Question

Step 1 - Information

A new client, OC Ranger, comes to you and asks you to record the business accounting transactions and prepare financial statements for a business as of December 31, 2019. The company, which uses the calendar year as its annual reporting period, began business on December 1, 2019. The name of the company is OC Ranger’s College Consulting Company.

1. Analyze the following transactions, calculate the amount of each entry, and use the debit and credit rules to prepare a journal entry for each transaction.
2. Post each debit and credit from the journal entries to their general ledger accounts (using T-Accounts) and cross-reference each account in the posting reference (PR) columns of the journal and ledger.
3. Calculate each account balance and list the accounts with their balances on a trial balance. Use the Accounting Worksheet to prepare the trial balance.
4. Verify that the total debits in the trial balance equal the total credits.

Accounting Transactions:

12/1/2019            OC Ranger invested $25,000 cash into a new business, OC Ranger’s College Consulting Company.

12/1/2019            $600 cash was paid for one month’s rent expense.

12/1/2019            $1,500 cash was paid to purchase a computer system.

12/1/2019            $7,000 of office equipment was purchased. $1,000 cash was paid as a down payment on the equipment and a note payable of $6,000 was signed for the remainder owed on the equipment.

12/1/2019            $3,000 of office supplies were purchased. $1,000 cash was paid and $2,000 was charged as an accounts payable.

12/1/2019            $2,400 cash was paid to purchase a 12-month prepaid insurance policy.

12/1/2019            $400 cash was paid to purchase advertising for the month of December.

12/15/2019         $2,100 cash was received from customers for consulting services revenue paid in cash.

12/15/2019         Customers were billed $3,600 for consulting services revenue earned on credit, which are recorded as accounts receivable.

12/20/2019         $900 cash was paid to a part-time employee for wages earned December 1 through December 15.

12/20/2019         $1,900 cash was received from customers for consulting services revenue paid in cash.

12/21/2019         $1,800 cash was collected from customers’ accounts receivable.

12/22/2019         $1,000 cash was received as a deposit from a customer for a special-order project the customer requested. The $1,000 is to be recorded in unearned revenue.

12/31/2019         Customers were billed $2,500 for consulting services revenue earned on credit, which are recorded as accounts receivable.

12/31/2019         $190 cash was paid for the office telephone bill.

12/31/2019         OC Ranger withdrew $3,000 cash from the business.

Chart of Accounts to be used for this client

101	Cash
106	Accounts Receivable
124	Office Supplies
128	Prepaid Insurance
163	Office Equipment
164	Accumulated Depreciation - Office Equip
167	Computer
168	Accumulated Depreciation - Computer
201	Accounts Payable
202	Interest Payable
208	Wages Payable
212	Unearned Revenue
245	Notes Payable
301	OC Ranger, Owner's Capital
302	OC Ranger, Owner's Withdrawal
403	Consulting Services Revenue
612	Depreciation Expense - Office Equipment
613	Depreciation Expense - Computer
623	Wages Expense
633	Interest Expense
637	Insurance Expense
640	Rent Expense
650	Office Supplies Expense
655	Advertising Expense
688	Telephone Expense
690	Utilities Expense

Step 2 - Information

The following information relates to your new client’s accounts. The company initially records prepaid and unearned items in balance sheet accounts (assets and liabilities, respectively).

1. Prepare all necessary adjusting entries on December 31, 2019. Use the debit and credit rules to prepare a journal entry for each transaction.
2. Post each debit and credit from the journal entries to their general ledger accounts (using T-Accounts) and cross-reference each account in the posting reference (PR) columns of the journal and ledger.
3. Calculate each adjusted account balance and list the adjusted balances on an adjusted trial balance. Use the Accounting Worksheet to prepare the adjusted trial balance.
4. Verify that the total debits in the adjusted trial balance equal the total credits.

Adjusting Entries

1. Record one month of depreciation for the computer of $25
2. Record one month of depreciation for the office equipment of $150
3. Record one month of insurance used as of December 31, 2019 of $200.
4. A physical count of the office supplies on December 31, 2019 shows that $1,100 of supplies are still in the storage cabinet.
5. Half of the $1,000 deposit received from the customer requesting a special-order project (originally recorded as unearned revenue) has been earned as of December 31, 2019.
6. Record $900 of wages payable as of December 31, 2019.
7. Record one month of interest payable on the equipment of $50.
8. Record the cell phone bill payable, but not paid, of $200.

Step 3 - Information

1. Prepare your client’s financial statements for the year ended December 31, 2019.
2. Complete the Income Statement and Balance Sheet columns of the Accounting Worksheet.
3. Prepare the December 31, 2019, Financial Statements, including the Income Statement, Statement of OC Ranger’s Capital, and the Balance Sheet.

Step 4 - Information

Prepare closing entries for your client.

1. Prepare all necessary closing entries on December 31, 2019. Use the debit and credit rules to prepare a journal entry for each transaction, post the journal entries to the Adjusting and Closing Journal.
2. Close revenue and expense accounts to the Income Summary account in the general ledger.
3. Post each debit and credit from the journal entries to their general ledger accounts (using T-Accounts) and cross-reference each account in the posting reference (PR) columns of the journal and ledger.
4. Calculate each general ledger account balance after the closing entries have been posted.
5. Enter the closing entries and list the post-closing balances on the Accounting Worksheet.
6. Verify that the total debits in the post-closing trial balance on the worksheet equal the total credits.

Answer 1