230 Course Project

For this project, assume that you started a corporation called Vanities Eyebrow Sculping Salon and Supply House in December 1, 2018. Your year-end is December

31st. During the month of December, the corporation set up a retail location where it provided eyebrow sculpting services and beauty supplies to its customers. You are the President and Treasurer of the Corporation and you are responsible for recording all the business transactions for the month and completing the entire accounting cycle for the year-ending December 31, 2018 (through the post-closing trial balance).

 

Part 1: Record the following external transactions for Vanities Eyebrow Sculping Salon and Supply for the month of December in the General Journal using the perpetual inventory system of accounting.

 

Transaction Date Description
1 12/1 Issued 100,000 shares of common stock for $100,000.
2 12/1 A retail space is rented. Paid for one year of rent in advance totaling
$24,000. (rent is $2,000 per month).
3 12/1 Purchased equipment for the business totaling $36,000 by signing a one-
year 6% note payable with payment and interest due on the maturity date
of the note.
4 12/5 Purchased $8,500 of supplies on account.
5 12/6 Purchased $20,000 of inventory on account with the term 2/15 net 30.
6 12/7 Provided services to customers for cash totaling $5,000.
7 12/8 Sold $4,000 of product on account terms 2/15 net 30. The inventory cost
$2,000.
8 12/8 Returned $500 worth of inventory that was purchased on account on 12/6.
9 12/9 Purchased an ad in the local newspaper to run during December for $400.
10 12/12 Customers purchased $1,000 of Holiday gift certificates for services to be
provided in the future (pre-paid for future services).
11 12/15 Paid employee salaries for the first half of December totaling $1,200.
12 12/15 Paid the invoice for the supplies that were purchased on December 5th.
13 12/18 Received half of the payment on the 12/8 sales invoice for the product
sold on that date.
14 12/20 Provided $4,500 of services to customers. $900 was paid for by redeemed
gift certificates and the remainder paid for by cash.
15 12/20 Customers returned $300 worth of product that was sold on account on
12/8. The returned inventory cost $150. The inventory was able to be
restocked.
16 12/21 Paid the invoice for the inventory purchased on account 12/6 minus
previous returns.
17 12/29 Paid a cash dividend of $800 to the shareholders.

 

General Journal Part 1

Record the external transactions in the General Journal

 

Ref # Date Account Debit Credit
1
2
3
4
5
6

 

General Journal Part 1 (Continued)

 

Ref # Date Account Debit Credit

 

Part 2: Post all the external transactions for the month of December from the General Journal to the General Ledger. The General Ledger T accounts are located at the end of the document templates and start on page 10.

 

Part 3: You can skip completing a Trial Balance (template not included) as you will prepare an adjusted trial balance after all the external and year-end adjusting entries have been made and posted to the General Ledger T accounts.

 

Part 4: Record the adjusting entries for Vanities Eyebrow Sculping Salon and Supply House for the month of December in the General Journal.

Transaction Date Description
A 1 12/31 Enter the adjusting entry for pre-paid rent for the month of December.
A 2 12/31 The equipment purchased for $36,000 has a useful life of 5 years and
no salvage value. (Monthly depreciation is $600).
A 3 12/31 At the end of December, $6,500 of supplies remain on hand.
A 4 12/31 The allowance method is followed in recording uncollectible
accounts.  It is estimated that 10% of the remaining accounts
receivable at year-end will not be collected in the coming year.
A 5 12/31 Record the year-end adjusting entry for the 6% one-year notes
payable.
A 6 12/31 Salaries for the second half of December are $1,400, but they will not
be paid until January 3rd.
General Journal – Adjusting Entries Part 4
Ref # Date Account Debit Credit
A 1
A 2
A 3
A 4
A 5
A 6

 

Part 5: Post all the adjusting entries for the month of December from the General Journal to the General Ledger. General Ledger T accounts are located at the end of the project and start on page 10.

Part 6: Complete an Adjusted Trial Balance for the year ended December 31, 2018.

 

Note:   I have included a few hash totals, so you can validate your numbers.

 

Vanities Eyebrow Salon and Supply House.

Adjusted Trial Balance

For the Year Ended December 31,2018

Account Debit Credit
Cash $ $
Accounts Receivable
Less: Allowance for Doubtful Accounts
Pre-Paid Rent
Supplies
Inventory
Equipment
Accumulated Depreciation
Accounts Payable
Notes Payable
Deferred Revenue
Interest Payable
Salaries Payable
Common Stock
Retained Earnings
Dividends
Service Revenue
Sales Revenue
Sales Returns
Sales Discounts
Rent Expense
Supplies Expense
Cost of Goods Sold
Salary Expense
Advertising Expense
Depreciation Expense
Bad Debt Expense
Interest Expense
Total $ 151,950 $

 

 

Page 7

 

Part 7: Complete a Multi-Step Income Statement

 

for the year ended December 31, 2018.

 

Vanities Eyebrow Salon and Supply House.

Multi-Step Income Statement

For the Year Ended December 31, 2018

 

Revenue
Service Revenue $
Sales Revenue $
Less: Sales Return
Sales Discounts
Net Sales $
Less: Cost of Goods Sold
Gross Profit $
Expenses $
Rent Expense
Supplies Expense
Salary Expense
Advertising Expense
Depreciation Expense
Bad Debt Expense
Total Operating Expenses $
Operating Income
$
Other Revenue and Expenses
Interest Expense
Income Before Income Taxes
Income Tax Expense 0
Net Income $

 

Part 8 Complete a Statement of Retained Earnings

 

for the year ended December 31, 2018.

 

Vanities Eyebrow Salon and Supply House

Statement of Retained Earnings

For the Year Ended December 31, 2018

Beginning Balance, December 1, 2018 $ 0
Net Income
Less:  Dividends
Ending Balance, December 31, 2018 $

 

Page 8

 

Part 9: Prepare a Balance Sheet as of December 31, 2018.

Vanities Eyebrow Salon and Supply House
Balance Sheet
December 31, 2018
Assets Liabilities
$ $
$ Total Current Liabilities $
Property Plant and Equipment Total Liabilities $
Stockholders’ Equity
Total Long-Term Assets $
Total Stockholders’ Equity
Total Liabilities and
Total Assets $ $ 140,240
Stockholders’ Equity

 

Part 10: Record the closing entries for the year-ended December 31, 2018.in the General Journal.

 

Part 11:  Post closing Entries from the General Journal to General Ledger

 

Ref # Date Account Debit Credit
12/31
C. 1
Retained Earnings
12/31 Retained Earnings
C. 2

 

 

 

 

 

 

 

 

 

 

  1. 3

 

 

 

 

 

 

 

12/31         Retained Earnings

 

 

Page 9

 

Part 12: Prepare a Post-Closing Trial Balance. Fill in account names.

 

Vanities Eyebrow Salon and Supply House

Post-Closing Trial Balance

For the Year Ended December 31, 2018

 

Account Debit Credit

 

 

Total $   141,010

 

General Ledger Parts 2 & 5

 

References are posted in the accounts to help you navigate the project.

 

Posted journal references are in left column for debit entries and right column for credit entries for each account. ATB (Adjusted Trial Balance) is ending balance for each account prior to closing entries and the closing balance for all balance sheet accounts. After closing entries are posted the CB (Closing Balance) should be zero for all revenue and expense accounts. See the illustrative sample account at the end of the project with posting references.

 

Assets

 

Ref # Cash Ref #
1 2
6 9
10 11
13 12
14 16
17
ATB
Ref # Accounts Receivables Ref #
7 13
15
ATB

 

Ref # Inventory Ref #
5 7
15 8
16
ATB
Ref # Equipment Ref #
3
ATB
Accumulated
Ref # Depreciation Ref #
A 2
ATB
Liabilities

 

 

Allowance for Uncollectible
Ref # Accounts Ref #
A 4
ATB
Ref # Pre-Paid Rent Ref #
2 A 1
ATB
Ref # Supplies Ref #
4 A 3
ATB

 

 

Ref # Accounts Payable Ref #
8 4
12 5
16
0 ATB
Ref # Notes Payable Ref #
3
ATB
Ref # Deferred Revenue Ref #
14 10
ATB

 

 

Page 10

 

Liabilities Continued…

 

Ref # Interest Payable Ref #
A 5
ATB
Ref # Salaries Payable Ref #
A 6
ATB
Revenues
Ref # Service Revenue Ref #
6
14
C 1 ATB
0 CB
Ref # Sales Revenue Ref #
7
C 2 ATB
CB
Ref # Sales Returns Ref #
15
ATB C 1
CB
Ref # Sales Discounts Ref #
13
ATB C 1
CB

Expenses

 

Ref # Rent Expense Ref #
A 1
ATB C 2
CB
Ref # Supplies Expense Ref #
A 3
ATB C 2
CB
Ref # Cost of Goods Sold Ref #
7 15
ATB C 2
CB
Ref # Salary Expense Ref #
11
A 6
ATB C 2
CB
Ref # Advertising Expense Ref #
9
ATB C 2
CB

 

 

 

 

 

 

 

 

 

 

Page 12

 

Expenses Continued…

 

Ref # Depreciation Expense Ref #
A 2
ATB C 2
CB
Ref # Bad Debt Expense Ref #
A 4
ATB C 2
CB
Ref # Interest Expense Ref #
A 5
ATB C 2
CB

 

 

Stockholders’ Equity

 

Ref # Common Stock Ref #

 

1

 

ATB

 

 

Ref # Dividends Ref #
17
ATB C 3
CB

 

 

 

 

 

 

 

 

 

 

 

Page 13

 

 

 

 

 

 

 

 

Ref # Retained Earnings Ref #
0 ATB
C 1 C 2
CB C 3

 

 

Illustrative posting to T accounts

 

Ref # Cost of Goods Sold Ref #
18 2,000 100 21
A 7 1,000
ATB 2,900 2,900 C 2
CB 0

 

 

External journal reference = #

 

Adjusting journal reference = A #

 

Closing journal reference = C #

 

ATB =Adjusted Trial Balance

 

account ending $ balance

 

CB= Closing Trial Balance account

 

ending $ balance

 

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