1. Charles Diggs began his new business, called Diggs Systems Company, on January 1. 20xx. The company writes computer programs with special applications for businesses that own small computers. During the first six months of operation, the business was so successful that Diggs had to hire new employees on several occasions. Yet, he continually had to put off creditors because he lacked the funds to pay them. He wants to apply for a bank loan, but after preparing a statement showing the totals of receipts of cash and payments of cash, he wonders whether a bank will make a loan to him on the basis of what seem to be poor results. Deciding that he needs some accounting help, Diggs asks you to review the statement and the company's operating results.

   Diggs Systems Company

   Statement of Cash Receipts and Payments

   For the Six Months Ended June 30, 20xx

   Cash Receipts:
   Investment by Charles Diggs							$50,000
   Fees for Computer Services							74,600
   Total Receipts							124,600
   Cash Outflows:
   Wages							38,650
   Insurance							4,250
   Rent							12,600
   Supplies							6,321
   Office Equipment							14,360
   Dividends paid to Shareholder							2,000
   Computer Rental							24,000
   Maintenance							2,460
   Service Van							14,450
   Utilities:
   Total Cash Payments							119,091
   Cash Balance							$5,509

   After verifying the information in Diggs statement, you obtain these additional facts about Diggs Systems Company:

   a. In addition to the amount received from customers, programming services totaling $29,100 have been performed but are not yet paid for.

   b. Employees have been paid all the wages owed to them except for $1,050 earned since the last payday. The next regular payday is July 3.

   c. The insurance account represents a two year policy purchased on January 3.

   d. The Rent account represents rent of $1,800 per month, including the rent for July.

   e. In examining the expenditures for supplies, you find invoices for $1,950 that have not been paid, and an inventory count of the supplies reveals $2,625 of unused supplies are on hand.

   f. The office equipment is fully paid for. You estimate it will last six years and be worthless at the end of that time.

   g. The computer rental agreement provides for a security deposit of $6,000 plus monthly payments of $3,000.

   h. The maintenance account represents a one year maintenance agreement, paid in advance on January 2.

   i. The Service Van account represents the down payment on a van purchased on June 1 for $45,000. The van has useful life of 10 years. It has an estimated residual value of $5,500.

   A. Prepare an Income Statement, Balance Sheet, Statement of Cash Flows and Statement of Retained Earnings. In addition, prepare the adjusting J/E entries for transaction a through i.