Ace Lawn Care Module 2 Mini Practice Problem Jim has asked you to prepare financ
ID: 2551356 • Letter: A
Question
Ace Lawn Care Module 2 Mini Practice Problem
Jim has asked you to prepare financial statements for his first month of operation. The following information relates to the month of May, 2014. (Round all calculations to the nearest whole dollar)
On May 2, Jim signed a 1 year, 6% note for $3,500 associated with the purchase of a used truck for the business. The interest will be due with the principle of the note.
On May 2, Jim purchased a used truck for $7,000 to use for the lawn care business. He estimates a trade-in value of $500 at the end of the estimated five-year life of the truck.
On May 5, Jim purchased a lawn mower for $300 and an aerator for $500. He estimates $0 salvage value for both pieces of equipment and an estimated two-year life for both.
On May 6, Jim writes a $600 check for a six month insurance policy that expires October 31, 2014.
Instructions:
Using the chart of accounts provided, and the Excel template provided with this assignment, record the adjustments in the Worksheet, calculate the adjusted trial balance and complete the worksheet.
Prepare the Income Statement, Statement of Owner’s Capital and Balance Sheet for Ace Lawn Care for May, 2014
Prepare journal entries, in good form, to record the May adjusting entries. Explanations are optional. Start with Page 3 of the General Journal for the adjusting entries.
Post the journal entries to general ledger accounts. There are already transactions in the ledger for the month, you are adding to those transactions.
Prepare and post the closing entries for May, 2014. Start with Page 4 of the General Journal for the closing entries
Prepare a post-closing trial balance as of May 31, 2014, for Ace Lawn Care.
Ace Lawn Care
Chart of Accounts
Classification
Account Number
Account Name
ASSETS
101
Cash
110
Accounts Receivable
120
Supplies
130
Prepaid Insurance
150
Equipment
155
Accumulated Depreciation – Equipment
LIABILITIES
201
Accounts Payable
220
Notes Payable
225
Interest Payable
OWNER’S EQUITY
301
Owner’s Capital
305
Owner’s Drawings
310
Income Summary
REVENUES
401
Lawn Service Revenue
EXPENSES
620
Supplies Expense
630
Fuel Expense
640
Repair and Maintenance Expense
650
Advertising Expense
660
Insurance Expense
670
Depreciation Expense
680
Interest Expense
Classification
Account Number
Account Name
ASSETS
101
Cash
110
Accounts Receivable
120
Supplies
130
Prepaid Insurance
150
Equipment
155
Accumulated Depreciation – Equipment
LIABILITIES
201
Accounts Payable
220
Notes Payable
225
Interest Payable
OWNER’S EQUITY
301
Owner’s Capital
305
Owner’s Drawings
310
Income Summary
REVENUES
401
Lawn Service Revenue
EXPENSES
620
Supplies Expense
630
Fuel Expense
640
Repair and Maintenance Expense
650
Advertising Expense
660
Insurance Expense
670
Depreciation Expense
680
Interest Expense
GENERAL LEDGER ACCOUNT Cash ACCOUNT NO 101 BALANCE DATE DESCRIPTION Debit Credit 2014 20,000 20,000 16,500 15,700 15,100 15,050 15,550 16,250 16.175 16,975 17,475 17,075 15,575 2 3 6 8 16 23 26 30 31 JI JI JI 3,500 800 600 500 700 J2 J2 J2 J2 J2 75 800 400 1,500 31Explanation / Answer
Adjusting Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-May Interest Expense 17.50 $3,500 X 6% X (1/12) Interest Payable 17.50 (To record the interest accrued) 31-May Depreciation Expense 116.67 ($7,000 - $500) / 60 Months Accumulated Depreciation - Equipment 116.67 (To record the Depreciation Expense) 31-May Depreciation Expense 33.33 $800 / 24 Months Accumulated Depreciation - Equipment 33.33 (To record the Depreciation Expense) 31-May Insurance Expense 100.00 Prepaid Insurance 100.00 (To record the Insurance Expense) Closing Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-May Income Summary 792.50 Supplies Expense - Fuel Expense 400.00 Repair & Maintenance Expesne 75.00 Advertising Expense 50.00 Insurance Expense 100.00 Interest Expense 17.50 Depreciation Expense 150.00 (To record the closing entry for expense) 31-May Lawn Service Revenue 2,700.00 Income Summary 2,700.00 (To record the closing entry for revenue) 31-May Income Summary 1,907.50 Owners', Capital 1,907.50 (To record the Net Income) 31-May Owners', Capital 1,500.00 Owners' Drawing 1,500.00 (To record transfer of drawing to capital) Cash Accounts Receivable Date Debit Credit Balance Date Debit Credit Balance 31-May 15,575.00 Dr. 31-May 200.00 Dr. 15,575.00 Dr. Supplies Prepaid Insurance Date Debit Credit Balance Date Debit Credit Balance 31-May - - Dr. 31-May 600.00 Dr. 31-May 100.00 500.00 Dr. Equipment Accumulated Depreciation - Equipment Date Debit Credit Balance Date Debit Credit Balance 31-May 7,800.00 Dr. 31-May - Cr. 31-May 116.67 116.67 Cr. 31-May 33.33 150.00 Cr. Accounts Payable Notes Payable Date Debit Credit Balance Date Debit Credit Balance 31-May - Cr. 31-May 3,500.00 Cr. Interest Payable Owner's Capital Date Debit Credit Balance Date Debit Credit Balance 31-May - Cr. 31-May 20,000.00 Cr. 31-May 17.50 17.50 Cr. Owner's Drawing Lawn Service Revenue Date Debit Credit Balance Date Debit Credit Balance 31-May 1,500.00 Dr. 31-May - 2,700.00 Cr. Supplies Expense Fuel Expense Date Debit Credit Balance Date Debit Credit Balance 31-May - Dr. 31-May 400.00 Dr. Repair & Maintenance Expesne Advertising Expense Date Debit Credit Balance Date Debit Credit Balance 31-May 75.00 Dr. 31-May 50.00 Dr. Insurance Expense Interest Expense Date Debit Credit Balance Date Debit Credit Balance 31-May - Dr. 31-May - Dr. 31-May 100.00 100.00 Dr. 31-May 17.50 Depreciation Expense Date Debit Credit Balance 31-May - Dr. 31-May 116.67 116.67 Dr. 31-May 33.33 150.00 Dr. Trial Balance Adjustments Adjusted Trial Balance Income Summary Balance Sheet Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash 15,575.00 15,575.00 15,575.00 Accounts Receivable 200.00 200.00 200.00 Supplies - - - Prepaid Insurance 600.00 100.00 500.00 500.00 Equipment 7,800.00 7,800.00 7,800.00 Accumulated Depreciation - Equipment - 150.00 150.00 150.00 Accounts Payable - - - Notes Payable 3,500.00 3,500.00 3,500.00 Interest Payable - 17.50 17.50 17.50 Owner's Capital 20,000.00 20,000.00 20,000.00 Owner's Drawing 1,500.00 1,500.00 1,500.00 Lawn Service Revenue 2,700.00 2,700.00 2,700.00 Supplies Expense - - - - Fuel Expense 400.00 400.00 400.00 - Repair & Maintenance Expesne 75.00 75.00 75.00 - Advertising Expense 50.00 50.00 50.00 - Insurance Expense - 100.00 100.00 100.00 - Interest Expense 17.50 17.50 17.50 Depreciation Expense 150.00 150.00 150.00 Totals 26,200.00 26,200.00 267.50 267.50 26,367.50 26,367.50 792.50 2,700.00 25,575.00 23,667.50 Net Income 1,907.50 1,907.50 Totals 2,700.00 2,700.00 25,575.00 25,575.00 - - - - Ace Lawn Care Income Statement For the Month Ended May 31, 2014 Revenue Lawn Service Revenue 2,700.00 Expenses Supplies Expense - Fuel Expense 400.00 Repair & Maintenance Expesne 75.00 Advertising Expense 50.00 Insurance Expense 100.00 Interest Expense 17.50 Depreciation Expense 150.00 Total Expense 792.50 Net Income 1,907.50 Ace Lawn Care Statement of Owner's Equity For the Month Ended May 31, 2014 Beginning Balance - Net Income 1,907.50 Drawings (1,500.00) Net Increase in Owner's Equity 407.50 Capital Introduced 20,000.00 Ending Balance - May 31, 2014 20,407.50 Ace Lawn Care Balance Sheet As of May 31, 2014 Assets Current Assets Cash 15,575.00 Accounts Receivable 200.00 Supplies - Prepaid Insurance 500.00 16,275.00 Property, Plant & Equipment Equipment 7,800.00 Accumulated Depreciation - Equipment (150.00) 7,650.00 Total Assets 23,925.00 Liabilities & Stockholders Equity Liabilities Current Liabilities Accounts Payable - Notes Payable 3,500.00 Interest Payable 17.50 3,517.50 Long Term Liability - Total Liabilities 3,517.50 Stockowners' Equity 20,407.50 Total Liabilities & Stockowner' Equity 23,925.00 Ace Lawn Care Closing Trial Balance For the Month Ended May 31, 2014 Dr. Amt. Cr. Amt. Cash 15,575.00 Accounts Receivable 200.00 Supplies - Prepaid Insurance 500.00 Equipment 7800 Accumulated Depreciation - Equipment 150.00 Accounts Payable - Notes Payable 3,500.00 Interest Payable 17.50 Owner's Capital 20,407.50 Total 24,075.00 24,075.00