Reference no: EM131324326

Ace Lawn Care Module - Mini Practice Problem

Jim Graham started his career mowing lawns for neighbors while he was in junior high school. Jim worked summers for the local golf course while he was in high school and now that he has graduated, he is starting his own lawn care business. You are taking an accounting class at the local community college and have agreed to help Jim set up and maintain the accounting records for his new business. He has set up a checking account in the business name, Ace Lawn Care, at the local bank. After some discussion with you, Jim has decided to set the business up as a sole proprietorship. You and Jim established a chart of accounts to be used in recording the business transactions. In May, 2014, the following activities occur at Ace Lawn Care.

May 1 Jim withdraws $20,000 from his savings account and deposits it in the business' bank account.

May 2 Jim purchases a used truck for $7,000 to use for the lawn care business, he writes a check for $3,500 and signs a 1 year, 6% note for the balance.

May 5 Jim purchases a lawn mower for $300 and an aerator for $500 and writes a check for the total amount.

May 6 Jim writes a $600 check for a six month insurance policy that expires October 31, 2014

May 7 Jim establishes a $1,000 line of credit account with Jones Fuel, a local gas station.

May 8 Jim writes a check for $50 for a weekly advertisement in the local newspaper. The advertisement will run every Friday through the end of May, 2014.

May 16 At the end of the first week, Jim has earned $600 for lawn care services. Of the $600, $500 was paid in cash and $100 was on credit.

May 23 At the end of the second week, Jim has earned $1,100 for lawn care services. Of the $1,100, $700 was paid in cash and $400 was on credit.

May 26 Jim writes a check for $75 to have the mower blade sharpened.

May 30 At the end of the third week, Jim has earned $1,000 for lawn care services. Of the $1,000, $800 was paid in cash and $200 was on credit.

May 31 Jim receives payments, on account, in the amount of $500

May 31 Jim receives his monthly invoice and writes a check for $400 to Jones Fuel.

May 31 Jim writes a check to himself for $1,500 for personal expenses.

Instructions:

1. Using the chart of accounts provided below, and the Excel template provided with this assignment,prepare journal entries, in good form, to record the May transactions. Explanations are optional.

2. Post the journal entries to general ledger accounts.

3. Prepare a trial balance as of May 31, 2014, for Ace Lawn Care.

Ace Lawn Care
Chart of Accounts

Classification	Account Number	Account Name
ASSETS	101	Cash
	110	Accounts Receivable
	120	Supplies
	130	Prepaid Insurance
	150	Equipment
	155	Accumulated Depreciation - Equipment
LIABILITIES	201	Accounts Payable
	220	Notes Payable
	225	Interest Payable
OWNER'S EQUITY	301	Owner's Capital
	305	Owner's Drawings
REVENUES	401	Lawn Service Revenue
EXPENSES	620	Supplies Expense
	630	Fuel Expense
	640	Repair and Maintenance Expense
	650	Advertising Expense
	660	Insurance Expense
	670	Depreciation Expense
	680	Interest Expense