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MOSES'S GROUND MAINTENANCE, INC. PRACTICE SET (For the Months June, July, August, & September) In the spring of 2016, Amos Moses decided to open a lawn care business. He called it Moses's Ground Maintenance, Inc. Not only would he provide lawn care services, but he would also sell certain products that would assist his customers in maintaining a beautiful lawn, ultimately making them the envy of their neighbors. Amos has decided to organize his business as a corporation. Although, a sole proprietorship would be easier to set up, Amos wanted to eliminate any personal liability he might be subject to if he were to organize as a sole-proprietorship. He realizes that it is more complicated to organize his business as a corporation and that he might pay more in taxes, but he feels it's worth the extra cost. Amos has hired you to be his accountant and has decided not to purchase an accounting software package at this time. Therefore, you will be required to record all transactions manually. You will need to set up a manual accounting system. Therefore, you will have to create/use a general journal, a general ledger, and subsidiary ledgers. You will be responsible for journalizing all transactions and posting them to the appropriate ledger accounts. Additionally, you will be required to prepare a trial balance for each month, adjusting entries, an adjusted trial balance at year-end. At year-end you will also have to prepare a set of financial statements for the company. This will include, in proper format, an Income Statement, Statement of Retained Earnings, Balance Sheet, and a Statement of Cash Flows. You will also be required to record and post the closing transactions and prepare a post-closing trial balance. Moses's Ground Maintenance, Inc. fiscal year ends September 30. In June of 2016, Amos begins operations. 1 The following events occurred in June: 6/2 Amos opens a banks account for Moses's Ground Maintenance, Inc. at State Bank and deposits $100,000 into his account. Amos invests the money into his business in exchange for 50,000 shares of $1 par value common stock. 6/3 Amos issues Ck # 1000 to Moses's Ground Maintenance to establish the Petty Cash Fund in the amount of $500. Amos will use this account when he needs to make cash purchases. 6/ 4 Amos visits the law firm of Honest Abe for assistance on setting up his business as a corporation. 6/ 4 Amos hires Paula Rivere to design a brochure and a poster to advertise his company and the services and products he has available. 6/ 8 Amos purchases a one-year subscription for $36 (Ch # 1001) to Grass Is Us Quarterly. 6/10 Amos receives an invoice for services rendered by Honest Abe Law Firm in the amount of $2,500 - terms net 20. 6/11 Amos issues check #1002 to Paula Rievere for $3,500 for the design and printing of the brochures and posters. The brochures and posters will be used immediately and therefore, should be expensed immediately. 6/12 Amos purchases a riding lawn mower on account from Better Grounds Wholesale Supply for $5,500. At the same time, Amos purchases a weedwacker for $1,350 by issuing check #1003. 6/15 Amos pays $4,000 (check #1004) to purchase inventory for the business. Amos purchases: 100 bags of weed killer at $10/bag 150 bags of fertilizer at $20/bag Amos plans to resell these products at a 50% gross profit. 6/15 Amos has a push lawnmower that he transfers to the business in exchange for 500 shares of common stock. The lawnmower has a fair value of $1,500. 6/16 Amos purchases a new truck and trailer for the business. The truck costs $35,000 and the trailer $10,000. He finances both the truck and the trailer through Pig E Bank at a rate of 8% for 5 years. The first monthly payment is due on July 16. NOTE: You will need to create a loan amortization schedule to determine that amount of the monthly note and interest expense for each month. You can use a website such as www.bankrate.com to create the schedule. When recording your entries, adjust all amounts to the nearest dollar. 6/16 Amos purchases an auto insurance policy in the amount of $900. Check # 1005 is issued to Farm Town Insurance. The policy is for 6 months and covers the period from 6/16 - 12/15. In order to provide Amos with accurate accounting information, expense the policy evenly over each of the six months. (Note: The adjusting entry for insurance expense will be done at the end of the fiscal year). 2 6/17 Amos purchases, on account, $175 worth of fuel from Git 'n GO. The fuel is being used in the lawn equipment. Expense the purchase. 6/18 Amos gets his first 12-month contract to maintain a lawn. He is going to charge his new customer, Don Notting, $200 per month. The contract will begin on July 1. 6/21 Amos issues check # 1006 to pay the invoice received from the law firm. 6/25 Amos receives a check (#1234) from . Don Notting in the amount of $2,400 in payment of the lawn service contract. 6/29 Amos provides lawn care services for Iphelia Payne and receives $350 cash. Iphelia is pleased with Amos's work and will call when she needs him again. Note: See the first two events for July before preparing the trial balance for June. The following events occurred in July: 7/1 Amos receives an invoice from you, his accountant in the amount of $2,000 (terms 3/10, n/30). The accounting expenses should be expensed in the month that it applies - in this case June. Therefore, record the transaction and date it June 30. 7/2 Amos receives bills for the following: telephone - $250; water - $45; electricity - $175; cell phne - $100. The telephone and cell phone bills are payable to TeleCom Telephone Company. The water and utility bills are payable to Max Power Utilities. These expenses also belong to the month of June. 7/2 Amos pays Better Grounds Wholesale Supply in full by issuing check #1007. 7/2 Amos pays Git 'n GO in full (Check #1008). 7/11 Amos performs lawn care services as agreed for Don Notting. 7/15 Amos paid the telephone, cell phone, water and electricity bills in full (Check #'s 1009 and 1010, respectively). 7/16 Amos pays Pig E Banks the first payment on the loan of $45,000 (ck # 1011). 7/18 Amos performs lawn care services for $2,000 on account for a new customer named Luke Warn (term n/30). 7/18 Amos sells 10 bags of weed killer and 15 bags of fertilizer for cash to Iphelia Pain. Amos is required to charge a 5% sales tax that is payable to HOGG Department of Revenue. 7/20 Amos pays you for the services you provided in June (Ch# 1012). 3 7/30 Amos pays $1,200 (ck # 1013) for a one-year liability insurance policy. The policy coverage takes effect on August 1. Note: See the first two events for August before preparing the trial balance for July. The following events occurred in August: 8/1 Amos receives an invoice from you, his accountant in the amount of $2,500 (terms 3/10, n/30). This invoice is for services performed for the month of July. 8/2 Amos receives the following bills related to telephone and utilities used in the month of July: telephone $150, cell phone $150, water $35, and electricity $275. 8/3 Amos remits the sales tax (ck # 1014) to HOGG Department of Revenue. 8/7 Amos performed lawn care services for Don Notting as contracted. 8/9 Amos pays you, his accountant, for July services (ck # 1015). 8/10 Amos receives payment from Luke Warn in full payment for services provided in July. 8/12 Amos pays the telephone, cell phone, water, and electric bills (cks # 1016 and #1017). 8/16 Amos makes his second payment on the $45,000 loan (Ck # 1018). 8/20 Amos treats you to breakfast at The Daily Grind Coffee Shop for a total cost of $25. Amos paid this out of petty cash. 8/24 Amos performs lawn care services for Iona Frisbee for $200 cash. 8/24 Amos secures a contract with Barren View Golf Club for $5,000 per month. Due to this increase in business, Amos hires a part-time employee, Joe Slowe. Amos will pay Joe $10/hour. 8/25 Amos performs the services for the month of August at Barren View Golf Club. He contacts you and asks you to send an invoice for $5,000 for the services. Additionally, he needs you to add 50 bags of fertilizer and 25 bags of weed killer to the invoice. Amos tells you to set the terms 2/10, n/30. Don't forget to charge sales taxes on the products sold. (Round to the nearest dollar). 8/30 Amos' pays $125.00 in cash to HOGG Department of Revenue for an Occupational License for his business. Amos uses his petty cash to make this payment. 8/30 Amos ask you to issue check #1019 to Joe Slowe for the net amount owed him for time that he worked this past week. 4 Joe worked 20 hours. Amos is required to withhold the following from Joe's pay: federal income taxes at a rate of 15%, state income taxes at a rate of 6% and FICA taxes at a rate of 7.65%. (Round to the nearest dollar). You must also record a journal entry for the employer's payroll taxes. This includes FICA tax of 7.65% and Federal Unemployment Insurance of 6.00%. Note: See the first two events in September before preparing the trial balance for August. The following events occurred in September: 9/1 Amos receives an invoice from you, his accountant in the amount of $1,500 (terms 3/10, n/30). This is for services for the month of August. 9/2 Amos receives a bill from TeleCom Telephone in the amount of $220 and one from Max Power Utilities in the amount of $200. These bills relate to the month of August. Amos sells 4 bags of weed killer and 10 bags of fertilizer on account to Don Notting terms 2/10, n/30. 9/5 9/6 Amos receives check # 2222 from Barren Golf Club for full payment for the services and products invoiced in August. 9/7 Amos remits the sales taxes payable (for the month of August) to HOGG Department of Revenue (ck #1020). 9/10 Amos pays $200 cash for fuel for his equipment. Amos uses his petty cash for this transaction. 9/16 Amos performs lawn care services for Don Notting as agreed. 9/16 Amos pays the third payment on the $45,000 loan (ck # 1021). 9/20 Amos purchases on account from Better Grounds Wholesale Supply 10 bags of weed killer at a cost of $10/bag and 10 bags of fertilizer at a cost of $20 per bag. 9/25 Amos performs lawn care services for Barren View Golf Club and ask you to send the invoice for $5,000. 9/26 Amos ask you to issue check #1022 to Joe Slowe for the net amount owed him for time that he worked this past month. Joe worked 60 hours during the month of September. Amos is required to withhold the following from Joe's pay: federal income taxes at a rate of 15%, state income taxes at a rate of 6% and FICA taxes at a rate of 7.65%. 5 You must also record a journal entry for the employer's payroll taxes. This includes FICA tax of 7.65% and Federal Unemployment Insurance (FUTA) of 6.00%. 9/30 Amos receives payment in full on account from Don Notting for the weed killer and fertilizer he purchased on 9/5. 9/30 Amos pays Better Grounds Wholesale Supply in full for the 10 bags of weed killer and 10 bags of fertilizer purchased on 9/20 (ck #1023). 9/30 Amos remitted payment to the U.S Treasury for the federal income taxes, FICA taxes and FUTA taxes related to the August payroll (ck #1024). In addition he remitted payment to the Louisiana Department of Revenue (ck # 1025) for the state income taxes related to the August payroll. 9/30 Amos declared and paid dividends in the amount of $6,000 (ck # 1026). Note: See the first three events for October before preparing the trial balance for September. The following invoices and bills were received on October 1: 10/1 Amos receives an invoice from you, his accountant in the amount of $2,000 (terms 3/10, n/30). The invoice is for services performed in September. 10/1 Amos received a bill from TeleCom Telephone Company relating to September services: Telephone $250 and Cell phone $100. 10/1 Amos received a bill from Max Power Utilities for September Utilities as follows: water $45 and electricity $200. 6 MOSES' GROUND MAINTENANCE, INC. PRACTICE SET (For the Months June, July, August, & September) You are required to: Assignment #1: For the Month of June (4 points) In proper General Journal format, record the transactions for the month; include brief descriptions of each transaction with your journal entry. In proper General Journal format, record the adjusting entry to accrue the interest expense on the note with Pig E Bank. Your interest expense will be determined by taking the unpaid balance of the note at the beginning of the month * annual interest rate * (# of days lapsed since the last note payment / 365). Post the journal entries for the month to the general ledger accounts, use appropriate posting references. Prepare a trial balance for the month ended. o Using proper format, create your trial balance in Microsoft Excel. You should include all accounts that are listed in the chart of accounts, even if they do not currently have a balance. The accounts should be in the order shown in the chart of accounts. o Submit the trial balance through Moodle. o Retain your general journals and ledgers until you have completed assignment #7. Assignment #2: For the Month of July (4 points) In proper General Journal format, record the transactions for the month; include brief descriptions of each transaction with your journal entry. In proper General Journal format, record the adjusting entry to accrue the interest expense on the note with Pig E Bank. Your interest expense will be determined by taking the unpaid balance of the note at the beginning of the month * annual interest rate * (# of days lapsed since the last note payment / 365). Post the journal entries for the month to the general ledger accounts, use appropriate posting references. Prepare a trial balance at the end of the month. o Using proper format, create your trial balance in Microsoft Excel. You should include all accounts that are listed in the chart of accounts, even if they do not currently have a balance. The accounts should be in the order shown in the chart of accounts. o Submit the trial balance through Moodle. o Retain your general journals and ledgers until you have completed assignment #7. Assignment #3: For the Month of August (4 points) In proper General Journal format, record the transactions for the month; include brief descriptions of each transaction with your journal entry. 7 In proper General Journal format, record the adjusting entry to accrue the interest expense on the note with Pig E Bank. Your interest expense will be determined by taking the unpaid balance of the note at the beginning of the month * annual interest rate * (# of days lapsed since the last note payment / 365). Post the journal entries for the month to the general ledger accounts, use appropriate posting references. Prepare a trial balance at the end of the month. o Using proper format, create your trial balance in Microsoft Excel. You should include all accounts that are listed in the chart of accounts, even if they do not currently have a balance. The accounts should be in the order shown in the chart of accounts. o Submit the trial balance through Moodle. o Retain your general journals and ledgers until you have completed assignment #7. Assignment #4: For the Month of September (4 points) In proper General Journal format, record the transactions for the month; include brief descriptions of each transaction with your journal entry. In proper General Journal format, record the adjusting entry to accrue the interest expense on the note with Pig E Bank. Your interest expense will be determined by taking the unpaid balance of the note at the beginning of the month * annual interest rate * (# of days lapsed since the last note payment / 365). Post the journal entries for the month to the general ledger accounts, use appropriate posting references. Prepare a trial balance at the end of the month. o Using proper format, create your trial balance in Microsoft Excel. You should include all accounts that are listed in the chart of accounts, even if they do not currently have a balance. The accounts should be in the order shown in the chart of accounts. o Submit the trial balance through Moodle. o Retain your general journals and ledgers until you have completed assignment #7. Assignment #5: Year-end Adjusting Entries (4 points) After preparing the trial balance for the month of September, make proper general journal adjusting entries for the following items: A. Depreciation for all Property, Plant and Equipment. Information related to all assets is shown in the table below: Equipment Life Method Salvage Value Riding Mower 5 years Straight-line $500 Push Mower 3 years Straight-line $350 Weed Wacker 3 years Straight-line $0 Truck 7 years Straight-line $1,500 Trailer 5 years Straight-line $500 Moses Ground Maintenance records a full month of depreciation in the month an asset is acquired and/or disposed. Round all depreciation amounts to the nearest dollar. 8 B. Current portion of the Long-Term Note Payable to Pig E. Bank. C. Prepaid Insurance. Post the adjusting entries from above to the General Ledger Accounts, use appropriate posting references. Prepare an adjusted trial balance for September. o Using proper format, create your adjusted trial balance in Microsoft Excel. o Submit the trial balance through Moodle. o Retain your general journals and ledgers until you have completed assignment #7. Assignment #6: Financial Statements (10 points) Prepare Year-End Financial Statements for Moses Ground Maintenance, Inc. This includes the Income Statement, Statement of Retained Earnings, and Balance Sheet. o Using proper format, create your financial statements in Microsoft Word. o Submit the financial statements through Moodle. Assignment #7: Closing Entries (10 points) In proper General Journal format prepare the closing entries for Moses Ground Maintenance. Post the closing entries to the General Ledger Accounts, use appropriate posting references. Prepare a post-closing trial balance. o Using proper format, create your post-closing trial balance in Microsoft Excel. o Submit the post-closing trial balance through Moodle. o Submit your general journals and general ledgers through Moodle. 9 ======================================================================== MOSES GROUND MAINTENANCE, INC. CHART OF ACCOUNTS Cash Petty Cash Accounts Receivable Inventory Prepaid Insurance Lawn Equipment Accumulated Depreciation - Lawn Equipment Truck Accumulated Depreciation - Truck Trailer Accumulated Depreciation - Trailer 105 107 110 130 140 220 221 230 231 240 241 Accounts Payable Customer Deposits (Unearned Revenue) Sales Tax Payable FICA Payable FUTA Payable Federal Income Tax Payable State Income Tax Payable Current Maturities of Long-Term Debt Notes Payable (long-term) Interest Payable Salaries & Wages Payable 310 320 330 332 334 336 338 375 410 420 425 Common Stock ($1 par value) Additional Paid-in Capital on Common Stock Retained Earnings Dividends 520 521 550 560 Sales Revenue Service Revenue Sales Discounts Sales Returns & Allowances 610 620 612 614 Cost of Goods Sold Accounting Services Expense Advertising Expense Depreciation Expense Dues & Subscriptions Insurance Expense Legal Expenses Meals & Entertainment Taxes and Licenses Telephone Expense Utilities Expense Fuel Expense Interest Expense Payroll Tax Expense Wages Expense Income Tax Expense 710 720 725 727 730 735 740 745 767 770 775 780 820 825 830 835 10 GENERAL JOURNAL Date General Journal - Page 1 Accounts & Explanations PR Debit Credit General Journal - Page 2 11 Date Accounts & Explanations PR Debit Credit General Journal - Page 3 12 Date Accounts & Explanations PR Debit Credit General Journal - Page 4 13 Date Accounts & Explanations PR Debit Credit General Journal - Page 5 14 Date Accounts & Explanations PR Debit Credit General Journal - Page 6 15 Date Accounts & Explanations PR Debit Credit General Journal - Page 7 16 Date Accounts & Explanations PR Debit Credit 17 Date General Journal - Page 8 Accounts & Explanations PR Debit Credit 18 Moses Ground Maintenance, Inc. General Ledger Account: CASH Date Explanation Account #: 105 REF Debit Credit Balance 19 Account: PETTY CASH Date Explanation Account #: 107 REF Account: ACCOUNTS RECEIVABLE Date Explanation Explanation REF Explanation Balance Debit Credit Balance Credit Balance Credit Balance Account #: 130 REF Account: PREPAID INSURANCE Date Credit Account #: 110 Account: INVENTORY Date Debit Debit Account #: 140 REF Debit 20 Account: LAWN EQUIPMENT Date Explanation Account #: 220 REF Debit Account: ACCUMULATED DEPRECIATION - LAWN EQUIPMENT Date Explanation REF Account #: 221 Account: TRUCK Account #: 230 Date Explanation REF Account: ACCUMULATED DEPRECIATION - TRUCK Date Explanation REF Debit Debit Credit Balance Credit Balance Credit Balance Credit Balance Account #: 231 Debit 21 Account: TRAILER Date Explanation Account #: 240 REF Debit Account: ACCUMULATED DEPRECIATION - TRAILER Date Explanation REF Account #: 241 Account: ACCOUNTS PAYABLE Account #: 310 Date Explanation REF Debit Debit Credit Balance Credit Balance Credit Balance 22 Account: CUSTOMER DEPOSITS - (UNEARNED REVENUE) Date Explanation Account #: 320 REF Account: SALES TAX PAYABLE Date Explanation Explanation REF Explanation Balance Debit Credit Balance Credit Balance Credit Balance Account #: 332 REF Account: FUTA PAYABLE Date Credit Account #: 330 Account: FICA PAYABLE Date Debit Debit Account #: 334 REF Debit 23 Account: FEDERAL INCOME TAX PAYABLE Date Explanation Account #: 336 REF Account: STATE INCOME TAX PAYABLE Date Explanation Debit REF Debit Account #: 375 Date Debit REF Account: NOTES PAYABLE (LONG-TERM) Date Explanation Balance Credit Balance Credit Balance Credit Balance Account #: 338 Account: CURRENT MATURITIES OF L/T DEBT Explanation Credit Account #: 410 REF Debit 24 Account: INTEREST PAYABLE Date Explanation Account #: 420 REF Account: SALARIES & WAGES PAYABLE Date Explanation Explanation Credit Balance Credit Balance Credit Balance Credit Balance Account #: 425 REF Account: COMMON STOCK ($1 PAR VALUE) Date Debit Debit Account #: 520 REF Account: ADDITIONAL PAID-IN CAPITAL - COMMON STOCK Date Explanation REF Debit Account #: 521 Debit 25 Account: RETAINED EARNINGS Date Explanation Account #: 550 REF Account: DIVIDENDS Date Explanation Explanation REF Explanation Account: SALES DISCOUNTS Balance Debit Credit Balance Credit Balance Credit Balance Account #: 610 REF Account: SERVICE REVENUE Date Credit Account #: 560 Account: SALES REVENUE Date Debit Debit Account #: 620 REF Debit Account #: 612 26 Date Explanation REF Account: SALES RETURNS & ALLOWANCES Date Explanation Explanation REF Explanation REF Explanation Account: DEPRECIATION EXPENSE Debit Credit Balance Debit Credit Balance Credit Balance Credit Balance Account #: 720 REF Account: ADVERTISING EXPENSE Date Balance Account #: 710 Account: ACCOUNTING SERVICE EXPENSE Date Credit Account #: 614 Account: COST OF GOODS SOLD Date Debit Debit Account #: 725 REF Debit Account #: 727 27 Date Explanation REF Account: DUES & SUBSCRIPTIONS Date Explanation Explanation REF Explanation REF Explanation REF Explanation Credit Balance Debit Credit Balance Debit Credit Balance Credit Balance Credit Balance Account #: 745 REF Account: TAXES & LICENSES Date Debit Account #: 740 Account: MEALS & ENTERTAINMENT Date Balance Account #: 735 Account: LEGAL EXPENSE Date Credit Account #: 730 Account: INSURANCE EXPENSE Date Debit Debit Account #: 767 REF Debit 28 Account: TELEPHONE EXPENSE Date Explanation Account #: 770 REF Account: UTILITIES EXPENSE Date Explanation Explanation REF Explanation Balance Debit Credit Balance Credit Balance Credit Balance Account #: 780 REF Account: INTEREST EXPENSE Date Credit Account #: 775 Account: FUEL EXPENSE Date Debit Debit Account #: 820 REF Debit 29 Account: PAYROLL TAX EXPENSE Date Explanation Account #: 825 REF Account: WAGES EXPENSE Date Explanation Explanation REF Balance Debit Credit Balance Credit Balance Credit Balance Account #: 835 REF Account: Date Credit Account #: 830 Account: INCOME TAX EXPENSE Date Debit Debit Account #: Explanation REF Debit 30 31