Financial Accounting I Comprehensive Problem

After your last final this quarter you meet a student with whom you graduated high school. You get to talking and find she is graduating this quarter in digital design. When she finds out you have just finished financial accounting I she asks if you will help set up and keep the books for her new company, Jessi’s Creative Design. Accounting was not included as part of Jessi’s program and she really needs some help. You did very well in financial accounting I and agree to get her started. Jessi will hire a CPA to file all tax forms and apply with the IRS for a tax ID number. You will keep the books and monthly send them to the CPA. The first step is to create a chart of accounts. Number your account categories-assets 100, liabilities 200, stockholders’ equity 300, revenue 400, and expense 500. Next, number the accounts within the categories. Be sure to leave numbers open for when you need to add accounts. Use the following accounts in your chart of accounts: • • • • • • • • Cash Accounts receivable Equipment Prepaid subscriptions Supplies Accumulated depreciationequipment Prepaid advertising Accounts Payable • • • • • • • • • Unearned revenue Common stock Retained earnings Dividends Sales Advertising expense Supplies expense Photo expense Depreciation expense

After Creative Design’s first month of operations your friend delivers to you a stack of invoices, check stubs, receipts and her first VISA-Business bill. You must decipher these in order to enter them into the accounts. After sorting through the source documents you make a list of transactions for the first month, April: 1. Jessi invested her life savings in the company $10,000. 2. Jessi purchased from Best Buy a computer and printer/ fax/ copier and monitor and software for $3500. She got a 12 month no interest credit arrangement and will make monthly payments