ACC – Byte of Accounting Problem

June
1: Hudson Bloom invested $133,906.00
cash and computer equipment with a fair market value of $35,420.00 in his new
business, Byte of Accounting.

June
1: Check # 5000 was used to purchased
office equipment costing $736.00 from Office Express. The invoice number was 87417.

June
1: Check # 5001 was used to purchased
computer equipment costing $11,040.00 from Thomas Cummings. The invoice number was 20117.

June
2: Check # 5002 was used to make a
down payment of $33,000.00 on additional computer equipment that was
purchased from Royce Computers, invoice number 76542. The full price of the computer was
$165,000.00. A five-year note was
executed by Byte for the balance.

June
4: Additional office equipment costing
$400.00 was purchased on credit from Discount Computer Corporation. The invoice number was 98432.

June
8: Unsatisfactory office equipment
costing $80.00 from invoice number 98432 was returned to Discount Computer
for credit to be applied against the outstanding balance owed by Byte.

June
10: Check # 5003 was used to make a
$25,250.00 payment reducing the prinicpal owed on the June 2 purchase of
computer equipment from Royce Computers.

June
14: Check # 5004 was used to purchase a one-year insurance policy covering
its computer equipment for $5,472.00 from Seth’s Insurance. The effective date of the policy was June
16 and the invoice number was 2387.

June
16: A check in the amount of $8,250.00 was received for services
performed for Pitman Pictures.

June
16: Byte purchased a building and the
land it is on for $149,000.00 to house its repair facilities and to store
computer equipment. The lot on which
the building is located is valued at $24,000.00. The balance of the cost is to be allocated
to the building. Check # 5005 was used
to make the down payment of $14,900.00.
A thirty year mortgage with an inital payement due on August 1st, was
established for the balance.

June
17: Check # 5006 for $7,500.00 was
paid for rent of the office space for June, July and August.

June
17: Received invoice number 26354 in
the amount of $475.00 from the local newspaper for advertising.

June
21: Billed various miscellaneous local customers $4,200.00 for consulting
services performed.

June
21: Check # 5008 was used to purchase
a fax machine for the office from Office Machines Express for $700.00. The invoice number was 975-328.

June
21: Accounts payable in the amount of
$320.00 were paid with Check # 5007.

June
22: Check # 5010 was used to pay the
advertising bill that was received on June 17.

June
22: Received a bill for $1,140.00 from
Computer Parts and Repair Co. for repairs to the computer equipment. The invoice number was 43254.

June
22: Check # 5009 was used to pay
salaries of $1,035.00 to equipment operators for the week ending June
18. Ignore payroll taxes.

June
23: Cash in the amount of $3,365.00
was received on billings.

June
23: Purchased office supplies for
$705.00 from Staples on account. The
invoice number was 65498.

June
28: Billed $6,225.00 to miscellaneous
customers for services performed to June 25.

June
29: Cash in the amount of $5,899.00
was received for billings.

June
29: Paid the bill received on June 22,
from Computer Parts and Repairs Co with Check # 5011.

June
29: Check # 5012 was used to pay
salaries of $1,035.00 to equipment operators for the week ending June
25. Ignore payroll taxes.

June
30: Received a bill for the amount of
$840.00 from O & G Oil and Gas Co.
The invoice number was 784537.

June
30: Check # 5013 was used to pay for
airline tickets of $2,400.00 to send the kids to Grandma Ellen for the
July 4th holiday.

Adjusting
Entries – Round to two decimal places.

The rent
payment made on June 17 was for June, July and August. Expense the amount associated with one
month’s rent.

A
physical inventory showed that only $292.00 worth of office supplies remained
on hand as of June 30.

The
annual interest rate on the mortgage
payable was 9.00 percent. Interest
expense for one-half month should be computed because the building and land
were purchased and the liability incurred on June 16.

Record
a journal entry to reflect that one half month’s insurance has expired.

A review of Byte’s job worksheets show that
there are unbilled revenues in the amount of $5,750 for the period of June
28-30.

The
fixed assets have estimated useful lives as follows:

Building
– 31.5 years

Computer
Equipment – 5.0 years

Office
Equipment – 7.0 years

Use the
straight-line method of depreciation.
Management has decided that assets purchased during a month are
treated as if purchased on the first day of the month. The building’s scrap value is $7,500. The
office equipment has a scrap value of $450.
The computer equipment has no scrap value. Calculate the depreciation for one month.

A review
of the payroll records show that unpaid salaries in the amount of $621.00 are
owed by Byte for three days, June 28 –
30. Ignore payroll taxes.

The note
payable to Royce Computers (transactions 04 and 07) is a five-year note, with
interest at the rate of 12 percent annually.
Interest expense should be computed based on a 360 day year.

Closing
Entries

Close
the revenue accounts.

Close
the expense accounts.

Close the income summary
account.

Close
the withdrawals account.