Case 1 Intermediate Accounting 1 Accounting Cycle

Point Value: 100 points Due Date: See syllabus

In this case you will complete the accounting cycle (Illustration 3-6) for one month for a new company. To facilitate the end-of-month accounting and reporting process you will use a worksheet. The worksheet is a tool used to adjust account balances and prepare financial statements, however, the worksheet does not replace the financial statements. Preparation of a worksheet is covered in Appendix 3C on pages 121-124.

The following is the information concerning the company. Instructions are at the end of the case.

At the start of the new business the company set up the following chart of accounts:
101	Cash	405	Commissions Earned
106	Accounts Receivable	410	Consulting Revenue
124	Office Supplies	612	Depreciation ExpenseComputer Equip.
128	Prepaid Insurance	622	Salaries Expense
167	Computer Equipment	637	Insurance Expense
168	Accumulated DepreciationComputer Equip.	640	Rent Expense
209	Salaries Payable	650	Office Supplies Expense
307	Common Stock	684	Repairs Expense
318	Retained Earnings	688	Telephone Expense
319	Dividends	901	Income Summary
You may ADD additional accounts as necessary. Be sure to assign an account # based on the account classification: Assets: 100 199 Liabilities: 200-299 Equity: 300- 399 Revenues: 400-499 Expenses: 600-699

April 1, 2017, John Adams created a new travel agency, Adventure Travel. The following transactions occurred during the companys first month.
April	1		Adams invested $54,000 cash and computer equipment worth $27,000 in the company in exchange for common stock.
	2		The company rented furnished office space by paying $5,200 cash for the first months (April) rent.
	3		The company purchased $3,800 of office supplies for cash and debited the entire amount to an expense account.
	5		The company collected $10,500 cash for consulting services to be provided in the next three months.
	7		The company paid $2,640 cash for the premium on a 12-month insurance policy. Coverage begins on April 8.
	14		The company paid $2,400 cash for two weeks salaries earned by employees.
	24		The company collected $21,600 cash on commissions from airlines on tickets obtained for customers.
	28		The company paid $2,400 cash for two weeks salaries earned by employees.
	29		The company paid $650 cash for minor repairs to the companys computer.
	30		The company paid $1,600 cash for this months telephone bill.
	30		The company paid $1,200 cash for dividends.
Use the following information for instructions 4 and 5:
a.	Three-fourths of one months insurance coverage has expired.
b.	At the end of the month, $2,100 of office supplies are still available.
c	One months depreciation on the computer equipment was recorded. The company uses straight-line method of depreciation, the computer is estimated to have 5 year useful life and no residual value.
d.	Employees earned $720 of unpaid and unrecorded salaries as of month-end.
e.	The company earned $2,300 of commissions that are not yet billed at month-end.
f.	The company has provided consulting services for $3,200 for customers who have paid in advance (April 5th transaction)

Instructions:

1. Journalize April transactions in the provided General Journal; 2. Post April transactions to the provided ledger accounts (T-accounts), calculate and present the unadjusted balance of each account at the end of the month (unadjusted balances); 3. Prepare the trial balance in the worksheet; 4. Record the adjusting entries in the worksheet; 5. Journalize April adjusting entries in the General Journal; 6. Post the adjusting entries to the ledger accounts and determine the adjusted balances; 7. Prepare the adjusted trial balance in the worksheet; 8. Complete the income statements and the balance sheet columns of the worksheet; 9. Prepare in good form the income statement, statement of retained earnings and classified balance sheet for the month ending April 30; 10. Journalize the closing entries in the General Journal; 11. Post the closing entries in the ledger accounts. Bonus: Prepare a post-closing trial balance in the provided template (5 bonus points).