Accounting cycle

Accounting.xlsx

Home >Business & Finance homework help >Accounting homework help >Accounting cycle

Accounting Cycle Problem

On January 1, 2023, Mr. Wild formed a corporation to provide services to clients. Information about the first year of operation follows:
	Jan. 1	Investors provided $1,000,000 in cash in exchange for stock of The Wild Corporation.
	Jan. 1	Purchased equipment in exchange for $200,000 cash and a $1,000,000 note payable at an annual rate of 5%, payable every 6 months.
	Jan. 1	Purchased $33,000 of insurance that will cover the next 3 years. This was recorded as prepaid insurance.
	Feb. 1	Purchased $20,000 of office supplies on account that will be needed during the upcoming year.
	Mar. 15	Paid Salaries of $30,000.
	Mar. 31	Billed customers for services in the amount of $200,000.
	Apr. 15	Paid the vendor who sold Wild the office supplies on Feb. 1.
	Apr. 30	Collected $100,000 on accounts receivable.
	June 15	Paid salaries of $50,000.
	June 30	Paid $20,000 for employee travel costs.
	June 30	Paid $10,000 for a company party.
	June 30	Paid the interest due and $100,000 to reduce the balance of the note payable.
	July 1	Billed customers for services provided in the amount of $200,000.
	Aug 1	Collected $200,000 on accounts receivable.
	Aug. 15	Purchased $15,000 of office supplies on account.
	Sept. 15	Paid salaries of $40,000.
	Sept. 30	Paid $20,000 for a customer appreciation event.
	Sept. 30	Paid $30,000 for employee travel costs incurred by staff.
	Dec. 1	Collected $50,000 as deposits from customers who contracted for 2024.
	Dec. 31	Declared and paid a $20,000 dividend to shareholders.

The Wild Corporation uses the following accounts in it's Chart of Accounts:
	Cash
	Accounts Receivable
	Office Supplies
	Prepaid Insurance
	Equipment
	Accumulated Depreciation
	Accounts Payable
	Interest Payable
	Unearned Revenue
	Notes Payable
	Capital Stock
	Retained Earnings
	Dividends
	Service Revenue
	Salaries Expense
	Meals & Entertainment Expense
	Travel Expense
	Insurance Expense
	Office Supplies Expense
	Interest Expense
	Depreciation Expense
	Income Summary
COMPLETE THE FOLLOWING:
(a)	Journalize the listed transactions.
(b)	Post the transactions to the appropriate general ledger accounts.
(c)	Prepare a trial balance as of December 31.
(d)	Journalize and post adjusting entries based on the following additional information.
	There was $8,000 of Office Supplies on hand at year.	Purchased $25,000 of supplies on account.
	The equipment had 20-year life, with $100,000 salvage value.
	At year end, Wild Corp. had provided $85,000 of unbilled services to customers. These services will be billed in early 2023.	Declared and paid a $25,000 dividend to shareholders.
(e)	Prepare an adjusted trial balance as of December 31.
(f)	Prepare an income statement and Statement of Retained Earnings for this fiscal year, and a classified Balance Sheet as of December 31.
(g)	Journalize and post closing entries.
(h)	Prepare a post-closing trial balance as of December 31.

General Journal

GENERAL JOURNAL Page 1
	Date	Accounts	Debit	Credit
	Jan. 1	Cash	1,000,000
		Capital Stock		1,000,000
		Investors provided $1,000,000 in cash in exchange for stock of The Wild Corporation.
	Jan. 1	Equipment	1,200,000
		Cash		200,000
		Notes Payable		1,000,000
		Purchased equipment in exchange for $200,000 cash and a $1,000,000 note payable at an annual rate of 5%, payable every 6 months.
	Jan. 1	Prepaid Insurance	33,000
		Cash		33,000
		Purchased $33,000 of insurance that will cover the next 3 years. This was recorded as prepaid insurance.
	Feb. 1	Office Supplies	20,000
		Accounts Payable		20,000
		Purchased $20,000 of office supplies on account that will be needed during the upcoming year.
	Mar. 15	Salaries Expense	30,000
		Cash		30,000
		Paid Salaries of $30,000.
GENERAL JOURNAL Page 2
	Date	Accounts	Debit	Credit
	Mar. 31	Accounts Receivable	200,000
		Service Revenue		200,000
		Billed customers for services in the amount of $200,000.
	Apr. 15	Accounts Payable	20,000
		Cash		20,000
		Paid the vendor who sold Wild the office supplies on Feb. 1.
	Apr. 30	Cash	100,000
		Accounts Receivable		100,000
		Collected $100,000 on accounts receivable.
	June 15	Salaries Expense	50,000
		Cash		50,000
		Paid salaries of $50,000.
	June 30	Travel Expense	20,000
		Cash		20,000
		Paid $20,000 for employee travel costs.
GENERAL JOURNAL Page 3
	Date	Accounts	Debit	Credit
	June 30	Meals & Entertainment Expense	10,000
		Cash		10,000
		Paid $10,000 for a company party.
	June 30	Notes Payable	100,000
		Interest Expense	250,000
		Cash		350,000
		Paid the interest due and $100,000 to reduce the balance of the note payable.
	July 1	Accounts Receivable	200,000
		Service Revenue		200,000
		Billed customers for services provided in the amount of $200,000.
	Aug 1	Cash	200,000
		Accounts Receivable		200,000
		Collected $200,000 on accounts receivable.
	Aug. 15	Office Supplies	15,000
		Accounts Payable		15,000
		Purchased $15,000 of office supplies on account.
GENERAL JOURNAL Page 4
	Date	Accounts	Debit	Credit
	Sept. 15	Salaries Expense	40,000
		Cash		40,000
		Paid salaries of $40,000.
	Sept. 30	Meals & Entertainment Expense	20,000
		Cash		20,000
		Paid $20,000 for a customer appreciation event.
	Sept. 30	Travel Expense	30,000
		Cash		30,000
		Paid $30,000 for employee travel costs incurred by staff.
	Dec. 1	Cash	50,000
		Unearned Revenue		50,000
		Collected $50,000 as deposits from customers who contracted for 2024.
	Dec. 31	Dividends	20,000
		Cash		20,000
		Collected $50,000 as deposits from customers who contracted for 2024.

General Ledger

CASH
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-		-
Jan. 1	capital stock	1,000,000		1,000,000
Jan. 1	equipment		200,000	800,000
Jan. 1	prepaid insurance		33,000	767,000
Mar. 15	salaries expenses		30,000	737,000
Apr. 15	account payable		20,000	717,000
Apr. 30	account receivable	100,000		817,000
June 15	salaries expenses		50,000	767,000
June 30	travel expense		20,000	747,000
June 30	meal and entertainment		10,000	737,000
June 30	Note payable & interest expenses		350,000	387,000
Aug 1	account receivable	200,000		587,000
Sept. 15	salaries expenses		40,000	547,000
Sept. 30	meal and entertainment		20,000	527,000
Sept. 30	travel expense		30,000	497,000
Dec. 1	unearned revenue	50,000		547,000
Dec. 31	Dividends		20,000	527,000

ACCOUNTS RECEIVABLE
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
Mar. 31	service revenue	200,000		200,000
Apr. 30	cash		100,000	100,000
July 1	service revenue	200,000		300,000
Aug 1	cash		200,000	100,000
				100,000
OFFICE SUPPLIES
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
Feb. 1	account payable	20,000		20,000
Aug. 15	account payable	15,000		35,000
				35,000
PREPAID INSURANCE
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
Jan. 1	cash	33,000		33,000
				33,000
EQUIPMENT
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
Jan. 1	cash & note payable	1,200,000		1,200,000
ACCUMULATED DEPRECIATION
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
				-
ACCOUNTS PAYABLE
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
Feb. 1	office supplies		20,000	20,000
Apr. 15	cash	20,000		-
Aug. 15	office supplies		15,000	15,000
INTEREST PAYABLE
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
				-
UNEARNED REVENUE
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
Dec. 1	cash		50,000	50,000
NOTES PAYABLE
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
Jan. 1	equipment		1,000,000	1,000,000
June 30	cash	100,000		900,000
CAPITAL STOCK
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
Jan. 1	cash		1,000,000	1,000,000
RETAINED EARNINGS
Date	Description	Debit	Credit	Balance
Jan. 1	Balance forward	-	-	-
				-
				-
DIVIDENDS
Date	Description	Debit	Credit	Balance
Dec. 31	cash	20,000		20,000
				20,000
SERVICE REVENUE
Date	Description	Debit	Credit	Balance
Mar. 31	account receivable		200,000	200,000
July 1	account receivable		200,000	400,000
				400,000
				400,000
SALARIES EXPENSE
Date	Description	Debit	Credit	Balance
Mar. 15	cash	30,000		30,000
June 15	cash	50,000		80,000
Sept. 15	cash	40,000		120,000
				120,000
MEALS & ENTERTAINMENT EXPENSE
Date	Description	Debit	Credit	Balance
June 30	cash	10,000		10,000
Sept. 30	cash	20,000		30,000
				30,000
TRAVEL EXPENSE
Date	Description	Debit	Credit	Balance
June 30	cash	20,000		20,000
Sept. 30	cash	30,000		50,000
				50,000
INSURANCE EXPENSE
Date	Description	Debit	Credit	Balance
				-
				-
OFFICE SUPPLIES EXPENSE
Date	Description	Debit	Credit	Balance
Feb. 1	account payable	20,000		20,000
Aug. 15	account payable	15,000		35,000
INTEREST EXPENSE
Date	Description	Debit	Credit	Balance
June 30	cash	250,000		250,000
				250,000
				250,000
DEPRECIATION EXPENSE
Date	Description	Debit	Credit	Balance
				-
				-
INCOME SUMMARY
Date	Description	Debit	Credit	Balance
				-
				-
				-

Unadj Trial Balance

THE WILD CORPORATION
Unadjusted Trial Balance
December 31, 2020
		Debits	Credits
	Cash	$ 527,000
	Accounts Receivable	100,000
	Office Supplies	35,000
	Prepaid Insurance	33,000
	Equipment	1,200,000
	Accounts Payable		15,000
	Unearned Revenue		50,000
	Notes Payable		900,000
	Capital Stock		1,000,000
	Dividends	20,000
	Service Revenue		400,000
	Salaries Expense	120,000
	Meals & Entertainment Expense	80,000
	Office Supplies Expense	35,000
	Interest Expense	250,000
		$ 2,400,000	$ 2,365,000

Adjusting Entries

GENERAL JOURNAL Page 5
	Date	Accounts	Debit	Credit
	31-Dec	Office Supplies Expense	27,000
		Office Supplies		27,000
		(To supplies expensed)
	31-Dec	Depreciation Expense	45,000
		Accumulated Depreciation		45,000
		(To record depreciation)
	31-Dec	Unearned Revenue	85,000
		Service Revenue		85,000
		(To revenue recognized)

Adj Trial Balance

THE WILD CORPORATION
Adjusted Trial Balance
December 31, 2020
		Debits	Credits
	Cash	$ 527,000
	Accounts Receivable	100,000
	Office Supplies	6,000
	Prepaid Insurance	33,000
	Equipment	1,200,000
	Accounts Payable		15,000
	Unearned Revenue		35,000
	Notes Payable		900,000
	Capital Stock		1,000,000
	Dividends	20,000
	Service Revenue		490,000
	Salaries Expense	120,000
	Meals & Entertainment Expense	80,000
	Office Supplies Expense	35,000
	Interest Expense	250,000
	Travel Expense	50,000
	Accumulated Depreciation
		$ 2,421,000	$ 2,440,000

Financial Statements

THE WILD CORPORATION
Income Statement
For the Year Ending December 31, 2020
	Revenues
	service revenue		$ 315,000
	Expenses
	travel expenses	$ 50,000
	meal&entertainment	30,000
	interest expenses	250,000
	supplies expenses	35,000
	depreciation expenses	-
		-
		-	365,000
	Net income		$ (50,000)
THE WILD CORPORATION
Statement of Retained Earnings
For the Year Ending December 31, 2020
	Beginning retained earnings		$ -
	Plus: Net income		(50,000)
			$ (50,000)
	Less: Dividends		-
	Ending retained earnings		$ (50,000)
THE WILD CORPORATION
Balance Sheet
December 31, 2020
	Assets
	Current assets
		$ -
		-
		-	$ - 0
	Non-current assets
		-	- 0
	Property, plant & equipment
		$ -
		-	-
	Total assets		$ -
	Liabilities
	Current liabilities
		$ -
		-
		-	$ -
	Long-term liabilities
			-
	Total liabilities		$ -
	Stockholders' equity
		$ -
		(50,000)
	Total stockholders' equity		(50,000)
	Total Liabilities and equity		$ (50,000)

Closing Entries

	GENERAL JOURNAL Page 6
		Date		Accounts		Debit		Credit

Post-Closing Trial Balance

THE WILD CORPORATION
Post-Closing Trial Balance
December 31, 2020
	Debits	Credits
	$ -	$ -
	$ -	$ -