Chapter2Accounting Lab#2Assignment

P. MontComputers

Description & Instructions

You have decided to establish acomputerrepair business. You think it likely that you will also provide instructional webinars(for a fee)for various graphic design software packagesin small businesses. You name the company P. Mont Computers.

You will keep the accounting recordsyourself, with your first month of operationsinJanuary.

Since you are both repairing computers andproviding instructional webinars, you decide to trackrevenues using two accounts: Service Revenue for computer repairsand Consulting Revenue for webinars.

You begin the company by obtaining a charter from the state, with authorization to issue100,000 shares of $1 par value common stock. You decide to become an S corporation so that the corporation does not have to pay corporate tax. You will have to pay income taxes on your individual tax return.

You use the accrual basis of accounting. You close the books and prepare financial statementseach month.

Before recording transactions, you set up a "Chart of Accounts." A chart of accounts is a list of the accounts that will be in the general ledger that will likelybeusedduring January. This is provided as a separate Excel document that can be referred to while entering transactions during the period.

Lab #2 is based upon the material in Chapter 2that allows you to practice creating journal entries.

Lab #3isa continuation ofLab #2 and isbased onChapter 3 - adjusting entries,the creation of financial statements, and several analysis questions.

JanuaryEventsfor P. Mont Computers

The events for the first month of the company's operations are presented below.Record

the necessary journal entries for the events that occurred.

January 2

You wrote a personal check to purchase30,000 shares of P. Mont Computers'common stock. Your check was for $30,000. Each share of stock is issued at par value, as the stock has a $1 par value per share. At this point, the new company has just one shareholder: You. Inthefuture, if you decide to expand the business, you may issue stock to others.

Recordthe sale of stock in the records of P. Mont Computers.

Accounts Debit Credit

Cash	30,000
Common Stock$1 Par Value		30,000

January3

The company decided to lease shop space on the localpedestrianmall. The rent is $750 per month. You were required to pay for6monthsofrent in advance. You wrote a corporate check to pay for the6months of rent. (We consider checks written to be the same as paying for something in cash).

Hint:Because the company is purchasing a resource(the rent)that it will consume in the future, you should record the cost as an asset and defer recognizingthe rentexpense until the resource produces revenue. You will adjust the books on January 31 to recognize one month's worth of therent as anexpenseof January(this will be done in Lab #3 on Chapter 3).

Prepaid Rent	4,500
Cash		4,500

January 3

The company paid $2,400by checktothe PittInsuranceAgencyfor a one-year insurance policy. Again, the insurance will be used over multiple periods. Therefore, you should record the cost as an asset and defer recognizing the expense until the end of the month(this will be done in Lab #3 on Chapter 3).

Prepaid Insurance	2,400
Cash		2,400

January4

The company purchased store equipment fromJonesEquipment Co. The equipment costwas$5,800. The company paid $800 in cash and agreed to pay the balance within30days.

Store Equipment	5,800
Cash		800
Accounts Payable		5,000

January5

You purchased various office supplies for $1,100 from Office Supply Warehouse.(Hint:You will not use all of the supplies during January, and therefore will record the supplies in an asset account - and will adjust at the end of the month(in Lab #3)). You purchased the supplies witha corporate check (remember this is the same as purchasing with cash).

Office Supplies	1,100
Cash		1,100

January 5

The company purchased various computerrepair supplies from Williams Supply Co. Again, you purchased enough supplies to last for at least several months. The cost of the supplies was $3,500. You purchased the supplies on account and will have to pay within 30 days. (Hint:Use the Repair Supplies account to record the new asset and adjust at the end of the month(in Lab #3)).

Repair Supplies	3,500
Accounts Payable		3,500

January 7

To make the community aware of your new business and generate some customers, youadvertise on a local radio station, paying $700by corporate check (remember this is the same as paying immediately in cash).

Advertising Expense	700
Cash		700

January 8

The first customer arrived! Susanna Rodriguezbrought in a computerneeding a quick repair. She was willing to wait while you did the work. When you finished, you presented her with a bill for $105and she gave you a check forthe total.

Cash	105
Service Revenue		105

January 10

Another customer, Jim Springfield, brought in several computersneeding repair. You told him that you would have the work done by January 13. You asked Jim for a deposit of $100(Hint: make sure to think about when the work will be completed, as this impacts the recognition of revenue).

Cash	100
Unearned Revenue		100

January 10

Also on January 10, a customer namedFranBarremailed and wanted to set up a tutorial webinarfor a graphic design idea. You negotiated a price of $75for thewebinarand set upthedate/time for thewebinar asJanuary 15 at 9:00am.

January 13

You completed the work for Jim Springfield. When he arrived at your store, you gave him a bill for $500. He paid you the balance due, and you presented him with the repaired computers.(Hint: remember to reviewthe transaction on 1/10).

Cash	400
Unearned Revenue	100
Service Revenue		500

January 15

Youconductedthe webinar withFranBarr. When you were done, yousent her an electronic invoice (bill)for $75. She asked if she couldelectronicallypay you $35at that point and the remainder the following week. While you would have much preferred to collect all of the money right then, you agreed to let her pay the remainder on January 22.

Cash	35
AccountsReceivable	40
Service Revenue		75

January 15

Jenny Chen came into your store to discuss an interesting proposal. She asked your store to providegraphic designtraining/consultationstoa group of local non-profit organizations. Jennysaid thatyou would be"on call" for 3 months, andthe organizationswere willing to pay you in advance for 3 months. You negotiated afee of$800per month, andyouwill begin providing consulting services on 1/16. Jenny wrote your company a check forthe upcoming 3 months.

Cash	2,400
Unearned Revenue		2,400

January 20

A check for the balance that FranBarrowed you arrived, paying off her account in full.

Cash	40
Accounts Receivable		40

January25

Twoinvoicesarrived. One was for $90for the telephone service for January. It was due on February 10 - so you decided to wait until then to make payment to Southern Telephone. The other bill of $378was for the electricity for January, and it was dueat the end of January.You immediately wrote a check to Southern Electric for theamount owed.

Telephone Expense	90
Accounts Payable		90
Utility Expense	378
Cash		378

January 30

You completed work forseveralcash-paying customers (other than those mentioned in the above transactions) during the month. Rather than record each of these cash-paying customers separately, you kept a record of all the cash receipts in a separate journal. The total of the cash received for computerrepair services provided was $4,457.

Cash	4,457
ServiceRevenue		4,457

January 31

You decided to pay Williams SupplyCo.the amount youowedthem since the payment was due soon(see the transaction on January 5).

Repair Supplies	3,500
Accounts Receivable		3,500

END OfDaily EntriesFOR JANUARY!

can someone please help with completing a general ledger (t-account) for this lab? the information provided in the journal entry is the information that will be used to conduct a general ledger (t-account).