Exercise Two

 

You might recall Jenny’s Running Service was just getting underway.  If you look at their trial balance, before adjustments, you recall they had:

                                                            Dr.                               Cr.

Cash                                                    70,000

A/R                                                      25,000

Prepaid Insurance                                   3,000

Supplies                                               15,000

Trucks                                                  60,000                                                            

Accounts Payable                                                                     2,000

Notes Payable                                                                          55,000

Unearned Revenue                                                                   5.000

Common Stock                                                                        100,000

R/E                                                                                          0

Service Revenue                                                                       25,000

Rent Expense                                       1,000

Salary Expense                         10,000

Utility Expense                          1,000

Fuel Expense                                        2,000

 

Totals                                                   187,000                       187,000

 

 

Seems like Forrest is too busy doing other things to worry about all of this, so Lt. Dan has come to you, not really too sure how to do some things, and wants you to help him. After all, you have nailed your first exam in Acc 231!

 

He knows that you are probably going to have to make some adjusting entries, but really isn’t too sure how to do that.

 

  1. He mentions the fact that insurance was a one year policy.
  2. He said that Forrest messed up and didn’t pay the gas bill (which was the original accounts payable) on time, and he knew the company was going to be assessed a $50 interest payment.  Jenny was really ticked about that!
  3. He noted that the payroll should have been higher since someone came to work and Forrest mailed the payroll stuff to the gas vendor!  Anyway, those people should have earned $5,000, and he was cutting them a check next week.  He durn sure didn’t know how to fix this mess. Can you?
  4. Jenny took an inventory of the chocolate that Forrest had purchased under supplies, and determined $12,000 was still in the storeroom.
  5. Lt. Dan noted that they had bought a new computer at Office Depot for $2,000 on account, but didn’t tell us that before.
  6. Jenny had also done a quick tab on all the work the company had done, and determined that $10,000 of invoices had to be prepared but had not told us before.
  7. And good grief, remember that work that Forrest was supposed to do and had been paid for before it was done?  Turns out Forrest did $3,000 of that during the month but didn’t know how to write this down.
  8. Jenny told us that she had figured out that depreciation on the trucks, after you added in the fact that they had bought some new things worth $10,000 on credit that were built into the trucks, should be $400 per month. We’ll assume Jenny is right on this – so far she has been pretty good about this stuff.
  9. And, Jenny told us she got a bill from the utility company dated October 28th for $900.
  10. Oh, yeah, you sent them a bill for $500 for accounting work and they hadn’t paid it yet, and they said they got it and would give us a check next week.

 

Go for it!  First we do the journal entries, and then we will worry about the entries themselves into the general ledger, then we will do the adjusted trial balance, and then we’ll do the financial statements. This should keep ya busy….