Intermediate Accounting

Chapter Three Journal Entry Exercise

This practice set is for QuickSteps, Inc. QuickSteps, Inc. is apublicly traded corporation.

PART A – JOURNAL ENTRIES. Using the ledgerpaper provided, type the journal entries for the followingtransactions. The events occurred during 20x1. Please use theproper format for journal entries and do not abbreviate accounts.For Part A - do not prepare year-end adjusting entries. Assume thatQuickSteps, Inc. will not use reversing entries. Please referencethe Chart of Accounts for help identifying the appropriate accountname.

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

October 1 Paid office rent of $700.

October 1 Pre-paid $14,000 foradvertising. The advertisements will run October through the end ofApril.

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 paidin 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% notepayable, in the amount of $10,000. Interest is due every at the endof the six months.

November 1 Paid $12,000 for a one-yearinsurance 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. $8,000on 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 ofAccounts. Place the account name and account number (located in theChart of Accounts) at the top of each T-Account. Post the Part Ajournal entries to the appropriate T-accounts. Assume thatQuickSteps started with zero balances in all accounts. See yourbook for examples of using a T-account as a ledger.

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

PART D – ADJUSTING ENTRIES. Using thetransactions from Part A in conjunction with the informationprovided below, prepare year-end adjusting entries. Type theadjusting entries on the journal paper.

1. Payroll for December 26-December 31 equals $10,000, but willnot be paid until January.

2. Supplies on hand equal $300.

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

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

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

6. QuickSteps, Inc. has not yet received December’s utilitybill. The amount due is estimated to be $1,800.

7. There may be additional year-end adjusting entries that arenot referenced in #1-6 above. Review the accounts in the trialbalance and determine whether other accounts requireadjustment.

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

PART F – CLOSING ENTRIES. Using the journalpaper provided, prepare closing entries and post them to theledger.

PART G – POST-CLOSING TRIAL BALANCE. Type apost-closing Trial Balance. Be sure to use the appropriateheading.

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

PART I – ACCOUNTING EQUATION. Draw theaccounting equation and indicate the normal balance for eachaccount. (See Chapter 3 handout for example of how this should bedemonstrated. Stockholders’ Equity needs to be broken down into theindividual accounts that impact the Stockholders’ Equitybalance.)