ScholarMatic: Explanation & Answer
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Service Industry:
This problem has a value of 10% of the final grade.
Objectives:
Demonstrate application of Accounting Concepts pertaining to a service
company including the following:
·
Selection of Business Form
·
Journalization and Posting of Daily Transactions
·
Creation of Unadjusted Trial Balance
·
Adjustment of accounts to properly reflect
balances at the end of the period.
·
Creation of Financial Statements
·
Completion of the Closing Process with
appropriate closing entries and posting to T accounts
·
Determination of Book Value for Fixed Assets
·
Discussion of the Company’s financial position
As you work through this problem please refer to the Penn
State rules regarding Academic Integrity.
You must cite any source that was used in completing this
assignment.
PART 1. 5%
Bob loves construction
and wants to start his own company. He
is married, 30 years old and lives with his wife in their house in
Goodville. He currently has a full time
job for a local architect that supports the family. His dream is to restore old houses and bring
them back to their original status. He
has saved $20,000 to start this business.
He knows nothing about accounting and has hired you to provide him with
accounting services as well as guidance in starting this business.
The first task is to
determine what business form Bob should choose. Explain the different business formats to
Bob and which one you recommend for Bob’s new business: “Builder Bob” (BB)
PART 2. 90%
Bob has followed your
advice and on January 7, 2014 he deposited $20,000 into a business bank account
for BB and started pursing his dream. It
has been a hectic 6 months and on July 2nd Bob contacts you for
help. Bob hands you a box of receipts
and a list of what he has done during this period. He wants to know whether he can quit his job
and work his business full time. He has
applied for a small business loan but was told by the bank that he needs a set
of books with financial statements along with a listing of the fixed assets at
Book Value. The banker told him that
the books should be closed as if the year ended on June 30, 2014 with
corresponding financial statements.
1. Create the Journal for the six months of
transactions and Post these to T-accounts
(46 pts)
2. Create the Unadjusted Trial Balance (4 pts)
3. Make the necessary Adjusted Journal Entries
(8 pts)
4. Create the Adjusted Trial Balance ( 4 pts)
5. Prepare the Financial Statements for the
year ended June 30, 2014: Income
Statement (6pts), Statement of Retained Earnings (2 pts), Balance Sheet (10
pts)
6. Close the books using appropriate journal
entries with T-accounts (5 pts)
7. Determine the Book Value of the Fixed
Assets (5 pts)
PART 3: 5%
Discuss the economic
position of Builder Bob (BB) and what you would advise Bob concerning his job
at the Architectural Firm. Be certain to
support your statements with evidence.
ScholarMatic: Explanation & Answer
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