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(solution) Jim has asked you to prepare financial statements for his first


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)


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)

 

1. 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.

 

2. 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.

 

3. 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.

 

4. On May 6, Jim writes a $600 check for a six month insurance policy that expires

 

October 31, 2014. Instructions:

 

1. 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.

 

2. Prepare the Income Statement, Statement of Owner?s Capital and Balance Sheet for

 

Ace Lawn Care for May, 2014

 

3. 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.

 

4. Post the journal entries to general ledger accounts. There are already transactions in

 

the ledger for the month, you are adding to those transactions.

 

5. Prepare and post the closing entries for May, 2014. Start with Page 4 of the General

 

Journal for the closing entries

 

6. Prepare a post-closing trial balance as of May 31, 2014, for Ace Lawn Care. Classification

 

ASSETS LIABILITIES

 

OWNER?S

 

EQUITY

 

REVENUES

 

EXPENSES Ace Lawn Care

 

Chart of Accounts

 

Account Number Account Name

 

101

 

Cash

 

110

 

Accounts Receivable

 

120

 

Supplies

 

130

 

Prepaid Insurance

 

150

 

Equipment

 

155

 

Accumulated Depreciation ? Equipment

 

201

 

Accounts Payable

 

220

 

Notes Payable

 

225

 

Interest Payable

 

301

 

Owner?s Capital

 

305

 

310

 

401

 

620

 

630

 

640

 

650

 

660

 

670

 

680 Owner?s Drawings

 

Income Summary

 

Lawn Service Revenue

 

Supplies Expense

 

Fuel Expense

 

Repair and Maintenance Expense

 

Advertising Expense

 

Insurance Expense

 

Depreciation Expense

 

Interest Expense

 


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