Bill’s Lawn Care Module 2 Mini Practice Problem

Bill’s Lawn Care Module 2 Mini Practice Problem

 

Bill 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, Bill 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, Bill 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, Bill 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, Bill 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 Bill’s 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 Bill’s Lawn Care.


 

Bill’s 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

 

 

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