Bill’s Lawn Care Module 1 Mini Practice Problem


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    Bill’s Lawn Care Module 1 Mini Practice Problem
    Bill’s Lawn Care Module 1 Mini Practice Problem

    Bill Graham started his career mowing lawns for neighbors while he was in junior high school. Bill worked summers for the local golf course while he was in high school and now that he has graduated, he is starting his own lawn care business. You are taking an accounting class at the local community college and have agreed to help Bill set up and maintain the accounting records for his new business. He has set up a checking account in the business name, Bill’s Lawn Care, at the local bank. After some discussion with you, Bill has decided to set the business up as a sole proprietorship. You and Bill established a chart of accounts to be used in recording the business transactions. In May, 2014, the following activities occur at Bill’s Lawn Care.

    May 1 Bill withdraws $20,000 from his savings account and deposits it in the business’ bank account.

    May 2 Bill purchases a used truck for $7,000 to use for the lawn care business, he writes a check for $3,500 and signs a 1 year, 6% note for the balance.

    May 5 Bill purchases a lawn mower for $300 and an aerator for $500 and writes a check for the total amount.

    May 6 Bill writes a $600 check for a six month insurance policy that expires October 31, 2014

    May 7 Bill establishes a $1,000 line of credit account with Jones Fuel, a local gas station.

    May 8 Bill writes a check for $50 for a weekly advertisement in the local newspaper. The advertisement will run every Friday through the end of May, 2014.

    May 16 At the end of the first week, Bill has earned $600 for lawn care services. Of the $600, $500 was paid in cash and $100 was on credit.

    May 23 At the end of the second week, Bill has earned $1,100 for lawn care services. Of the $1,100, $700 was paid in cash and $400 was on credit.

    May 26 Bill writes a check for $75 to have the mower blade sharpened.

    May 30 At the end of the third week, Bill has earned $1,000 for lawn care services. Of the $1,000, $800 was paid in cash and $200 was on credit.

    May 31 Bill receives payments, on account, in the amount of $500

    May 31 Bill receives his monthly invoice and writes a check for $400 to Jones Fuel.

    May 31 Bill writes a check to himself for $1,500 for personal expenses.

    Instructions:

    1. Using the chart of accounts provided below, and the Excel template provided with this assignment,prepare journal entries, in good form, to record the May transactions. Explanations are optional.
    2. Post the journal entries to general ledger accounts.
    3. Prepare a trial balance as of May 31, 2014, for Bill’s Lawn Care.

    Bill’s Lawn Care
    Chart of Accounts
    Classification
    Account Number
    Account Name
    ASSETS
    101
    Cash

    110
    Accounts Receivable

    120
    Supplies

    130
    Prepaid Insurance

    150
    Equipment

    155
    Accumulated Depreciation – Equipment
    LIABILITIES
    201
    Accounts Payable

    220
    Notes Payable

    225
    Interest Payable
    OWNER’S EQUITY
    301
    Owner’s Capital

    305
    Owner’s Drawings
    REVENUES
    401
    Lawn Service Revenue
    EXPENSES
    620
    Supplies Expense

    630
    Fuel Expense

    640
    Repair and Maintenance Expense

    650
    Advertising Expense

    660
    Insurance Expense

    670
    Depreciation Expense

    680
    Interest Expense

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