Comprehensive Review Problem 1
Jim Arnold’s Photography Studio
You have reached the end of the first section of this book: The following problem is desined to review and reinforce your knowledge of accounting for a service business.
Jim Arnold has been a photographer since his graduation from high school several years ago. On July 1, 20X1, he decided to open his own photography firm, called Arnold’s Photos. To start his accounting system. Jim developed the chart of accounts shown below.
Arnold’s Photo Studio. Chart of Accounts
111 Cash OWNER’S EQUITY
311 Jim Arnold, Capital
112 Accounts Receivable 312 Jim Arnold, Drawing
113 Office Supplies 313 Income Summary
114 Photography supplies
115 Prepaid Insurance REVENUE
121 Office Equipment 411 Photography Revenue
121.1 Accumulated Depreciation- Office Equipment 412 Vending Machine Revenue
122 Photography Equipment EXPENSES
122.1 Accumulated Depreciation-Photography Equipment 511 Salaries Expenses
123 Furniture Fixtures 512 Advertising Expenses
123.1 Accumulated Depreciation- Furniture and Fixtures 513 Rent Expense
514 Repairs Expense
LIABILITIES 515 Insurance Expense
211 Accounts Payable 516 Office Supplies Expense
212 Notes Payable 517 Photography Supplies Expense
213 Salaries Payable 518 Depreciation Expense- Office Equipment
519 Depreciation Expense- Photography Equipment
520 Depreciation Expense- Furniture and Fixtures
521 Utilities Expense
522 Miscellaneous Expense
Jim completed the following transaction during the first month of operations:
1 Jim invested $40,000 cash and photography equipment valued at $20,000 in the business
1 Purchased office supplies for cash, $1,300.
1 Purchased photography supplies on account, 6,750.
1 Paid July rent, $1,700.
1 Paid for a newspaper ad, $500.
2 Purchased office equipment on account, $6,700.
2 Paid property insurance for the upcoming year, $3,600.
3 Purchased a computer a computer system and software, $3,200, by issuing a note payable.
5 Paid for proportional handouts, $150.
6 Paid miscellaneous expenses, $175.
7 Paid salaries of employees, $1,400.
7 Recorded week’s cash receipts for photo work, $1,350.
8 Paid for carpet cleaning (a miscellaneous expense), $75
9 Recorded photo work done for a customer on account, $885.
9 Purchased additional photography supplies on account, $3,200.
10 Purchased additional photography equipment for cash, $3,500.
10 Entered into a contract with Southside Food Vendors to place vending machines in the waiting room. Jim is to receive 10% of all sales, with a minimum of $200 monthly. Received $200 as an advance payment.
11 Purchased furniture for the lobby area, $1,700. Paid cash in full.
12 Paid cash for the installation of overhead lightning fixtures, $900.
15 Recorded second week’s cash receipts for photo work, $2,170.
15 Paid second week salaries, $1,400.
17 Jim withdrew cash for personal use, $800.
18 Paid for a TV ad , 710.
19 Paid for repair to equipment, $80
19 collected $500 for the photo work done on account on July 9
22 Recorded third week’s cash receipts for photo work, $2,045.
22 Paid weekly salaries, $1,400.
23 Did a special wedding photo session for a customer on credit, $550
28 Recorded third week’s cash receipts for photo work, $1,995.
28 Paid salaries of employees, $1,400.
28 Paid water bill for February, $70.
28 Paid electric bill for February, $1,095.
28 Made a $500 payment on the note for the computer purchased on July 3.
28 Made a payment for the office equipment purchased on account, $2,000.
28 Made a payment on the photography supplies purchased on account, $1,000.
28 Wrote a business check to pay for Jim’s home phone bill, $310.
28 Southside Food Vendors reported a total of $2,800 of vending machine sales for February. Ten percent of these sales is $280. Since $200 has already been received and recorded in February, Jim was owed $80. Received the $80 check.
1. Open an account in the ledger for each account shown in the chart of accounts.
2. Journalize each of the transactions for July, beginning on page 1 of the general journal.
3. Post the journal entries to the ledger.
4. Prepare a trial balance of the ledger in the first two columns of a 10-column work sheet.
5. Complete the 10-column work sheet. Assume for the purposes of this problem that Jim has a one-month accounting period. Data for adjustments are as follow:
a) Office supplies on hand $850
b) Photography supplies on hand $5,550
c) Insurance expired , $300.
D Salaries unpaid, two days of a five day week; weekly salaries are $1,400
E) Depreciation of office equipment $190
f) Depreciation of photography equipment $275
g) Depreciation of furniture and fixtures $75
6. Prepare an income statement for the month ended on July 31.
7. Prepare a statement of owner’s equity for the month ended on July 31.
8. Prepare a balance sheet as of July 31.
9. Journalize adjusting entries from the completed work sheet
10. Journalize closing entries
11. Post adjusting and closing entries to the ledger
12. Prepare a post-closing trial balance.
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- Submitted On 20 Jun, 2017 09:29:08