Complete Accounting Cycle

For the past several years, Kareem Ismail has operated a part-time consulting business from his home. As of October 1, 2010 Kareem decided to move to rented quarters and to operate the business, which was to be known as Iron Mountain Consulting, on a full-time basis. Iron Mountain Consulting entered into the following transactions during October:

Oct. 1. The following assets were received from Kareem Ismail: cash, $18,000 accounts receivable, $5,000 supplies, $1,500; and office equipment, $10,750. There were no liabilities received.

Oct. 1. Paid three months’ rent on a lease rental contract, $4,800.

2. Paid the premiums on property and casualty insurance policies, $2,700.

4. Received cash from the clients as an advance payment for services to be provided and recorded it as unearned fees, $3,150.

5. Purchased additional office equipment on account from Office Station Co., $1,250.

6. Received cash from clients on account, $2,000.

10. Paid cash for a newspaper advertisement $325.

12. Paid Office Station Co. for part of the debt incurred October 5, $750.

12. Recorded services and provided on account for the period October 1—12, $5,750.

14. Paid part-time receptionist for two weeks’ salary, $900.

17. Recorded cash from cash clients for fees earned during the period of October 1—17, $9,250.

18. Paid cash for supplies, $600.

20. Recorded services provided on account for the period October 13—20, $4,100.

24. Recorded cash from cash clients for fees earned for the period October 17—24, $4,850.

26. Received cash from clients on account, $3,450.

27. Paid part-time receptionist for two weeks’ salary, $900.

29. Paid telephone bill for October, $250.

31. Paid electricity bill for October, $300.

31. Recorded cash from cash clients for fees earned for the period October 25—31, $3,975.

31. Recorded services provided on account for the remainder of October, $2,500.

31. Kareem withdrew $7,500 for personal use.

**********Instructions**********

1. Journalize each transaction in a two-column journal, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.)

11. Cash 31. Kareem Ismail, Capital

12. Accounts Receivable 32. Kareem Ismail, Drawing

14. Supplies 41. Fees Earned

15. Prepaid rent 51. Salary Expense

16. Prepaid insurance 52. Rent Expense

18. Office equipment 53. Supplies Expense

19. Accumulated Depreciation 54. Depreciation Expense

21. Accounts Payable 55. Insurance expense

22. Salaries Payable 59. Miscellaneous expense

23. Unearned fees

2. Post journal to ledger of four-column accounts.

3. Prepare an unadjusted trial balance.

4. At the end of October, the following adjustment data were assembled. Analyze and use the data to complete parts (5) and (6).

a. Insurance expired during October is $225.

b. Supplies on hand on October 31 are $875.

c. Depreciation of office equipment for October is $400.

d. Accrued receptionist salary on October 31 is $200.

e. Rent expired during October is $1,600.

f. Unearned fees on October 31 are $1,150.

5. Optional: Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet) and complete the spreadsheet.

6. Journalize and post the adjusting entries.

7. Prepare an adjusted trial balance.

8. Prepare an income statement, a statement of owner’s equity, and a balance sheet.

9. Prepare and post closing entries. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry.

10. Prepare a post-closing trial balance.

I have also included questions with multiple choice answers. I care about these because they will determine what kind of grade I will end up with.

1. The ending balance of the adjusted trial balance is:

a. 69,925 dollars

b. 69,905 dollars

c. 69,915 dollars

d. 69,935 dollars

2. Income statement, the net income is:

a. 27,100

b. 26,100

c. 25,100

d. 28,100

3. Statement of Owner’s equity, ending capital is:

a. 43,850

b. 33,850

c. 53,850

d. 66,850

4. Balance sheet, ending balance is:

a. 55,400

b. 55,500

c. 55,600

d. 55,700

5. Post-closing Trial balance, Kareem Ismail, Capital ending balance is:

a. 53,850

b. 54,850

c. 52,850

d. 55,850

6. Post-closing Trial balance, ending balance is:

a. 56,000

b. 56,100

c. 56,200

d. 56,300