Accounting Cycle Problem
The John Marshall Company, Inc., which provides consulting services to major utility companies, was formed on January 2 of this year. Transactions completed during the first year of operation were as follows:
January 2 – Issued 600,000 shares of stock for $10,000,000.
January 10 – Acquired equipment in exchange for $2,000,000 cash and a $6,000,000 note payable. The note is due in ten years.
February 1 – Paid $24,000 for a business insurance policy covering the two–year period beginning on February 1.
February 22 – Purchased $900,000 of supplies on account
March 1 – Paid wages of $185,600
March 23 – Billed $2,730,000 for services rendered on account
April 1 – Paid $100,000 of the amount due on the supplies purchased February 22.
April 17 – Collected $210,000 of the accounts receivable
May 1 – Paid wages of $200,400.
May 8 – Received and paid bill for $98,200 for utilities.
May 24 – Paid $42,500 for sales commissions.
June 1 – Made the first payment on the note issued January 10. The payment consisted of $60,000 interest and $200,000 applied against the principal of the note.
June 16 – Billed customers for $560,000 of services rendered.
June 30 – Collected $300,000 on accounts receivable.
July 10 – Purchased $155,000 of supplies on account.
August 25 – Paid $160,000 for administrative expenses.
September 23 – Paid $30,000 for warehouse repairs.
October 1 – Paid general wages of $90,000.
November 20 – Purchased supplies for $60,000 cash.
December 15 – Collected $125,600 in advance for services to be provided in December and January.
December 30 – Declared and paid a $50,000 dividend to shareholders.
The chart of accounts that Marshall Company, Inc. uses is as follows:
Assets:
101 Cash
102 Accounts receivable
103 Supplies
104 Prepaid insurance
110 Equipment
112 Accumulated depreciation
Liabilities:
201 Accounts payable
202 Unearned service revenue
203 Wages payable
210 Interest payable
220 Notes payable
Stockholders’ Equity:
301 Common stock
310 Retained earnings
320 Dividends
Revenues:
401 Service revenue
Expenses:
501 Wage expense
502 Utility expense
503 Selling expense
504 Administrative expense
505 Repairs expense
506 Insurance expense
507 Supplies expense
510 Depreciation expense
520 Interest expense
Other:
601 Income summary
REQUIRED: Utilizing the information provided above, complete the following steps in an Excel workbook (Template provided):
Journalize the transactions for the year.
Post the journal entries to a T account.
Prepare an unadjusted trial balance as of December 31.
Journalize and post adjusting entries to the T accounts based on the following additional information:
Eleven months of the insurance policy expired by the end of the year.
Depreciation for equipment is $400,000.
The company provided $70,000 of services related to the advance collection of December 15.
There are $500,000 of supplies on hand at the end of the year.
An additional $170,000 of interest has accrued on the note by the end of the year.
Wilson accrued wages of $200,000 at the end of the ear.
Prepare an adjusted trial balance as of December 31.
Prepare a single-step income statement and statement of retained earnings for the year ended December 31 and a classified balance sheet as of December 31.
Journalize and post the closing entries
Prepare a post-closing trial balance as of December 31.
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