You may download and complete this fileThe following categories are the basis for grading:Journal entriesAdjusting journal entriesClosing journal entriesGeneral LedgerWorksheetIncome StatementStatement of Retained EarningsBalance SheetFormat/NeatnessA couple of inconsistencies/problems in the Comprehensive Problem:Adjusting entry i. asks us to record one month of expired insurance. However, there is no insurance expense account. Please record this event to Maintenance Expense, rather than the normal Insurance Expense that you would expect.The journal entry on 12/24 asks us to record automobile expenses involving travel. There is no travel expense account, so please record this event to Maintenance Expense.The journal entry on 12/4 has us recording prepaid insurance. The term of the policy is listed as December 1, 2016 – December 1, 2018. Please consider the term of the policy to be December 1, 2018 to December 1, 2020.Here’s a check figure – after entering journal entries for activity through December 31 (NOT adjusting entries), and posting those transactions to ledger accounts, your Unadjusted Trial Balance as of 12/31/18 should be $467,505 in both the Debits and Credits columns.
comprehensive_problem.docx
Unformatted Attachment Preview
WE DO HAIR, INC.
2
We Do Hair, Inc. is a full service hair salon, operated by its majority shareholder and hair specialist,
Scarlett Coif. Presented below is the November 30, 2018, unadjusted trial balance of We Do Hair,
Inc. The temporary account balances represent the results of entries recorded during the first 11
months of 2018, and the balance in We Do Hair’s common stock and retained earnings accounts have
not changed since December 31, 2017. Currently, 15,000 shares of stock are outstanding and 50,000
shares have been authorized. All income tax effects are to be ignored for this project.
We Do Hair, Inc.
Unadjusted Trial Balance
November 30, 2018
REF
DEBIT
CREDIT
Cash
111
$36,667
Senior Center Receivables
112
3,400
Supplies Inventory
113
8,400
Prepaid Rent
114
Hair Equipment
131
Accumulated Depreciation, Equipment
132
Computer and other office equipment
135
Accumulated Depreciation, Computer and
other office equipment
136
Accounts Payable
211
Wages Payable
212
Interest Payable
213
Unearned Service Revenue
214
1,700
Long-Term Notes Payable
220
10,000
Common Stock ($5 par value)
311
40,000
Retained Earnings
312
21,182
Income Summary
313
Men’s haircut revenue
411
81,160
Women’s haircut revenue
412
149,700
Perm revenue
413
64,000
Senior citizen cut revenue
414
16,783
Wages Expense
511
54,836
$4,100
30,739
12,830
1,500
195,000
3
Rent Expense
512
18,900
Supplies Expense
514
20,250
Utilities Expense
515
18,200
Advertising Expense
516
9,750
Maintenance Expense
517
6,280
Depreciation Expense, Hair equipment
518
Depreciation Expense, Computer and other
office equipment
519
Interest Expense
520
Total
533
$402,955
$402,955
4
The following transactions occurred during the month of December 2018:
12/1
We Do Hair, Inc. rents its salon space as part of a local mall. We Do Hair prepays its rent 12 months in advance. The
annual rental payment is made on December 1 of each year and expires on December 1 of the following year. The rental
payment is made on this date for the 12 months ending December 1, 2019. The payment is $19,200.
12/2
Cash revenues received for various services were: men’s haircuts $3,200, women’s haircuts $4,800, perms $980, and
senior citizens $680.
12/4
Senior Citizens Receivable represents visits made by We Do Hair to area Senior Citizen Centers to give haircuts to
residents of the senior center. After giving haircuts on a given day, We Do Hair bills the senior center for the number of
haircuts given. Today haircuts at Johnson Senior Care were given totaling $2,500 and Johnson was billed accordingly.
12/4
Purchased a two-year insurance policy, protecting We Do Hair from lawsuits for especially bad haircuts. The term of this
policy is December 1, 2016 – December 1, 2018. The two-year premium is $9,600.
12/5
Purchased various haircut supplies, on account, $1,700.
12/7
Purchased an automobile for employees to use when driving to give off-site haircuts, such as to area senior citizen homes.
Record as Hair Equipment. Cost of the auto is $21,000. $10,000 is paid in cash and the remainder is financed with a
three-year, 8% note payable, the principle amount of the note being paid in full on December 1, 2021. Interest is paid
annually each December 1, beginning December 1, 2019.
12/10
Received bill for and paid $6,500 for a series of radio advertisements that were aired December 1 – 10.
12/12
Cash revenues for men’s haircuts were $8,800 and women’s haircuts were $12,600. In addition, cash revenues for perms
were $5,900.
12/14
Received payments from senior citizen centers, $3,400, on account.
12/17
Paid wages to employees, who are paid per haircut given. This period’s biweekly wage totaled $9,270.
12/19
Paid $670 to janitorial service for cleaning the office.
12/20
Received bill for advertisements shown in local newspapers, totaling $3,900. The bill we be paid in a couple of weeks.
12/21
Purchased supplies, on account, $1,250.
12/23
Paid various accounts payable bills, $7,160.
12/24
Paid various automobile expenses for driving to senior citizen centers, and other travel related expenses, $1,175.
12/28
Performed haircuts at the Community Senior Citizen center, and billed the center, $4,600.
12/31
Cash haircuts and perms for the last half of the month were men’s haircuts $4,200, women’s haircuts $5,800, perms $600.
12/31
Paid more bills on account, $800.
12/31
Paid interest on the $10,000 long-term note payable, $1,000.
REQUIREMENTS
1.
Prepare and post journal entries to record the December transactions listed above.
2.
Prepare a 6 column work sheet and enter the December 31 unadjusted balances from the accounts. Also enter adjusting entries
into the worksheet for the following items, and complete the worksheet.1
1
You are reminded that the work sheet is not an official book of entry like a journal or general ledger. It is used by the
accountant to the dollar values of the accounts as well as adjusting journal entries, to gain an idea of what the accounts
will look like on the financial statements. The adjusting journal entries must be posted to the general ledger. The general
ledger is the official book of record that maintains account balances for the business. So, you must journalize entries and
post them to the general ledger as well as complete the worksheet.
5
a.
Unpaid wages were $10,700 as of December 31.
b.
The December 31 supply inventory was $3,200.
c.
The expired portion of the prepaid rent as of 12/31/16 is recorded.
d.
Depreciation for the year on the hair equipment follows: (1) on the equipment owned throughout the year $2,950, (2) the
automobile purchased on December 7 has a 5 year life and no salvage value. Record one month’s depreciation on the auto.
Total depreciation is the sum of (1) and (2).
e.
Depreciation for the year on the Computer and Other Equipment was $4,300.
f.
Unpaid utilities expense for December was $2,364 (credit accounts payable).
g.
Unearned revenue is for 68 haircuts to be given to a local Boy Scouts group. The group paid in advance for these haircuts in
November. As of December 31, 56 of the haircuts have been given.
h.
Prepare the adjustment to accrue interest on the note payable from December 7 (24 days).
i.
The expired portion (1 month) of the liability insurance (December 4) is recorded.
3.
Journalize and post the adjusting entries. Please note these adjusting entries will be entered into the worksheet (#2 above) and
also are recorded in the journal and posted to the ledger. Please do both!
4.
Journalize and post the closing entries. Please note these closing entries are not recorded in the worksheet, but they are recorded
in the journal and posted to the ledger. After journalizing and posting these entries, revenues and expenses should have balances
of $zero, and retained earnings should be updated accordingly.
5.
Prepare an income statement, statement of retained earnings, and a classified balance sheet for the year-ended
December 31, 2018.
6
GENERAL JOURNAL – WE DO HAIR, INC.
DATE
ACCOUNT
REF
DEBIT
CREDIT
7
8
GENERAL JOURNAL – WE DO HAIR, INC.
DATE
ACCOUNT
REF
DEBIT
CREDIT
9
10
GENERAL JOURNAL – WE DO HAIR, INC.
DATE
ACCOUNT
REF
DEBIT
CREDIT
11
12
GENERAL JOURNAL – WE DO HAIR, INC.
DATE
ACCOUNT
REF
DEBIT
CREDIT
13
14
GENERAL JOURNAL – WE DO HAIR, INC.
DATE
ACCOUNT
REF
DEBIT
CREDIT
15
16
GENERAL LEDGER – WE DO HAIR, INC.
CASH – 111
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
36,667
Senior Center Receivables – 112
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
17
11/30
3,400
18
GENERAL LEDGER
SUPPLIES INVENTORY – 113
DATE
DESCRIPTION
DEBIT
CREDI
T
11/30
BALANCE
8,400
PREPAID RENT – 114
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
11/30
19
PREPAID INSURANCE – 116
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
CREDIT
BALANCE
11/30
GENERAL LEDGER
HAIR EQUIPMENT – 131
DATE
11/30
DESCRIPTION
DEBIT
54,836
20
ACCUMULATED DEPRECIATION, HAIR EQUIPMENT – 132
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
4,100
COMPUTER AND OTHER OFFICE EQUIPMENT – 135
DATE
11/30
DESCRIPTION
DEBIT
CREDIT
BALANCE
30,739
21
22
GENERAL LEDGER
ACCUMULATED DEPRECIATION, COMPUTER & OTHER OFFICE EQUIP. – 136
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
12,830
ACCOUNTS PAYABLE – 211
DATE
DESCRIPTION
DEBIT
11/30
CREDIT
BALANCE
1,500
WAGES PAYABLE – 212
23
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
11/30
24
GENERAL LEDGER
INTEREST PAYABLE – 213
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
CREDIT
BALANCE
UNEARNED SERVICE REVENUE – 214
DATE
DESCRIPTION
DEBIT
11/30
1,700
LONG-TERM NOTES PAYABLE – 220
DATE
11/30
DESCRIPTION
DEBIT
CREDIT
BALANCE
10,000
25
26
GENERAL LEDGER
COMMON STOCK ($5 PAR VALUE) – 311
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
40,000
RETAINED EARNINGS – 312
DATE
DESCRIPTION
DEBIT
11/30
CREDIT
BALANCE
21,182
INCOME SUMMARY – 315
27
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
21,182
GENERAL LEDGER
MEN’S HAIRCUT REVENUE – 411
DATE
11/30
DESCRIPTION
DEBIT
CREDIT
BALANCE
81,160
28
WOMEN’S HAIRCUT REVENUE – 412
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
149,700
PERM REVENUE – 413
DATE
11/30
DESCRIPTION
DEBIT
CREDIT
BALANCE
64,000
29
GENERAL LEDGER
SENIOR CITIZEN CUT REVENUE – 414
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
16,783
WAGES EXPENSE – 511
DATE
11/30
DESCRIPTION
DEBIT
CREDIT
BALANCE
195,000
30
RENT EXPENSE – 512
DATE
DESCRIPTION
DEBIT
11/30
CREDIT
BALANCE
18,900
GENERAL LEDGER
SUPPLIES EXPENSE – 514
31
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
20,250
UTILITIES EXPENSE – 515
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
18,200
ADVERTISING EXPENSE – 516
DATE
11/30
DESCRIPTION
DEBIT
CREDIT
BALANCE
9,750
32
MAINTENANCE EXPENSE – 517
DATE
DESCRIPTION
DEBIT
CREDIT
11/30
BALANCE
6,280
GENERAL LEDGER
DEPRECIATION EXPENSE, HAIR EQUIPMENT – 518
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
DEPRECIATION EXPENSE, COMPUTER AND OTHER EQUIPMENT – 519
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
33
INTEREST EXPENSE – 520
DATE
DESCRIPTION
DEBIT
CREDIT
BALANCE
533
34
WORKSHEET, December 31, 2018
DESCRIPTION
UNADJUSTED
TRIAL BALANCE
DEBIT
CREDIT
ADJUSTMENTS
DEBIT
CREDIT
ADJUSTED
TRIAL BALANCE
DEBIT
CREDIT
Cash
Sen. citizen receivables
Supplies Inventory
Prepaid Rent
Prepaid Insurance
Hair Equipment
Accumulated Depreciation,
Hair Equipment
Computer and other
Accumulated Depreciation,
Computer and other
Accounts Payable
Wages Payable
Interest Payable
Unearned service revenue
Long-Term Notes Payable
Common Stock
Retained Earnings
Income summary
Men’s haircut revenue
Women’s haircut revenue
Perm revenue
Senior citizen cut revenue
Wages Expense
Rent Expense
35
Supplies Expense
Utilities Expense
Advertising Expense
Maintenance Expense
Depreciation Expense, Hair
Equipment
Depreciation Expense,
Computer and other
Interest Expense
Totals
36
WE DO HAIR, INC.
INCOME STATEMENT
FOR THE YEAR ENDED
DECEMBER 31, 2018
37
WE DO HAIR, INC.
RETAINED EARNINGS STATEMENT
FOR THE YEAR ENDED
DECEMBER 31, 2018
38
WE DO HAIR, INC.
BALANCE SHEET
DECEMBER 31, 2018
39
40
…
Purchase answer to see full
attachment
