Points) Also complete a reconciliation.
Mr. Madoff decides to form an animal shelter for dogs and cats. On May 1, (the Happiest day in my mom's life), he made the following transactions:
1. On 5/1, he invested $350,000.00 of his own funds to form
Redemption Services, LLC. He also borrows $100,000.00 from Chase
Bank and he deposits the cash into the business. He deposits all of the funds into the First Redemption Bank.
2. On 5/1, he paid $9,600.00 for insurance for 12 months.
5/1, he paid $21,000 for a security system on Account. The equipment has a 3 year useful life and a salvage value of $3,000.00. In addition, it costs $500.00 per month for the monitoring service.
4. On 5/2, he paid $3,000.00 for rent for the month. 5. On 5/3, he paid $1,500.00 for dog and cat food. 6. On 5/5, he bought
$2,450.00 of pet supplies on Account. 7. On 5/10, he transfers $75,000.00 to Pope Francis Bank.
8. On 5/12, he transfers $1,000.00 to form a petty cash
9. On 5/14, he paid out $2,500.00 in wages to his employees. Employees are paid every two weeks.
10. On 5/15, his grand opening produced cash fees and contributions totaling $7,500.00 for professional services. In addition, he has sales of $2,500.00 placed with customer's Visa accounts. He will not collect payment from Visa for 15 days.
11. On May 19, he bought $3,800.00 of pet supplies on
Account and he bought $1,000.00 of supplies that he
decides to expense.
12. On 5/20, he held a pet sale. The cash register daily
receipt totaled $2,600.00, but the cash received was $2,800.00.
13. On 5/22, he purchases the building for $300,000.00. He borrows
$240,000.00 from First Redemption Bank and uses $60,000.00 of company cash. The building has a useful life of 20 years
with salvage value of $60,000.00.
14. On 5/23, he borrowers $5,000.00 in cash from his
MasterCard Account for additional capital.
15. On 5/28, he paid out $2,500.00 in wages to his employees.
16. On 5/29, he holds a pet training class and receives professional fees of $2,000.00, $1,500.00 in cash, with the remaining being billed.
17. On 5/30, he took an inventory of his pet food and supplies. The total of supplies remaining was $2,250.00
18. On 5/30, he buys pizza for his employees for $750.00 taken from petty cash.
19. On 5/30, he pays himself a salary of $2,000.00. 20. On
5/30, he receives $500.00 from Visa.
21. On 5/31, he makes a cash donation of $2,000.00 to the First Redemption Church.
22. On 5/31, he receives $250.00 for fees previously billed.
Perform the following tasks for the month of May:
1) Journalize each transaction. 2) Prepare
T-Accounts for each Account. 3) Make all adjusting entries. 4) Prepare an Income Statement. 5) Prepare a Statement of Owners Equity. 6) Prepare a Balance Sheet.
Perform the following reconciliation:
Bank Statement Balance: $17,965.00 Check
Book Balance:
$19,058.00 Deposits in Transit: $1,860.00, $677.00, $1,175.00, Outstanding Checks: $550.00, $625.00, $487.00, $717.00 Bank Fees:
$55.00 and 25.00 Bank
Credit Memo
Bank Debit Memo
$80.00 Recording Error:
Check recorded in checkbook for $51.00 but was written for $151.00.
How would you handle these events in compliance with
rules for attorney's trust and business accounts?
1. Ed Farmer, Esq. receives his professional fees from the lender of $4,500.00 for a commercial real estate closing. He instructs you to endorse this check over to his ex-wife for back alimony.
2. While reconciling your trust account, you notice an unidentified wire for $100,000.00 from Wells Fargo into the account for a closing that was delayed. The closing has not been rescheduled.
3. At a real estate closing in your office, a final adjustment is made for condominium fees leaving your client short funds of $5,525.00. He writes a personal check to your firm for the shortage from his bank account, which
is the same bank that has your trust account.
4. You order new checks for your trust account. Your bank charges your trust account a fee of $125.00.
5. At 12/31, you are advised to get rid of all prior year bank records and statements.
Mr. Connelly retains your services for the purchase of a building where is bakery is located. The purchase price of the building is $935,000.00. He decides to borrow
$650,000.00 from Washington Savings Bank. On August 1, the day of closing, the following transactions are made:
1. The bank chares a commitment fee of 9,350.00. 2. The bank charges an appraisal fee of $2,850.00.
3. The bank charges prepaid interest in the form of a mortgage point of $9,350.00.
4. The bank charges an inspection fee of $1,250.00. 5. The bank charges a tax service fee of $280.00.
5. The bank charges an escrow of $8,945.00 for taxes and
6. The bank charges the first year insurance premium of
7. The bank gives the Buyer a credit for one-half of
the appraisal fee of $1,425.00 for an application fee.
8. The bank charges $2,550.00 for their attorney fee. 9. Your office pays the following: – Open Mortgage to Citi for $534,667.00.
– Open Lien to Ed Jones, his former partner for $150,000.00.
– Real Estate Commissions for $56, 100.00. – Realty Transfer Tax
for $8,125.00
Title Insurance Fee for $4,330.00. Survey Fee for $2,550.00. Seller's attorney for $4,250.00.
Your fee of $5,525.00. – Recording Fees of $450.00.
– Real estate taxes for the third quarter taxes are paid by the buyer of $6,930.00.
– You make an adjustment for the Buyer for
fourth quarter taxes of $2,310.00. – Seller's proceeds of $179,548.00.
Using T-Accounts, determine the following:
1) Net loan proceeds received from the bank. 2) Funds required by the Buyer to complete the transaction.
You are the paralegal in a small matrimonial firm, consisting of the firm's attorney, you, and a secretary. The attorney is stuck in
Court on a post-judgment motion. The attorney asks you to conduct the initial interview for a party seeking a divorce. He asks that you put together a list of marital assets and liabilities that require a valuation. He asks that you focus on the marital assets and liabilities. What assets and liabilities are you most concerned with and what questions would you ask the client? Hint: Think of your trial balance.
Chrissy Sweets is a small business owner and is seeking financing to expand his business. He presents the balance sheet for his company and asks your thoughts. What comments or questions would you present?
Chrissy Sweets, LLC
Balance Sheet
Cash A/R
M/ P
Owner's Equity


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