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Foundations of Accounting I
Accounting Project
Written by: Karen Pitsch
David’s Entertainment is a merchandising business. Their account balances as of November 30, 2012 (unless otherwise indicated), are as follows:
110
Cash
$ 73,920
112
Accounts Receivable
34,250
113
Allowance for Doubtful Accounts
11,000
115
Merchandise Inventory
123,900
116
Prepaid Insurance
3,750
117
Store Supplies
2,850
123
Store Equipment
100,800
124
Accumulated Depreciation-Store Equipment
20,160
210
Accounts Payable
21,450
211
Salaries Payable
0
218
Interest Payable
0
220
Note Payable (Due 2017)
15,000
310
D. Williams, Capital (January 1, 2012)
73,260
311
D. Williams, Drawing
50,000
312
Income Summary
0
410
Sales
853,445
411
Sales Returns and Allowances
20,020
412
Sales Discounts
13,200
510
Cost of Merchandise Sold
414,575
520
Sales Salaries Expense
74,400
521
Advertising Expense
18,000
522
Depreciation Expense
0
523
Store Supplies Expense
0
529
Miscellaneous Selling Expense
2,800
530
Office Salaries Expense
40,500
531
Rent Expense
18,600
532
Insurance Expense
0
533
Bad Debt Expense
0
539
Miscellaneous Administrative Expense
1,650
550
Interest Expense
1,100
David’s Entertainment uses the perpetual inventory system and the First-in, First-out costing method. Transportation-in and purchase discounts should be added to the Inventory Control Sheet, but since this will complicate the computation of the First-in, First-out costing method, please ignore this step in the process. They also use the Allowance Method for bad debt.
The Accounts Receivable and Accounts Payable Subsidiary Ledgers along with the Inventory Control Sheet should be updated as each transaction affects them (daily).
David’s Entertainment sells four types of television entertainment units.
The sale prices of each are:
TV A: $3,500
TV B: $5,250
TV C: $6,125
PS D: $9,000
During December, the last month of the accounting year, the following transactions were completed:
Dec.
1. Issued check number 2632 for the December rent, $2,600.
3. Purchased three TV C units on account from Prince Co., terms 2/10, n/30, FOB shipping point, $11,100.
4. Issued check number 2633 to pay the transportation changes on purchase of December 3, $400. (NOTE: Do not include shipping and purchase discounts to the Inventory Control sheet for this project.)
6. Sold four TV A and four TV B on account to Albert Co., invoice 891,
terms 2/10, n/30, FOB shipping point.
10. Sold two projector systems for cash.
11. Purchased store supplies on account from Matt Co., terms n/30, $580.
13. Issued check to Prince Co. number 2634 for the full amount due, less discount allowed.
14. Issued credit memo for one TV A unit returned on sale of December 6.
15. Issued check number 2635 for advertising expense for last half of December, $1,500.
16. Received cash from Albert Co. for the full amount due (less return of December 14 and discount).
19. Issued check number 2636 to buy two TV C units, $7,600.
19. Issued check number 2637 for $6,100 to Joseph Co. on account.
20. Sold five TV C units on account to Cameron Co., invoice number
892, terms 1/10, n/30, FOB shipping point.
20. For the convenience of the customer, issued check number 2638 for shipping charges on sale of December 20, $700.
21. Received $12,250 cash from McKenzie Co. on account, no discount.
21. Purchased three projector systems on account from Elisha Co., terms 1/10, n/30, FOB destination, $15,600.
24. Received notification that Marie Co. has been granted bankruptcy with no
amount of recovery. We are to write-off her amount due. (Note: See page
402 for entry required.)
25. Issued a debit memo for return of $5,200 because of a damaged projection
system purchased on December 21, receiving credit from the seller.
26. Issued check number 2639 for refund of cash on sales made for cash, $600. (Customer was going to return goods until an allowance was arranged.)
27. Issued check number 2640 for sales salaries of $1,750 and office
salaries of $950.
28. Purchased store equipment on account from Matt Co., terms n/30, FOB
destination, $1,200.
29. Issued check number 2641 for store supplies, $470.
30. Sold four TV C units on account to Randall Co., invoice number 893,
terms 2/10, n/30, FOB shipping point.
30. Received cash from sale of December 20, less discount, plus transportation
paid on December 20. (Round calculations to the nearest dollar.)
30. Issued check number 2642 for purchase of December 21, less return
of December 25 and discount.
30. Issued a debit memo for $300 of the purchase returned from
December 28.
——————————————————————————————————
Check Figures for Accounting Project:
Cash Receipts Journal; Cash Column: 97,939
Unadjusted Trial Balance Total: 1,080,620
Net Income: 264,350
Post-Closing Trial Balance: 347,490
——————————————————————————————————————
Instructions:
1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account (General Ledger). Write Balance in the item section, and place a check mark (x) in the Post Reference column.
2. Journalize the transactions in a sales journal, purchases journal, cash receipts journal, cash payments journal, or general journal as illustrated in chapter 7. Also post to the Accounts Receivable and Accounts Payable Subsidiary ledgers and Inventory Control Sheet as needed.
3. Total each column on the special journals and prove the journal.
4. Post the totals of the account named columns and individually post the “other” columns as well to the General Ledger.
5. Prepare the Schedule of Accounts Receivable and the Schedule of Accounts Payable (their total amount must equal the amount in their controlling general ledger account).
6. Prepare the unadjusted trial balance on the worksheet.
7. Complete the worksheet for the year ended December 31, 2012, using the following adjustment data:
a. Merchandise inventory on December 31
$90,800
b. Insurance expired during the year
1,250
c. Store supplies on hand on December 31
975
d. Depreciation for the current year needs to be calculated. The business uses
the Straight-line method, the store equipment has a useful life of 10 years
with no salvage value. (NOTE: the purchase and return will not be included
as the dates of the transactions were after the 15th of the month).
e. Accrued salaries on December 31:
Sales salaries
$1,400
Office salaries
760
2,160
f. The note payable terms are at 8%, payment is not being made until Jan. 3, 2013. Interest must be recognized for one month.
g. Net realizable value of Accounts Receivable is determined to be $27,950.
8. Prepare a multiple-step income statement, a statement of owner’s equity, and a
classified balance sheet in good form. (Recommend review of “Current Liabilities” on pages 166 & 167 and “Current Maturities of Long-term Debt” on page 480.)
9. Journalize and post the adjusting entries.
10. Journalize and post the closing entries. Indicate closed accounts by inserting a line
in both balance columns opposite the closing entry.
11. Prepare a post-closing trial balance.
