Work4Me I Accounting Simulations 3rd Web-Based Edition Problem Four Daily and Adjusting Entries for Classic Accounting Services, Incorporated Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 2 Problem Four Classic Accounting Services, Inc. Trial Balance June 16 ________________________________________________________________ Debit Credit Cash 14,500.00 Accounts Receivable 13,650.00 Prepaid Rent 6,600.00 Prepaid Insurance 1,850.00 Office Supplies 724.00 Office Equipment 13,000.00 Accumulated Deprec. Office Equip. 2,550.00 Automobile 18,500.00 Accumulated Deprec. - Automobile 3,240.00 Building 138,000.00 Accumulated Deprec. - Building 29,000.00 Land 150,000.00 Accounts Payable 10,400.00 Short-term Notes Payable 5,000.00 Unearned Consulting Fees 3,000.00 Long-term Notes Payable 16,000.00 Mortgage Payable 60,000.00 Common Stock 100,000.00 Retained Earnings 91,676.00 Accounting Fees Earned 35,200.00 Consulting Fees Earned 14,755.00 Salaries and Wages Expense 8,612.00 Vehicle Operating Expense 750.00 Advertising Expense 825.00 Delivery Expense 425.00 Electric and Gas Expense 990.00 Telephone Expense 675.00 License Expense 125.00 Miscellaneous Expense 45.00 Interest Expense 1,550.00 ---------- ---------- Total 370,821.00 370,821.00 ========== ========== Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 3 CHART OF ACCOUNTS Classic Accounting Services, Incorporated Problem Four ASSETS REVENUE 101 Cash 401 Accounting Fees Earned 105 Accounts Receivable 405 Consulting Fees Earned 109 Notes Receivable 121 Prepaid Rent 122 Prepaid Insurance EXPENSES 125 Prepaid Advertising 127 Office Supplies 601 Salaries and Wages Expense 131 Office Equipment 602 Office Supplies Expense 132 Accum. Depreciation, Office Equip. 604 Vehicle Operating Expense 139 Automobiles 605 Advertising Expense 140 Accum. Depreciation, Automobiles 606 Delivery Expense 150 Building 610 Depreciation Exp., Office Equip. 151 Accum. Depreciation, Building 612 Depreciation Exp., Automobiles 160 Land 615 Depreciation Exp., Building 621 Rent Expense 622 Insurance Expense LIABILITIES 624 Property Tax Expense 625 Electric and Gas Expense 201 Accounts Payable 626 Telephone Expense 203 Short-Term Notes Payable 628 License Expense 209 Salaries & Wages Payable 635 Miscellaneous Expense 211 Property Taxes Payable 651 Interest Expense 215 Interest Payable 220 Unearned Consulting Fees 231 Long-Term Notes Payable 241 Mortgage Payable STOCKHOLDERS EQUITY 301 Common Stock 305 Retained Earnings 310 Cash Dividends Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 4 Problem 4 Journalizing Daily and Adjusting Entries Classic Accounting Services, Incorporated Problem Four, has been completed for you through the June 16 daily entries, and the balances of the accounts to this date are shown in the Trial Balance on page 2. Using the Chart of Accounts found on page 3, your first job is to complete the daily entries for the final two weeks of the month. After proving the accuracy of your June 30 Trial Balance, your second job is to complete the required adjusting entries and prepare an Adjusted Trial Balance. When the Adjusted Trial Balance totals match the Check It Out balances, your final responsibility will be to print the selected documents and use them to answer the analysis questions. 1. Go to www.pklsoftware.com, select Work4Me, and log in. 2. From the Menu Bar of the Data Entry page, select Problem 4, Daily and Adjusting Entries, and click. 3. Click on OK, at the message directing you to select Daily or Adjusting entries. 4. Move the pointer to Daily JE and click. You will be recording daily entries for last two weeks of June. When your June 30 trial balance matches the check figures, you will proceed to the adjusting entries for the period. You must record and correct all daily entries using the Daily JE data entry format. You must also remember to record and correct all adjusting entries only in the Adjusting JE data entry format. ****************************************************************************** TRANSACTIONS FOR JUNE 17-30 Student Analysis June 17 Purchased office equipment costing $3,550 and office supplies listed at $90 on account (30-day credit) from Acme Supply. At the document prompt, enter invoice number B4444 for this purchase. ****************************************************** June 17 Received a check for $865 for accounting services completed today and listed on invoice number C4666. Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 5 TRANSACTIONS FOR JUNE 17-30 Student Analysis June 19 Issued check number 00456 for $725 for June advertising listed on invoice number W5555 that was received today. ****************************************************** June 19 Performed $900 worth of additional accounting services for a client. The client paid $300 in cash and asked to be billed for the remaining balance owed (invoice number C4667). The client is allowed 30-day credit terms. ****************************************************** June 21 Received $2,000 cash as a retainer fee for consulting work to be performed for a client. At the document prompt enter RTFEE for retainer fee. ****************************************************** June 22 Paid $90.50 to Alis Shell Service for gas and automobile repairs. Check number 00457 paid in full invoice number 47777 that was received today. ****************************************************** June 23 Purchased $66 worth of postage stamps, envelopes, and business folders (office supplies) for the office issuing check 00458 in payment of invoice 00777. ****************************************************** June 23 Paid $24 to the Ortega Courier Service for delivery of documents to a client (check 00459 and delivery invoice number 22222). Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 6 TRANSACTIONS FOR JUNE 17-30 Student Analysis June 25 Received a check for $635 from a client as payment in full on her account balance (invoice C4632). ****************************************************** June 27 Issued check 00460 for $124 as payment in full of the Vandercamp Office Supply account balance that is due today (invoice number V4567). ****************************************************** June 29 Purchased a 6-month liability insurance policy for the period of July-December for $1,800 cash (check 00461 and invoice L3355). ****************************************************** June 29 Issued check 00462 for $304.50 to pay the Loomis-Newcastle Telephone Company bill that was received today. The invoice number for this billing is LN888. ****************************************************** June 30 Issued check number 00463 and paid a cash dividend of $1,500 to the stockholders of the company. At the invoice prompt enter CASHD for cash dividend. ****************************************************** June 30 Received a check for $300 as partial payment on account from a client (invoice number C4651). Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 7 Now that you have completed entering the daily entries for Classic Accounting Services, Incorporated, it is time to check the accuracy of your work. In the Check It Out box below are the correct balances of key accounts from the trial balance. 1. Move the pointer to Journal/Ledgers/Statements in the Menu Bar, move down to the General Ledger selection and click. The completed Trial Balance will appear on the screen. 2. Check your balances against the totals shown in the Check It Out box below. If all of your totals match the check figures, you are ready to begin entering the adjusting entries for Classic Bookkeeping Service, Inc. If your totals DO NOT match the check figures, proceed to the instructions below the Check It Out box. If any of your account balances do not match the correct check figures, you have one or more errors that must be corrected before you can continue. The most efficient method of locating and correcting the error/s is to a print copy of the Trial Balance and a copy of the General Journal. 1. Move the pointer to Journal/Ledgers/Statements in the Menu Bar, then down to General Ledger and click. Print a copy of the Classic Accounting Services, Incorporated, Trial Balance. CHECK IT OUT 101 Cash $13,966.00 105 Accounts Receivable 13,315.00 122 Prepaid Insurance 3,650.00 127 Office Supplies 880.00 131 Office Equipment 16,550.00 201 Accounts Payable 13,916.00 310 Cash Dividends 1,500.00 401 Bookkeeping Fees Earned 36,965.00 405 Consulting Fees Earned 14,755.00 625 Electric and Gas Expense 990.00 626 Telephone Expense 979.50 TRIAL BALANCE TOTAL $378,102.00 Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 8 2. Move the pointer to Journal/Ledgers/Statements in the Menu Bar, then down to General Journal and click. Print a copy of the General Journal. 3. From the accounts on the Trial Balance that do not match the check figures, check you journal entries for errors. Make the necessary corrections by backing out each error entry and then reentering it correctly. 4. When your balances match the Check It Out box figures, you are ready to begin recording the adjusting entries for Classic Accounting Services, Incorporated. Adjusting Entries for June 30 The adjusting entries procedure (Click on Adjusting JE) must be used to record (and correct) all adjusting entries. Remember that all adjustments are being made for June 30, the end of the SECOND QUARTER of the year. Adjusting entries must Not be entered using the Daily Entries procedure. Using your correct June 30 Trial Balance, and the adjustment information that follows, record the adjusting entries for Classic Accounting Services, Incorporated. A. A total of $545 worth of office supplies have been used during the second quarter. B. Rent was prepaid for six months in advance on April 1 of this year. C. The unexpired balance of the Prepaid Insurance account totals $1,800 at the end of June. D. A total of $1,550 worth of advertising copy was paid for and correctly charged to the Advertising Expense account during the quarter. An examination of the account shows that only $100 worth of advertising copy has not yet been run as of June 30. E. It is determined that $345 worth of accounting services have been completed for a client, but not yet been billed. Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 9 F. Total accrued interest on all notes payable, including the mortgage, is $325. G. An examination of the Unearned Consulting Fees account shows as of June 30, $1,380 of this account balance has been earned. H. Accrued property taxes for the quarter total $220. I. Depreciation of the office equipment for the year totals $1,260 and is calculated on the straight-line basis. J. Depreciation of the automobile has been calculated to be $180 per month. K. The building depreciates at a rate of $1,400 per quarter. L. Accrued wages total 8.5 hours worked at a rate of $12.50 per hour. With the completion of the adjusting entries for Classic Accounting Services, Incorporated, it is time to check the accuracy of your work. In the Check It Out box on the next page are the correct balances of some of the key accounts from the Adjusted Trial Balance. 1. Move the pointer to Journal/Ledgers/Statements in the Menu Bar, move down to the General Ledger selection and click. The completed Adjusted Trial Balance will appear on the screen. 2. Check your balances against the totals shown in the Check It Out box on the top of page 11. If your totals DO NOT match the check figures, proceed to the instructions below the Check It Out box on page 11. Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 10 If all of your totals match the check figures, you are ready to print the Adjusted Trial Balance and the other required documents. Continue with instruction three that follows. 3. Print the Adjusted Trial Balance for Classic Accounting Services, Incorporated. 4. Click on the Ledger Card button. The Cash ledger card will appear on the screen. Print the Cash account. 5. Using the pull-down screen, select, show, and print each of the following additional ledger cards. Account number: 105 Accounts Receivable Account number: 201 Accounts Payable Account number: 220 Unearned Consulting Fees Account number: 601 Salaries Expense 6. Move the pointer to Journal/Ledgers/Statements in the Menu Bar, then down to Financial Statements and select Income Statement. Print the document. 7. Print the Retained Earnings Statement. 8. Print the Classic Accounting Services, Incorporated Balance Sheet. 9. When all of the required documents have been printed, you have completed your computer work for Problem 4. Move the pointer to Assistance on the Menu Bar then down to Home Page and click. From the PKL software Home Page you may make another selection or click on File and exit the website. Using your printed documents, carefully answer the questions on the Classic Accounting Services, Incorporated, Problem Four Analysis Form. Instructions as to how and when your assignment is to be turned in will be given by your instructor. Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 11 IF ANY OF YOUR BALANCES DO NOT MATCH THE CORRECT FIGURES, YOU HAVE ONE OR MORE ERRORS THAT MUST BE CORRECTED BEFORE YOU CAN CONTINUE. The most efficient method of locating and correcting the errors is to print a copy of the Adjusting Trial Balance and a copy of the General Journal. 1. Move the pointer to Journal/Ledgers/Statements in the Menu Bar, then to General Ledger and click. Print a copy of the Classic Accounting Services, Incorporated, Adjusting Trial Balance. 2. Move the pointer to the Journal/Ledgers/Statements in the Menu Bar, then to General Journal and click. Print a copy of the General Journal. 3. Check your journal entries for error/s. If you do not match the balance of a particular account, check the transaction that was recorded (or not recorded) for that account. Make the necessary correction/s by backing out the error entry and then journalizing the correct entry. 4. When your corrected totals match the check figures, proceed to instruction 3-9 at the top of page 10. CHECK IT OUT 105 Accounts Receivable $13,660.00 121 Prepaid Rent 3,300.00 122 Prepaid Insurance 1,800.00 127 Office Supplies 335.00 132 Accumulated Depre., Office Equipment 2,865.00 209 Salaries & Wages Payable 106.25 211 Property Taxes Payable 220.00 220 Unearned Consulting Fees 3,620.00 401 Accounting Fees Earned 37,310.00 405 Consulting Fees Earned 16,135.00 605 Advertising Expense 1,450.00 612 Depreciating Expense, Automobile 540.00 615 Depreciating Expense, Building 1,400.00 651 Interest Expense 1,875.00 ADJUSTED TRIAL BALANCE TOTAL $381,353.25 Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 12 WORK4ME I - PROBLEM FOUR NAME_______________________________________ DAILY & ADJUSTING ENTRIES CLASS DAY AND TIME__________DATE________ 1. Do the totals on your printed Adjusted Trial Balances match the figures shown in the Check It Out box? Answer only Y for Yes or N for No. ______________ 2. If the ending inventory for supplies had been only $50, what would have been the balance of the Supplies Expense account after the required adjusting entry? $_____________ 3. If there had not been any accrued salaries and wages for the period, what would have been the balance of the Salaries and Wages Expense account? $_____________ 4. What is the total of the quarterly operating expenses? $_____________ 5. What is the total net income for the quarter ended June 30? $_____________ 6. The income from operations of the business is what percent of the total revenues? Always round to 2 decimal places. On the computer graded examination do NOT write the word percent or use the percent sign % in the answer to this question. _____________% 7. Salaries and Wages Expense is what percent of total revenues? On the computer graded examination do NOT write the word percent or use the percent sign [%] in the answer to this question. _____________% 8. For the same quarter one year ago, Income From Operations was 55.01% and Salaries and Wages Expense was 17.01% of Total Revenues. This current quarter has shown improvement in: A. Both Items B. Only Salaries and Wages C. Only in Income From Operations to Total Revenues D. None of the areas. ______________ 9. If in error, the adjusting entry for the depreciation of the building had not been recorded as required, what would have been the reported total for the net income of the business? $_____________ 10. How much has the Retained Earnings account increased this accounting period? $_____________ Work4Me I Problem 4 3rd Web-Based Edition, Copyright 2010 PKL Software, Incorporated. All rights reserved. Last Revised: April 1, 2010 Page 13 11. What is the net worth or total Stockholders Equity of Classic Accounting Services, Incorporated? $_____________ 12. On the June 30 Balance Sheet, what is the new book value of the Automobile? $_____________ 13. On the Cash account ledger card, what was the invoice number for the June 19 credit entry? ______________ Invoice Number 14. What was the number of the check used to pay the cash dividend on June 30? ______________ Check Number 15. On the Accounts Payable ledger card, what was the number of the check used to pay invoice number V4567? ______________ Check Number