ACCT504 Case Study 1 (Parts A and B) P2-69B Johnson Plumbing Inc and P3-77B Princess Inc.

Case Study 1 (Parts A and B, P2-69B and P3-77B)

(Learning Objectives 4, 5, 6: Analyze the impact of business transactions on accounts; record (journalize and post) transactions in the books; construct and use a trial balance)
During the first month of operations, Johnson Plumbing, Inc., completed the following transactions:
2-Mar Johnson received $35,000 cash and issued common stock to the stockholders.
3 Purchased supplies, $200, and equipment, $3,200, on account.
4 Performed services for a client and received cash, $1,400.
7 Paid cash to acquire land, $24,000.
11 Performed services for a customer and billed the customer, $800. Johnson expects to collect within one month.
16 Paid for the equipment purchased March 3 on account.
17 Paid the telephone bill, $150.
18 Received partial payment from customer on account, $400.
22 Paid the water and electricity bills, $170.
29 Received $1,500 cash for repairing the pipes of a customer.
31 Paid employee salary, $1,800.
31 Declared and paid dividends of $2,100.

Requirements: (60 Points)
1. Record each transaction in the journal. Key each transaction by date. Explanations are not required.
2. Post the transactions to the T-accounts, using transaction dates as posting references.
3. Prepare the trial balance of Johnson Plumbing, Inc., at March 31 of the current year.
4. The manager asks you how much in total resources the business has to work with, how
much it owes, and whether March was profitable (and by how much).

(Learning Objectives 3, 4: Adjust the accounts; construct the financial statements)
Consider the unadjusted trial balance of Princess, Inc., at August 31, 2012, and the related month-end adjustment data.
Princess, Inc.
Trial Balance Work Sheet
August 31, 2012
Trial Balance Adjustments Adjusted Trial Balance
Account Debit Credit Debit Credit Debit Credit
Cash 8,300
Accunts Receivable 1,900
Prepaid Rent 2,100
Supplies 2,400
Furniture 63,000
Accumulated Depreciation 3,700
Accounts Payable 4,000
Salary Payable
Common Stock 13,000
Retained Earnings 53,430
Dividends 4,300
Service Revenue 11,000
Salary Expense 2,600
Rent Expense
Utilities Expense 530
Depreciation Expense
Supplies Expense
Total $85,130 $85,130 $- $- $- $-

Adjustment data at August 31, 2012, include the following:
a. Accrued advertising revenue at August 31, $2,100.
b. Prepaid rent expired during the month. The unadjusted prepaid balance of $2,100 relates to the period August 2012 through October 2012.
c. Supplies used during August, $2,090.
d. Depreciation on furniture for the month. The furniture’s expected useful life is three years
e. Accrued salary expense at August 31 for Monday, Tuesday, and Wednesday. The five-day weekly payroll is $5,100 and will be paid on Friday.

Requirements (40 points)
1. Using Exhibit 3-9 as an example, prepare the adjusted trial balance of Princess, Inc., at August 31, 2012. Key each adjusting entry by letter.
2. Prepare the monthly income statement, the statement of retained earnings, and the classified balance sheet. Draw arrows linking the three statements.
Powered by