Intermediate Accounting

Chapter Three Journal Entry Exercise

This practice set is for QuickSteps, Inc. QuickSteps, Inc. is a publicly traded corporation.

PART A JOURNAL ENTRIES. Using the ledger paper provided, type the journal entries for the following transactions. The events occurred during 20x1. Please use the proper format for journal entries and do not abbreviate accounts. For Part A - do not prepare year-end adjusting entries. Assume that QuickSteps, Inc. will not use reversing entries. Please reference the Chart of Accounts for help identifying the appropriate account name.

October 1 Issued $100,000 of common stock (10,000 shares) in exchange for $80,000 cash and equipment valued at $20,000. The common stock had a par value of $2 per share.

October 1 Paid office rent of $700.

October 1 Pre-paid $14,000 for advertising. The advertisements will run October through the end of April.

October 2 Purchased $15,000 of equipment on account.

October 3 Hired five employees.

October 5 Purchased supplies on account, $3,000.

October 8 Performed services for clients, $180,000 (clients paid in cash at time of service).

October 9 Performed services and billed client, $250,000.

October 15 Received advance payment from clients, $80,000.

October 25 Paid monthly salaries of $30,000.

October 31 Purchased a new computer for $2,000 cash.

November 1 Signed a six-month, 12% note payable, in the amount of $10,000. Interest is due every at the end of the six months.

November 1 Paid $12,000 for a one-year insurance policy.

November 1 Paid office rent of $700.

November 25 Paid monthly salaries of $31,000.

December 1 Paid office rent of $700.

December 15 Paid cash dividends of $5,000.

December 20 Pays Alliance Corp. $8,000 on account.

December 24 Paid monthly salaries of $29,000.

PART B POSTING TO LEDGER. On your own paper, open a T-account for each account included in the Chart of Accounts. Place the account name and account number (located in the Chart of Accounts) at the top of each T-Account. Post the Part A journal entries to the appropriate T-accounts. Assume that QuickSteps started with zero balances in all accounts. See your book for examples of using a T-account as a ledger.

PART C - TRIAL BALANCE. Type a Trial Balance for December 31, 20x1. Be sure to use the appropriate heading.

PART D ADJUSTING ENTRIES. Using the transactions from Part A in conjunction with the information provided below, prepare year-end adjusting entries. Type the adjusting entries on the journal paper.

1. Payroll for December 26-December 31 equals $10,000, but will not be paid until January.

2. Supplies on hand equal $300.

3. As of December 31, 20x1, QuickSteps, Inc. has $2,000 worth of unearned revenue.

4. Depreciation for 20x1 equals $5,000.

5. Fees earned, but unbilled equal $15,000.

6. QuickSteps, Inc. has not yet received Decembers utility bill. The amount due is estimated to be $1,800.

7. There may be additional year-end adjusting entries that are not referenced in #1-6 above. Review the accounts in the trial balance and determine whether other accounts require adjustment.

PART E ADJUSTED TRIAL BALANCE. Type an Adjusted Trial Balance. Be sure to use the appropriate heading.

PART F CLOSING ENTRIES. Using the journal paper provided, prepare closing entries and post them to the ledger.

PART G POST-CLOSING TRIAL BALANCE. Type a post-closing Trial Balance. Be sure to use the appropriate heading.

PART H - ACCOUNTING CYCLE. List the steps in the accounting cycle.

PART I ACCOUNTING EQUATION. Draw the accounting equation and indicate the normal balance for each account. (See Chapter 3 handout for example of how this should be demonstrated. Stockholders Equity needs to be broken down into the individual accounts that impact the Stockholders Equity balance.)