 1,500 Mar . 23 ck#211 2,100 Apr. 23 ck#212 2,100 May 2 ck#213 200 May 13 ck#214 1,760 May 23 ck#215 2,100 Jun. 23 ck#216 200 Jun. 24 EFT payment to Paper Supplies Company 9 Jun. 25 Bank service charge 15 16,659 Ending Balance, June 30, 20X1 14,463