ACCT 503 Week 4 Case Study; CASE STUDY - THE COMPLETE ACCOUNTING CYCLE

During its first month of operation, the True Consulting Corporation, which specializes in management consulting, completed the following transactions. July 1 Issued 15,000 shares of the company's common stock in exchange for $15,000. July 3 Purchased a truck for $8,000. A down payment of $3,000 was made, with the balance on account. July 5 Paid $1,200 to cover rent from July 1 through September 30. July 7 Purchased $2,000 of supplies on account. July 10 Billed customers for consulting services performed, $3,700. July 14 Paid $500 toward the amount owed for the supplies purchased on July 7. July 15 Paid $1750 in cash for employee wages. July 19 Collected $1600 in cash from customers that were billed on July 10. July 21 Received $4,200 cash from customers for services performed. July 31 Paid $350 in cash for truck repairs. July 31 Declared and Paid $700 in cash dividends. Prepare journal entries to record the July transactions in the General Journal below. General Journal Date Description(Account Name) Debit Credit 1-JulCash 15,000 Common Stock 15,000 3-JulEquipment 8,000 Cash 3,000 Account Payable 5,000 5-JulPrepaid Rent 1,200 Cash 1,200 7-JulSupplies 2,000 Account Payable 2,000 10-JulAccounts Receivable 3,700 Service Revenue 3,700 Accounts Payable 7/14 600 7/2 5000 Income Tax Expense 7/31 1200 Bal 4400 Bal 1200 Income Tax Payable 7/31 1200 Retained Earnings 7/31 700 7/31 2700 Bal 1200 Common Stock Bal 2000 7/1 15000 Income Summary Bal 15000 Dividends 7/31 700 Bal 700 Requirement #4: Prepare adjusting entries using the following information in the General Journal below. Show your calculations! a) One month's rent has expired b) The remaining inventory of supplies is $600. c) The estimated depreciation on equipment is $100. d) The estimated income taxes are $1,200. General Journal Date Description (Account Name) Debit Credit Rent Expense 400 Prepaid Rent 400 Supplies 600 Supplies Expense 600 Equipment 100 Equipment Expense 100 Income Tax Expense 1200 Income Tax Payable 1200 Requirement #5: Post the adjusting entries to the General Ledger T-accounts and compute adjusted balances. Just add to the balances that are already listed. Requirement #7: Prepare the financial statements for True Consulting Corporation as of July 31 in the space below. You will only be preparing the income statement, statement of retained earnings, and the balance sheet. The statement of cash flows is a required financial statement, but is not required for this case study. True Consulting Corporation True Consulting Corporation Income Statement Statement of Retained Earnings For the Month Ending July 31 For the Month Ending July 31 Revenues: Retained Earnings, July 1 Service Revenue $ 500 Add: Net Income 2,700 Subtotal Expenses: Less: Dividends 700 Rent Expense 350 Retained Earnings, July 31 $ 2,000 Wages Expense 1,750 Repairs & Maintenance Expense 350 Supplies Expense 400 Depreciation Expense 100 Income Tax Expense 1,200 Total Expenses 4,150 Net Income $ 2,700 Requirement #8: Prepare the closing entries at July 31 in the General Journal below. General Journal Date Description (Account Name) Debit Credit 31-JulCash 13,200 31-JulCommon Stock 15,000 31-JulEquipment 8,000 31-JulAccounts Payable