Accounting 199- Accounting for Problem Solving

Assignment #2
Professor Peter Demerjian

Brenda and LeAnn decide to earn extra money by starting a painting business. They prepare to
open the business in May, and then start with painting jobs in June.

The following activities occurred in June:

1. They complete three painting jobs during the month:
a. Job 1: They complete this job on June 11 and are paid $1,350 in cash—with $150
originally received in May (see Assignment 1, #6). For this job they use $450
worth of paint.

Cash 1,350
Unearned revenue 150
Service revenue 1,500

Cost of goods sold 450

Paint 450

b. Job 2: They complete the job on June 19 and receive $1,100 in cash, and use $500
worth of paint.

Cash 1,100
Service revenue 1,100

Cost of goods sold 500

Paint 500

c. Job 3: They complete the job on June 30. The customer agrees to pay the total
amount ($1,700) on July 3. They use $650 worth of paint.

Accounts receivable 1,700

Service revenue 1,700

Cost of goods sold 650

Paint 650

2. Additionally, they sign two contracts in June for jobs to be started in July:
a. Job 4: The quoted price is $2,200. The customer will make a 10% down payment
when the work begins.

<no entry>

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 b. Job 5: The quoted price is $400. The customer pays half this amount when the
contract is signed on June 25. The other half will be paid when the work is
complete.

Cash 200
Unearned revenue 200

3. They pay their bill for paint purchased in May (see Assignment 1, #7).

Accounts payable 850

Cash 850

4. They purchase $1,700 in paint, all on account.

Paint 1,700
Accounts payable 1,700

5. They use $120 worth of supplies for painting jobs in June.

Supplies expense 120

Supplies 120

6. They purchase an additional $160 in supplies in cash.

Supplies 160
Cash 160

7. They hire Jasper, a friend, to help with the Job 3. Jasper will be paid $200 once the
customer pays on July 3.

Wage expense 200

Wage payable 200

Required:
a. Show journal entries for each transaction.
b. Complete t-accounts for the transactions.
c. Prepare a trial balance for the account balances at the end of June.
d. Construct a balance sheet and income statement for June.

Note: Please use the solution to Assignment 1 for account names and other details (i.e.,
adjustments) necessary for June. Remember that t-account balance carry over for balance sheet
accounts.

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 T-Accounts

Cash Paint Accounts Payable Service Revenue

1,660 850 850
450 (1a) (3) 850 1,700 (4) 1,500 (1a)
(1a) 1,350 850 (3) 500 (1b) 1,100 (1b)
(1b) 1,100 160 (6) (4) 1,700 650 (1c) 1,700 1,700 (1c)
(2b) 200
3,300 Wages Payable
950 4,300
Accounts Receivable 200 (7)
Ladders Cost of Goods Sold
(1c) 1,700 440
200 (1a) 450
1,700 (1b) 500
440 Income Tax Payable (1c) 650
Prepaid Insurance
900 Van 667 (adj4)
3,000 1,600

900 667 Supplies Expense

3,000
Supplies Contributed Capital (5) 120
150 Unearned Revenue 6,000
(6) 160 120 (5) 150
(1a) 150 200 (2b) 120
190
200 6,000 Wage Expense

(7) 200

200

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 c. Trial Balance

B&L Painting
Trial Balance
Accounts Payable Debit Credit
Cash 3,300
Accounts Recievable 1,700
Prepaid Insurance 900
Supplies 190
Paint 950
Ladders 440
Van 3,000
Unearned Revenue 200
Accounts Payable 1,700
Wages Payable 200
Contributed Capital 6,000
Service Revenue 4,300
Cost of Goods Sold 1600
Supplies Expense 120
Wage Expense 200
12,400 12,400

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 d. Statements

B&L Painting
Income Statement

Service Revenue 4,300

Operating Expenses
Cost of Goods Sold 1,600
Supplies Expense 120
Wage Expense 200
Total 1,920

Net Income 2,380

B&L Painting
Balance Sheet
Assets
Current Assets
Cash 3,300
Accounts Receivable 1,700
Prepaid Insurance 900
Supplies 190
Paint 950
Total Current Assets 7,040

Ladders 440
Van 3,000

Total Assets 10,480

Liabilies & Equity

Current Liabilities
Unearned Revenue 200
Accounts Payable 1,700
Wages Payable 200
Total Current Liabilities 2,100

Contributed Capital 6,000

Retained Earnings 2,380

Total Liabilities & Equity 10,480

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