Jim Arnold’s Photography Studio – Comprehensive Problem on pg 213

Comprehensive Problem I (Intro to manual accounting
and computerized accounting)
Jim Arnold has been a photographer since his
graduation from high school several years ago.
On February 1, 2011, he decided to open his own photography firm called
Arnold’s Photos. To start his accounting
system, Jim developed the chart of accounts shown below.

Arnold’s
Photo Studio. Chart of Accounts

ASSETS
111 Cash

OWNER’S EQUITY

311 Jim Arnold, Capital

112 Accounts Receivable

312 Jim Arnold, Drawing

113 Office Supplies

313 Income Summary

114
Photography supplies

115
Prepaid Insurance

REVENUE

121 Office Equipment

411 Photography Revenue

121.1
Accumulated Depreciation- Office Equipment

412 Vending Machine Revenue

122 Photography Equipment

EXPENSES

122.1
Accumulated Depreciation-Photography Equipment

511
Salaries Expenses

123 Furniture Fixtures

512 Advertising Expenses

123.1
Accumulated Depreciation- Furniture and Fixtures

513 Rent Expense

514 Repairs Expense

LIABILITIES

515 Insurance Expense

211 Accounts Payable

516 Office Supplies Expense

212 Notes Payable

517 Photography Supplies Expense

213 Salaries Payable

518 Depreciation Expense- Office Equipment

519 Depreciation Expense- Photography
Equipment

520 Depreciation Expense- Furniture and
Fixtures

521 Utilities Expense

522 Miscellaneous Expense

Jim completed the following transaction during the
first month of operations:
February 2011
1 Jim
invested $40,000 cash and photography equipment valued at $20,000 in the
business
1 Purchased office
supplies for cash, $1,300.
1 Purchased
photography supplies on account, 6,700.
1 Paid rent,
$1,700.
1 Paid for a
newspaper ad, $500.
2 Purchased office
equipment on account, $6,700.
2 Paid property
insurance for the upcoming year, $3,600.
3 Purchased a
computer a computer system and software, $3,200, by issuing a note payable.
5 Paid for
proportional handouts, $150.
6 Paid
miscellaneous expenses, $175.
7 Paid salaries of
employees, $1,400.
7 Recorded week’s
cash receipts for photo work, $10,350.
8 Paid for carpet
cleaning (a miscellaneous expense), $75
9 Recorded photo
work done for a customer on account, $1,885.
9 Purchased
additional photography supplies on account, $3,200.
10 Purchased
additional photography equipment
for cash, $3,500.
10 Entered into a
contract with Southside Food Vendors to place vending machines in the waiting
room. Jim is to receive 10% of all
sales, with a minimum of $200 monthly.
Received $200 as an advance payment.
11 Purchased
furniture for the lobby area, $1,700.
Paid cash in full.
12 Paid cash for the
installation of overhead lightning fixtures, $900.
15 Recorded second
week’s cash receipts for photo work, $12,170.
15 Paid second week
salaries, $1,400.
17 Jim withdrew cash
for personal use, $800.
18 Paid for a TV ad
, 710.
19 Paid for repair
to equipment, $80
19 collected $500
for the photo work done on account on February 9
22 Recorded third
week’s cash receipts for photo work, $12,045.
22 Paid weekly
salaries, $1,400.
23 Did a special
wedding photo session for a customer on credit, $2,550
28 Recorded third
week’s cash receipts for photo work, $9,995.
28 Paid salaries of
employees, $1,400.
28 Paid water bill
for February, $70.
28 Paid electric bill
for February, $1,095.
28 Made a $500
payment on the note for the computer purchased on February 3.
28 Made a payment
for the office equipment purchased on account, $2,000.
28 Made a payment on
the photography supplies purchased on account, $1,000.
28 Wrote a business
check to pay for Jim’s home phone bill, $310.
28 Southside Food
Vendors reported a total of $2,800 of vending machine sales for February. Ten percent of these sales is $280. Since $200 has already been received and
recorded in February, Jim was owed $80.
Received the $80 check.

Directions:
1. Open an account in
the ledger for each account shown in the chart of accounts.
2. Journalize each
of the transactions for February, beginning on page 1 of the general journal.
3. Post the journal
entries to the ledger.
4. Prepare a trial
balance of the ledger in the first two columns of a 10-column work sheet.
5. Complete the
10-column work sheet. Assume for the
purposes of this problem that Jim has a one-month accounting period. Data for adjustments are as follow:
a) Office supplies on hand $850

b) Photography supplies on hand $5,550
c) Insurance expired
, $300.
D Salaries unpaid,
two days of a five day week; weekly salaries are $1,400
E) Depreciation of office equipment $190
f) Depreciation of photography equipment $275
g) Depreciation of furniture and fixtures $75

6. Prepare an income
statement for the month ended on February 28
7. Prepare a
statement of owner’s equity for the month ended on February 28
8. Prepare a balance
sheet as of February 28.
9. Journalize
adjusting entries from the completed work sheet
10. Journalize
closing entries
11. Post adjusting and closing entries to the ledger
12. Prepare a post-closing trial balance.