MOSES’S GROUND MAINTENANCE, INC.
PRACTICE SET
(For the Months June, July, & August)
In the spring of 2021, Amos Moses decided to open a lawn care business. He called it Moses Ground Maintenance, Inc. Not only would he provide lawn care services, but he would also sell certain products that would assist his customers in maintaining a beautiful lawn, ultimately making them the envy of their neighbors.
Amos has decided to organize his business as a corporation. Although, a sole proprietorship would be easier to set up, Amos wanted to eliminate any personal liability he might be subject to if he were to organize as a sole-proprietorship. He realizes that it is more complicated to organize his business as a C-corporation and that he might pay more in taxes, but he feels it’s worth the extra cost.
Amos has hired you to be his accountant and has decided not to purchase an accounting software package at this time, but is considering using Quickbooks Online. Therefore, you will be required to record all transactions manually.
You will need to set up a manual accounting system. Therefore, you will have to create a general journal, and a general ledger. You will be responsible for journalizing all transactions and posting them to the appropriate ledger accounts. Additionally, you will be required to prepare a trial balance, adjusting entries, an adjusted trial balance. At the end of the period you will have to prepare a set of financial statements for the company. This will include, in proper format, an Income Statement, Statement of Shareholder’s Equity and Balance Sheet. You will also be required to record and post the closing transactions. Moses Ground Maintenance, Inc. fiscal year ends August 31. In June of 2021, Amos begins operations.
The following events occu
ed in June:
6/2 Amos opens a banks account for Moses Ground Maintenance, Inc at State Bank and deposits $100,000 into his account. Amos invests the money into his business in exchange for 50,000 shares of $1 par value common stock.
6/3 Amos issues Ck # 1000 to Moses Ground Maintenance to establish the Petty Cash Fund in the amount of $500. Amos will use this account when he needs to make cash purchases.
6/ 4 Amos visits the law firm of Honest Abe for assistance on setting up his business as a corporation.
6/ 4 Amos hires Paula Rivere to design a
ochure and a poster to advertise his company and the services and products he has available.
6/ 8 Amos purchases a one-year subscription for $36 (Ch # 1001) to Grass Is Us Quarterly.
6/10 Amos receives a bill for services rendered by Honest Abe Law Firm in the amount of $2,500 – terms net 20.
6/11 Amos receives a bill and issues check #1002 to Paula Rievere for $3,500 for the design and printing of the
ochures and posters. The
ochures and posters will be used immediately and therefore, should be expensed immediately.
6/12 Amos purchases a riding lawn mower on account from Better Grounds Wholesale Supply for $5,500. At the same time, Amos purchases a weedwacker for $1,350. Better Grounds gives Amos the bill totaling $6,850 he then issues check #1003 foe $1350 in partial payment of the invoice..
6/15 Amos receives the bill and pays $4,000 (check #1004) for the purchase of inventory for the business. Amos purchases:
· 100 bags of weed killer at $10
ag
· 150 bags of fertilizer at $20
ag
Amos plans to resell these products at a 50% gross profit.
6/16 Amos purchases a new truck and trailer for the business. The truck costs $35,000 and the trailer $10,000. He finances both the truck and the trailer through Pig E Bank at a rate of 8% for 5 years. The first monthly payment is due on July 16.
NOTE: You will need to create a loan amortization schedule to determine that amount of the monthly note and interest expense for each month. You can use a website such as www.bankrate.com to create the schedule. When recording your entries, adjust all amounts to the nearest dollar.
6/16 Amos receives a bill for the purchase of an auto insurance policy in the amount of $900. Check # 1005 is issued to Farm Town Insurance. The policy is for 6 months and covers the period from 6/16 – 12/15. In order to provide Amos with accurate accounting information, expense the policy evenly over each of the six months.
6/17 Amos purchases, on account, $175 worth of fuel from Git ‘n GO. The fuel is being used in the lawn equipment. Expense the purchase.
6/18 Amos gets his first 12-month contract to maintain a lawn. He is going to charge his new customer, Don Notting, $200 per month. The contract will begin on July 1.
6/21 Amos issues check # 1006 to pay the bill received from the law firm.
6/25 Amos receives a check (#1234) from Don Notting in the amount of $2,400 in payment of the lawn service contract.
6/29 Amos provides lawn care services for Iphelia Payne and receives $350 cash in payment of her invoice. Iphelia is pleased with Amos’s work and will call when she needs him again.
6/30 Compute and accrue the interest expense on the Pig E Bank note. You will have to accrue the interest that has accrued from 6/17 – 6/30.
Note: See the first two events for July before preparing
the trial balance for June. These events need to be recorded
June.
The following events occu
ed in July:
7/1 Amos receives a bill from you, his accountant in the amount of $2,000 (terms 3/10, n/30). The accounting expenses should be expensed in the month that it applies – in this case June. Therefore, record the transaction and date it June 30.
7/2 Amos receives bills for the following: telephone - $250; water - $45; electricity - $175; cell phne - $100. The telephone and cell phone bills are payable to TeleCom Telephone Company. The water and utility bills are payable to Max Power Utilities. These expenses also belong to the month of June.
7/2 Amos pays Better Grounds Wholesale Supply in full by issuing check #1007.
7/2 Amos pays Git ‘n GO in full (Check #1008).
7/3 Amos has a push lawnmower that he transfe
ed to the business in exchange for 500 shares of common stock. The lawnmower has a fair value of $1,500.
7/11 Amos performs lawn care services as agreed for Don Notting.
7/15 Amos paid the telephone, cell phone, water and electricity bills in full (Check #’s 1009 and 1010, respectively).
7/16 Amos pays Pig E Banks the first payment on the loan of $45,000 (ck # 1011).
7/18 Amos performs lawn care services for $2,000 on account for a new customer named Luke Warn (term n/30).
7/18 Amos sells 10 bags of weed killer and 15 bags of fertilizer for cash to Iphelia Pain. Amos is required to charge a 5% sales tax that is payable to HOGG Department of Revenue.
7/20 Amos pays you for the services you provided in June (Ch# 1012).
7/30 Amos receives and pays a $1,200 bill (ck # 1013) for the purchase of a one-year liability insurance policy. The policy coverage takes effect on August 1.
7/30 Compute and accrue the interest expense on the Pig E Bank note. You will have to accrue the interest that has accrued from 7/17 – 7/31.
Note: See the first two events for August before preparing the trial balance for July. Record these as adjusting entries on July 30.
The following events occu
ed in August:
8/1 Amos receives a bill from you, his accountant in the amount of $2,500 (terms 3/10, n/30). This invoice is for services performed for the month of July.
8/2 Amos receives the following bills related to telephone and utilities used in the month of July: telephone $150, cell phone $150, water $35, and electricity $275.
8/3 Amos remits the sales tax (ck # 1014) to HOGG Department of Revenue.
8/7 Amos performed lawn care services for Don Notting as contracted.
8/9 Amos pays you, his accountant, for July services (ck # 1015).
8/10 Amos receives payment from Luke Warn in full payment for services provided in July.
8/12 Amos pays the telephone, cell phone, water, and electric bills (cks # 1016 and #1017).
8/16 Amos makes his second payment on the $45,000 loan (Ck # 1018).
8/20 Amos treats you to
eakfast at The Daily Grind Coffee Shop for a total cost of $25. Amos paid this out of petty cash.
8/24 Amos performs lawn care services for Iona Frisbee for $200 cash.
8/24 Amos secures a contract with Ba
en View Golf Club for $5,000 per month. Due to this increase in business, Amos hires a part-time employee, Joe Slowe. Amos will pay Joe $10/hour.
8/25 Amos performs the services for the month of August at Ba
en View Golf Club. He contacts you and asks you to send an invoice for $5,000 for the services. Additionally, he needs you to add 50 bags of fertilizer and 25 bags of weed killer to the invoice. Amos tells you to set the terms 2/10, n/30. Don’t forget to charge sales taxes on the products sold. (Round to the nearest dollar).
8/30 Amos’ pays $125.00 in cash to HOGG Department of Revenue for an Occupational License for his business. Amos uses his petty cash to make this payment.
8/30 Amos ask you to issue check #1019 to Joe Slowe for the net amount owed him for time that he worked this past week.
Joe worked 20 hours. Amos is required to withhold the following from Joe’s pay: federal income taxes at a rate of 15%, state income taxes at a rate of 6% and FICA taxes at a rate of 7.65%. (Round to the nearest dollar).
You must also record a journal entry for the employer’s payroll taxes. This includes FICA tax of 7.65% and Federal Unemployment Insurance of 6.00%.
8/30 Amos receives an invoice from you, his accountant in the amount of $1,500 (terms 3/10, n/30). This is for services for the month of August.
8/30 Amos receives a bill from TeleCom Telephone