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Financial Accounting - Tuck

Mary Lous Case

Required:

Prepare T- accounts to record the transactions Mary Lou's entered into in June 2006.

Present the income statement for Mary Lou's for June 2006.

Present also the balance sheet as of June 30, 2006.

Ignore income taxes.

Mary Lou's Educational Services provides accounting tutoring to companies located in or near Erie,
Pennsylvania. The balance sheet for the firm as of 5/31/2006 is listed below:
ASSETS
Cash
Accounts Receivable
Supplies Inventory
Equipment
Accumulated Dep.

$25,000
86,000
23,000
100,000
(18,000)
$216,000

LIABILITIES AND EQUITIES


Accounts Payable
$9,000
Interest Payable
5,000
Bond Payable
100,000
Common Stock
10,000
Add. Paid in Cap.
60,000
Retained Earnings
32,000
$216,000

_________________________________________________________________________________________________________________________

Tuck School of Business at Dartmouth


Robert J. Resutek

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Financial Accounting - Tuck

Mary Lous Case

Transactions for the month of June and additional information are as follows:

1.

For new customers, Mary Lou's makes the customer pay in advance for services. For
established customers, the firm allows customers to pay after the services have been
provided (that is, all services rendered to established customers can be viewed as "credit
sales"). In June, Mary Lou's billed established customers for $200,000, all for tutorial
services provided in June. The balance in the Accounts Receivable account shown above
applies to amounts previously billed to established customers. Total payments on account
from established customers were $220,000 in June.

2.

On June 1, Mary Lou's signed a contract to do tutorial work for Cantaloupe Bancorp. of
Erie. The contract stipulated that $98,000 was to be paid for one year's worth of tutoring.
Because Cantaloupe was a new customer, the contract stipulated that Cantaloupe had to pay
for six month's tutoring in advance. Cantaloupe therefore paid $49,000 to Mary Lou's on
June 1. During June, Mary Lou's provided one month's worth of tutoring, per the terms of
the contract.

3.

Salaries earned by Mary Lou's tutors in June were $140,000, of which $23,000 were unpaid
as of June 30th.

4.

Mary Lou's purchased supplies, all on account, during June. Mary Lou's paid suppliers
$63,000 during June. The Accounts Payable account shown above shows the balance due to
suppliers as of June 1. At June 30th, $4,000 was owed to suppliers. A physical count of the
supplies inventory revealed that $22,000 of inventory was on hand.

5.

The balance in the Interest Payable account relates to the Bond Payable shown on the
balance sheet. Interest on the bond is paid each June 30th and December 30th.

6.

The equipment is being depreciated at the rate of $1,000 per month.

7.

Mary Lou's declared a dividend of $5,000 in June. The dividend was to be paid July 10th.

_________________________________________________________________________________________________________________________

Tuck School of Business at Dartmouth


Robert J. Resutek

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