Reference no: EM13492336

You have been asked to do the bookkeeping for KidKare Inc. for the last few days of December while their regular bookkeeper is ill.  KidKare Inc. began operations on July 1, 2011.  It provides childcare services Monday through Friday, except for holidays.  End of month adjusting entries have been made for July through November.  No entries have been made since Friday, December 23^rd.   KidKare has a December 31^st fiscal year end, but prepares monthly interim financial statements.  Laken Henry, manager and principle shareholder, provides you with the following:

Trial Balance as of December 23, 2011
Ref. #	Account Title	Debit	Credit
101	Cash	$ 12,094
110	Accounts Receivable	240
112	Allowance for Uncollectible Accounts		$      122
120	Supplies on Hand	1,025
135	Prepaid Insurance	420
145	Other Prepaids	150
150	Office Equipment	3,120
155	Accumulated Depreciation-Office Equipment		325
160	Play Equipment	9,200
165	Accumulated Depreciation-Play Equipment		375
170	Van	25,000
175	Accumulated Depreciation-Van		1,600
190	KidKare Trademark	210
201	Accounts Payable		280
240	Income Taxes Payable		200
260	Notes Payable, 6% due through 2014		15,687
310	Common Stock, $1 par value (20,000 shares)		20,000
315	Additional Paid-in Capital		10,000
410	Childcare Revenue		60,600
425	Interest Revenue		61
515	Salaries & Wages Expense	42,500
525	Rent Expense	5,400
530	Utilities Expense	940
532	Insurance Expense	300
535	Supplies Expense	5,040
540	Bad Debt Expense	202
550	Depreciation Expense	2,300
560	Miscellaneous Expense	132
570	Interest Expense	427
580	Income Tax Expense	550
	Totals	$109,250	$109,250

An examination of the Chart of Accounts revealed the following additional accounts:

            140      Prepaid Rent

            210      Revenue Received in Advance

            215      Utilities Payable

            220      Salaries & Wages Payable

            235      Interest Payable

            245      Dividends Payable

            250      Other Short-term Obligations

            340      Retained Earnings

            380      Dividends

            390      Income Summary

            430      Miscellaneous Revenue

Information after December 24^th:

a. On December 26, KidKare received $2,400 ($40 per day per child for 12 children for 5 days) from parents for child care services for the week of December 26 - 30. 

b. On December 27, KidKare ordered 10 folding chairs for $28 each from Seats-Here Company to be delivered and paid for on January 2^nd. 

c. On December 28, KidKare paid $270 for the purchase of food snacks (supplies) for the children.

d. On December 28, KidKare's Board of Directors declared a $.05 per share dividend on the 20,000 shares outstanding.  The dividend will be paid on January 11, 2012.

e. On December 30, KidKare received a $200 check from the parents of one of the children for care the week of January 2th through 6th. 

f. On December 30, KidKare paid $900 rent for the building for the month of January 2012.

g. On December 30, KidKare received the electricity bill of $230 for December.  The bill was paid January 3, 2012.

h. On December 30, Kidcare noted that the parents of two children had not paid the $400 they owed for child care services for the week of December 26-30 ($40/day per child for five days).  Kidcare billed the parents.

i. A physical count revealed $300 of supplies was left on hand on December 30.

j. On January 3, KidKare received and paid the phone bill of $72 for December.

k. On Monday, January 2, KidKare paid payroll of $1,200 in wages and $500 in salary for the week of December 26 through 30.

l. On January 4, KidKare received its December bank statement from National Sovereign Bank.  The $10 monthly checking account fee had been deducted and the $4 of interest earned on its savings account had been added to KidKare's accounts.

m. The December 23^rd balance in "Other Prepaids" contains $150, paid December 1, for water and sewer service for the three months of December 2011, January 2012 and February 2012.

n. The van was purchased July 1, 2011 for $25,000 by paying $7,000 down in cash and signing a three-year, 6%, $18,000 note.  The note requires monthly payments of $548 due by the 2^nd of each month which includes the interest on the outstanding balance.  The payments are made by automatic transfer on the 1st day of the month.  The van has a 50,000 mile estimated useful life and an estimated salvage value of $5,000.  KidKare uses the units of activity method of depreciation.  The van was driven 600 miles in December.

o. The office equipment was put into use on July 1, 2011.  It has a eight-year estimated useful life and a $300 estimated salvage value.  Kidcare uses the double-declining balance method to depreciate it.  (Round depreciation to the nearest month.)

p. The play equipment was purchased July 1, 2011.  It has a ten-year estimated useful life and a $200 estimated salvage value.  Kidcare depreciates it using the straight-line method.  (Round depreciation to the nearest month.)

q. Prepaid Insurance represents the remaining seven months (December 2011 through June 2012) on a one-year liability policy purchased July 1, 2011 for $720.

r. KidKare estimates uncollectible accounts at .4% (or .004) of total childcare revenue. (Hint:  Calculate bad debt expense for the entire six months. Then subtract the amount already recognized to calculate the amount to be added to bad debt expense for December.)

s. KidKare is subject to a 30% income tax rate on net earnings.

t. The December 23^rd balance in Account Receivable is related to the care of two children, who abruptly stopped care in late November and whose home address is no longer valid.  Attempts to collect are still being made.

u. The Account Payable amount is related to a supplies purchase made earlier in December.  It is expected to be paid in early January.

v. For financial reporting purposes $5,792 of the remaining balance on the note is considered "current," the rest is considered "long-term."   

Required:  Using either the MS Word file provided or the MS Excel file provided. (Round all final results to the nearest dollar amount.)

1. Make the appropriate journal entries for December 24 through 31.

2. Post the journal entries to the general ledger.

3. Journalize and post the adjusting entries.  Use journal page G16.

4. Prepare an adjusted trial balance as of December 31, 2011.

5. Prepare an Income Statement and Retained Earnings Statement for the six months fiscal period ending December 31, 2011 and a Balance Sheet as of December 31, 2011, in good form (including an income statement with operating income and income before taxes subtotals shown and a classified balance sheet).

6. Journalize and post closing entries for December 31, 2011.  Use journal page G17.

7. Prepare a post-closing trial balance as of December 31, 2011.

8. Submit your journal, general ledger, adjusted trial balance, financial statements and post-closing trial balance to the Accounting Cycle Project dropbox by the due date.