Question

Ace Lawn Care Module 2 Mini Practice Problem

Jim has asked you to prepare financial statements for his first month of operation. The following information relates to the month of May, 2014. (Round all calculations to the nearest whole dollar)

On May 2, Jim signed a 1 year, 6% note for $3,500 associated with the purchase of a used truck for the business. The interest will be due with the principle of the note.

On May 2, Jim purchased a used truck for $7,000 to use for the lawn care business. He estimates a trade-in value of $500 at the end of the estimated five-year life of the truck.

On May 5, Jim purchased a lawn mower for $300 and an aerator for $500. He estimates $0 salvage value for both pieces of equipment and an estimated two-year life for both.

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

Instructions:

Using the chart of accounts provided, and the Excel template provided with this assignment, record the adjustments in the Worksheet, calculate the adjusted trial balance and complete the worksheet.

Prepare the Income Statement, Statement of Owner’s Capital and Balance Sheet for Ace Lawn Care for May, 2014

Prepare journal entries, in good form, to record the May adjusting entries. Explanations are optional. Start with Page 3 (INCOME STATEMENT) of the General Journal for the adjusting entries.

Post the journal entries to general ledger accounts. There are already transactions in the ledger for the month, you are adding to those transactions.

Prepare and post the closing entries for May, 2014. Start with Page 4(BALANCE SHEET) of the General Journal for the closing entries

Prepare a post-closing trial balance as of May 31, 2014, for Ace Lawn Care.

Ace 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
	310	Income Summary
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

Answer 1