AC1220 ACCOUNTING I Lab 2 .1 1 AC1220 ACCOUNTING I Lab 2.1 For the AC1220 Lab 2.1 assignment, consider the following accounting scenarios based on transactions at Jake’s Computer Repai r Service. Jones must journalize these transactions, make the necessary adjustments, and prepare financial statements for Febru ary 20x1. In your response, ensure you address each of the following: 1. Journalize the transactions for the month of February 20x1, as described in Requirement 1. 2. Make the adjustment entries for February 20x1 based on the information provided in Requirement 2. 3. Complete the accounting worksheet in Requirement 3 by calculating the adjusted balances for each account and identifying the adjustments (i) - (l). 4. Prepare an income statement, a statement of owner’s equity, and a balance sheet for Jake’s Computer Repair Service as of February 28, 20x1, using the adjusted trial balance from Requirement 3. 5. Identify the basis of accounting Jones is applying (cash basis or accrual basis) in Requirement 5, explaining your choice. 6. Explain the accounting principle or concept Jones is applying when adjusting revenues and expenses for February 20x1 in Requirement 6. 7. Determine whether the statement regarding adjustment entries affecting the cash account is true or false in Requirement 7. 8. Discuss the effect on the income statement if Jones had failed to accrue interest on the note payable in Requirement 8. 9. Answer whether the cash basis of accounting is required under GAAP for financial statement preparation, as outlined in Requirement 9. Your answer should be detailed, clear, and organized. Be sure to include all necessary calculations and explanations for each requirement. Word Count Requirement: 800 – 1,200 words AC1220 ACCOUNTING I Lab 2 .1 2 AC1220 Lab 2.1 Introduction Jake’s Computer Repair Service earned a small profit for the month ended January 20x1. Jones expects the business to continue operating into the foreseeable future. In fact, he expects the business to grow so long as it continues to provide customers with excellent service. The following transactions take place in February 20x1: a. Feb . 1, 20x1. Jones pays off the accounts payable balance of $410 in cash. b. Feb . 2, 20x1. Jones contacts a local advertising agency, Hype! Inc. The agency offers to provide six months of customized advertising and promotional services for a fee of $1,200. Jones agrees and mails a check to Hype! Inc. for the full amount. Hint : Record a prepaid expense. c. Feb . 24, 20x1. Jones receives a utility bill for the month of February, $490. This amount is due on March 6, 20x1, and is still pa yable at month end. d. Feb . 28, 20x1. Service revenues for the month total $5,300: $3,900 cash and $1,400 on account. e. Feb . 28, 20x1. A customer brings in a laptop for repair and a software upgrade. The customer writes a check for $120 to cover the service. Jones begins work on the laptop on March 2, 20x1. f. Feb . 28, 20x1. Jones pays rent of $500 in cash. g. Feb . 28, 20x1. Jones withdraws $1,000 in cash. h. Feb . 28, 20x1. Wages are paid during the month, amounting to $900 in cash. Requirement 1 Make the necessary entries to journalize these transactions for the month of February. DATE REF DEBIT CREDIT 2/1/x1 Accounts Payable a 410 Cash a 410 To record payment to creditors AC1220 ACCOUNTING I Lab 2 .1 3 DATE REF 2/2/x1 Prepaid advertisement b 1200 Cash b 1200 DATE REF DEBIT CREDIT To record payment to advertisement agency DATE REF 2/24/x1 Utility expense c 490 To accounts payables c 490 To record unpaid utility bill DATE REF 2/28/x1 Cash d 3900 Accounts receivables d 1400 Service revenue d 5300 To record revenue DATE REF 2/28/x1 Cash e 120 Unearned service revenue e 120 To record unearned revenue DATE REF 2/28/x1 Rent f 500 Cash f 500 To record payment of rent DATE REF 2/28/x1 Drawings f 1000 Cash f 1000 To record drawings DATE REF 2/28/x1 Wages f 900 cash f 900 To record payment of wages On February 28, Jones takes the following facts into account: i. Feb. 28, 20x1. The supplies account had a balance of $910 on Feb. 1, 20x1. Some supplies were used during the month. Jones de termines that the original cost of the remaining supplies is $260.