Account Debit Credit Cash 62,000

Intermediate Accounting Mini-Project #1:

STUDENT ROLE: You are a recent accounting graduate and have just been hired by Johnson Accounting Firm as an entry-level accountant. Johnson Accounting is a public accounting firm that provides bookkeeping, accounting, payroll, audit, tax and consulting services to local residents and businesses. Today you have been assigned your first client – Daphne Design, Inc.

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CLIENT PROFILE: Daphne Design, Inc. is a local retail store that sells home furnishings and interior design consulting services. The business sells a wide range of products, including furniture, art, and home décor. Daphne Design, Inc. is a privately held corporation and has one shareholder – Daphne Smith. The company began operations on March 1, 2018, and Ms. Smith has been completing all bookkeeping, accounting and payroll services herself. Daphne first met with your supervisor on September 25, 2018, to inquire about accounting services. As her first business tax year was coming to a close she felt it was important to meet with an accountant. She was not exactly sure what services Johnson Accounting Firm could offer, or what help she needs, but your supervisor conducted a client interview and was able to provide some advice. Johnson Accounting has recommended monthly compilation services (using accrual accounting), payroll and sales tax consultation, and corporate and individual tax return preparation.

ASSIGNMENT: You have been assigned the task of assisting Daphne Design’s in completing appropriate financial statements for the 2018 year. Remember that Daphne was performing her own accounting work through the end of September. Your first task is to correct Ms. Smith’s trial balance as of December 31, 2018.

Below is the trial balance Daphne’s Design submitted:

Accounts Receivable8,350
Prepaid Advertising825
Accumulated Depreciation287
Salaries Payable2,050
Accounts Payable1,000
Sales Revenue42,835
Cost of Goods Sold22,000
Rent Expense7,000
Common Stock30,000
Paid in Capital in Excess of Par74,000
Advertising Expense1,925
Salaries Expense28,700
Utilities Expense1,750
Depreciation Expense287

Once you have corrected the Trial Balance, you need to journalize the closing entries for Daphne Designs and then prepare the Income Statement, Statement of Retained Earnings and the Balance Sheet. You must also calculate the Gross Profit %, Return on Sales, the Current Ratio and the Debt Ratio.

*Adapted from

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