Managerial Accounting

Instructions

CASE STUDY – THE COMPLETE ACCOUNTING CYCLE
Name: ___________________________________
This Case Study is worth 100 points, or 10% of your final course grade.
This Case Study relates to TCOs E and F, and Chapters 2 and 3.
MAKE SURE TO COMPLETE ALL REQUIREMENTS WHICH ARE LISTED BELOW.
There are 10 sheets in the Workbook, including this one.
All of the information that you need for the project is located in this Workbook.
Requirements Sheet in Workbook
Requirement 1—Prepare the Journal Entries in the General Journal Journal Entries
Requirement 2—Post Journal Entries to the General Ledger General Ledger
Requirement 3—Prepare a Trial Balance Trial Balance
Requirement 4—Prepare the Adjusting Entries Adjusting Entries
Requirement 5—Post Adjusting Entries to the General Ledger General Ledger
Requirement 6—Prepare an Adjusted Trial Balance Adjusted Trial Balance
Requirement 7—Prepare the Financial Statements Financial Statements
Requirement 8—Prepare the Closing Entries Closing Entries
Requirement 9—Post Closing Entries to the General Ledger General Ledger
Requirement 10—Prepare the Post Closing Trial Balance Post-Closing Trial Balance
Hint for success: Review the Week 2 Lesson prior to starting this project.
There are also hints contained within certain cells on some of the Worksheet tabs.
You can hover over the red pointer at the top right-hand corner of the cell to read the hint.
Hints are provided for the following balances:
1) The debits for the journal entries are on the Journal Entries tab.
2) The credits for the journal entries are on the Journal Entries tab.
3) The cash balance is on the General Ledger tab.
4) The debits for the trial balance are on the Trial Balance tab.
5) The credits for the trial balance are on the Trial Balance tab.
6) The debits for the adjusted trial balance are on the Adjusted Trial Balance tab.
7) The credits for the adjusted trial balance are on the Adjusted Trial Balance tab.
8) Net income for the income statement is on the Financial Statements tab.
9) Retained earnings as of July 31 are on the Financial Statements tab.
10) Total assets for the balance sheet are on the Financial Statements tab.
11) Total liabilities and shareholders’ equity for the balance sheet are on the Financial Statements tab.
12) The debits for the post-closing trial balance are on the Post-Closing Trial Balance tab.
13) The credits for the post-closing trial balance are on the Post-Closing Trial Balance tab.

Journal Entries

Requirement #1:
During its first month of operation in July, the Quick Tax Corporation, which specializes in tax preparation,
completed the following transactions.
July 1 Began business by making a deposit in a company bank account of $40,000, in exchange
for 4,000 shares of $10 par value common stock.
July 3 Paid the current month’s rent, $2,500
July 5 Paid the premium on a 1-year insurance policy, $3,600
July 7 Purchased supplies on account from Little Company, $700.
July 10 Paid employee salaries, $2,800
July 14 Purchased equipment from Lake Company, $9,500. Paid $1,500 down and the balance was
placed on account. Payments will be $500.00 per month for 20 months. The first payment is due 8/1.
Note: Use accounts payable for the balance due.
July 15 Received cash for preparing tax returns for the first half of July, $6,500
July 19 Made payment on account to Lake Company, $500.
July 31 Received cash for preparing tax returns for the last half of July, $8,250
July 31 Declared and paid cash dividends of $450.
Prepare journal entries to record the July transactions in the General Journal below. Use the following account names for journal entries.
Chart of Accounts: Account Title (Normal Balance)
Date Account Names Debit Credit
Assets
Cash (Debit)
Prepaid Insurance (Debit)
Supplies (Debit)
Equipment (Debit)
Accumulated Depreciation – Equipment (Credit)
Liabilities
Accounts Payable (Credit)
Income Tax Payable (Credit)
Stockholders’ Equity
Common Stock (Credit)
Retained Earnings (Credit)
Dividends (Debit)
Revenue
Tax Preparation Revenue (Credit)
Expenses
Rent Expense (Debit)
Salaries Expense (Debit)
Insurance Expense (Debit)
Supplies Expense (Debit)
Depreciation Expense (Debit)
Income Tax Expense (Debit)
Note: Remember that debits must equal credits—all of your journal entries should balance.

General Ledger

This Sheet will be used for Requirements 2, 5, and 9.
Requirement #2:
Post the July journal entries to the following T-accounts and compute ending balances.
Cash
DeVry: The balance of the Cash account after posting all journal entries should be $43,400.
Tax Preparation Revenue
Prepaid Insurance Rent Expense
Supplies Salaries Expense
Equipment Insurance Expense
Accumulated Depreciation – Equipment Supplies Expense
Accounts Payable Depreciation Expense
Income Tax Payable Income Tax Expense
Common Stock Retained Earnings
Dividends

Trial Balance

Requirement #3:
Prepare a trial balance for July in the space below.
Quick Tax Corporation
Trial Balance
July 31
Account Names Debits Credits
0
DeVry: Debits equal $62,950
0
DeVry: Credits equal $62,950

Adjusting Entries

Requirement #4:
Prepare adjusting entries using the following information in the General Journal
below. Show your calculations!
a) One month’s insurance has expired.
b) The remaining inventory of supplies is $300.
c) The estimated depreciation on equipment is $125.
d) The estimated income taxes are $2700.
Date Account Names Debit Credit
Requirement #5:
Post the adjusting entries to the General Ledger T-accounts and compute adjusted balances.

Adjusted Trial Balance

Requirement #6:
Prepare an adjusted trial balance in the space below.
Quick Tax Corporation
Adjusted Trial Balance
July 31
Account Names Debits Credits
0
DeVry: Debits equal $65,775
0
DeVry: Credits equal $65,775

Financial Statements

Requirement #7:
Prepare the financial statements for the Quick Tax Corporation as of July 31 in the space below.
You will only be preparing the income statement, statement of retained earnings, and the balance sheet.
The statement of cash flows is a required financial statement, but is not required for this case study.
Quick Tax Corporation Quick Tax Corporation Quick Tax Corporation
Income Statement Statement of Retained Earnings Balance Sheet
For the Month Ending July 31 For the Month Ending July 31 July 31
Revenues: Retained Earnings, July 1 Assets:
Tax Preparation Revenue Add: Net Income Cash
Subtotal Supplies
Expenses: Less: Dividends Prepaid Insurance
Rent Expense Retained Earnings, July 31 DeVry: Retained Earnings equals $5,475 Equipment
Salaries Expense Less: Accum Depreciation
Insurance Expense Total Assets
DeVry: Total assets equals $56,375 Supplies Expense
Depreciation Expense Liabilities:
Income Tax Expense Accounts Payable
Total Expenses Income Tax Payable
Total Liabilities
Net Income DeVry: Net Income equals $5,925 Stockholders’ Equity:
Common Stock
Retained Earnings
Total Stockholders’ Equity
Total Liabilities and
Stockholders’ Equity
DeVry: Total Liabilities & Stockholders’ Equity equals $56,375

Closing Entries

Requirement #8:
Prepare the closing entries at July 31 in the General Journal below.
Date Account Names Debit Credit
Requirement #9:
Post the closing entries to the General Ledger T-accounts and compute ending balances.

Post-Closing Trial Balance

Requirement #10:
Prepare a post-closing trial balance as of July 31 in the space below.
Quick Tax Corporation
Post-Closing Trial Balance
July 31
Account Names Debits Credits
0
DeVry: Debits equal $56,500
0
DeVry: Credits equal $56,500