Reference no: EM13836716
Service Industry:
Objectives: Demonstrate application of Accounting Concepts pertaining to a service company including the following:
- Selection of Business Form
- Journalization and Posting of Daily Transactions
- Creation of Unadjusted Trial Balance
- Adjustment of accounts to properly reflect balances at the end of the period.
- Creation of Financial Statements
- Completion of the Closing Process with appropriate closing entries and posting to T accounts
- Determination of Book Value for Fixed Assets
- Discussion of the Company's financial position
As you work through this problem please refer to the Penn State rules regarding Academic Integrity. You must cite any source that was used in completing this assignment.
PART 1:
Bob loves construction and wants to start his own company. He is married, 30 years old and lives with his wife in their house in Goodville. He currently has a full time job for a local architect that supports the family. His dream is to restore old houses and bring them back to their original status. He has saved $20,000 to start this business. He knows nothing about accounting and has hired you to provide him with accounting services as well as guidance in starting this business.
The first task is to determine what business form Bob should choose. Explain the different business formats to Bob and which one you recommend for Bob's new business: "Builder Bob" (BB)
PART 2:
Bob has followed your advice and on January 7, 2014 he deposited $20,000 into a business bank account for BB and started pursing his dream. It has been a hectic 6 months and on July 2nd Bob contacts you for help. Bob hands you a box of receipts and a list of what he has done during this period. He wants to know whether he can quit his job and work his business full time. He has applied for a small business loan but was told by the bank that he needs a set of books with financial statements along with a listing of the fixed assets at Book Value. The banker told him that the books should be closed as if the year ended on June 30, 2014 with corresponding financial statements.
1. Create the Journal for the six months of transactions and Post these to T-accounts
2. Create the Unadjusted Trial Balance
3. Make the necessary Adjusted Journal Entries
4. Create the Adjusted Trial Balance
5. Prepare the Financial Statements for the year ended June 30, 2014: Income Statement of Retained Earnings, Balance Sheet
6. Close the books using appropriate journal entries with T-accounts
7. Determine the Book Value of the Fixed Assets
PART 3:
Discuss the economic position of Builder Bob (BB) and what you would advise Bob concerning his job at the Architectural Firm. Be certain to support your statements with evidence.
2 1/12 BB paid $100 for a contractor license necessary to perform work in the state.
3. 1/12 BB purchased one year of contractor insurance for $2400
4. 1/13 BB purchased a laptop computer for $600 on account at Office Store. Useful life is 3 years.
5. 1/13 BB purchased an all in one printer/copier/scanner for $480 on account at Office Store. Useful life is 5 years.
6. 1/14 BB purchased office supplies for $120
7. 1/22 BB received $6,000 from Mr. Johnson for work to be done restoring a kitchen.
8. 1/31 BB received a phone bill for $49
9. 2/5 BB completed 2/3 of Mr. Johnson's kitchen
10. 2/8 BB paid $200 on the purchase of the computer
11. 2/10 Mr. Johnson ordered additional work to be done on the kitchen which will cost $2200
12. 2/12 BB paid the phone bill
13. 2/13 BB purchased a set of tools for $1500 from ToolCo. He paid $500 with the remainder on account. The tools have a useful life of 10 years.
14. 2/19 BB contracted to begin work on a renovation for Mrs. Adams. He will be paid $10,000 plus the cost of all materials purchased. He received a 10% deposit with the work to start on March 1st.
15. 2/20 BB paid the remainder due on the laptop.
16. 2/25 BB completed the Johnson kitchen and billed the client
17. 2/28 BB received a phone bill for $55
18. 2/28 BB received an internet bill for $50
19. 3/1 BB purchased $5,000 of materials from MATCO for the Adams renovation on account.
20. 3/3 BB paid $250 on the printer.
21. 3/6 BB purchased a Cargo Trailer to haul materials and tools to work sites. The cost of the trailer is $6500. BB paid $500 and obtained a 3 year loan from BIGBANK at 3% APR payable annually. The trailer has a 10 year useful life.
22. 3/10 BB received payment in full for the kitchen
23. 3/11 BB paid the phone bill and internet bill
24. 3/15 BB paid $150 on the set of tools.
25. 3/16 BB completed ½ of the work for Mrs. Adams
26. 3/19 BB purchased a 2012 Ford Explorer. The cost was $18,000. BB paid $3,000 and financed the remainder with DollarBank for 5 years at 5% APR payable semi-annually. Useful life is 6 years.
27. 3/24 BB received a payment of $5000 from Mrs. Adams
28. 3/30 BB paid off the printer
29. 4/1 BB received a phone bill for $50 and internet bill for $50
30. 4/1 BB completed the job for Mrs. Adams and submitted a bill for payment.
31. 4/5 BB paid $2500 on the materials account
32. 4/7 BB paid 150 on the set of tools.
33. 4/12 BB received $500 downpayment for work to be done for Mr. Peters. The job is estimated to take two weeks and cost $4000. BB will purchase materials and be reimbursed by Peters.
34. 4/13 BB purchased $60 of gas
35. 4/18 BB purchased $2000 of materials from MATCO for the Peters job on account.
36. 4/22 BB paid the internet and phone bills
37. 4/26 BB bought $250 of office supplies
38. 4/30 BB purchased Truck Tires for $320 and purchased 6 months of truck insurance for $660.
39. 4/30 BB received phone bill for $58 and internet bill for $50
40. 5/02 BB received payment of $6000 from Mrs. Adams
41. 5/04 BB completed the Peters Job and received $2000 payment
42. 5/15 BB paid $500 on his tool bill.
43. 5/20 BB paid $2000 on the materials bill.
44. 5/30 BB paid his utility bills late and paid 10% penalties on each
45. 6/15 BB received the phone bill for $48 and the internet bill for $50
46. 6/22 BB received a $5,000 down payment for the Manor House renovation that will begin July 1st. The estimated cost will be $20,000. BB will purchase all materials and be reimbursed by Manor House.
On June 30th it was determined that BB only had $26 of office supplies remaining.