Foundations of Accounting I Accounting Project Written by: Karen Pitsch Special thanks to Donna Larner andiddle !

o" is a #erchandising business" $heir account balances as of %o&e#ber '() *(+* ,unless other-ise indicated.) are as follo-s: ++( ++* ++' ++4 ++2 ++0 +*' +*1 *+( *++ *+3 **( '+( '++ '+* 1+( 1++ 1+* 4+( 4*( 4*+ 4** 4*' 4*: 4'( 4'+ 4'* 4'' 4': 44( !ash Accounts ecei&able Allo-ance for Doubtful Accounts 5erchandise In&entory Prepaid Insurance Store Supplies Store 67uip#ent Accu#ulated Depreciation8Store 67uip#ent Accounts Payable Salaries Payable Interest Payable %ote Payable ,Due *(+0. ,/2)((( to be paid in *(+'. andiddle) !apital ,9anuary +) *(+*. andiddle) Withdra-als Inco#e Su##ary Sales Sales eturns and Allo-ances Sales Discounts !ost of ;oods Sold Sales Salaries 6<pense Ad&ertising 6<pense Depreciation 6<pense Store Supplies 6<pense 5iscellaneous Selling 6<pense =ffice Salaries 6<pense ent 6<pense Insurance 6<pense >ad Debt 6<pense 5iscellaneous Ad#inistrati&e 6<pense Interest 6<pense / 01)'0( 2)+03 24( *)'12 4)04( *)34( +(()3(( '+)(2( ')*32 ( ( '()((( 12)*33 2()((( ( *:2)+'( +()(*( 0)*(( '()*4( '1)1(( +3)((( ( ( *)3(( *4)4(( *1)*(( ( ( +)24( +)+((

andiddle !o" uses the perpetual in&entory syste# and the Last8in) First8out costing #ethod" $ransportation8in and purchase discounts should be added to the In&entory !ontrol Sheet) but since this -ill co#plicate the co#putation of the Last8in) First8out costing #ethod) please ignore this step in the process" $hey also use the Allo-ance 5ethod for bad debt" $he Accounts ecei&able and Accounts Payable Subsidiary Ledgers along -ith the In&entory !ontrol Sheet should be updated as each transaction affects the# ,daily."

andiddle !o" sells three types of #icro-a&e o&ens" $he sale prices of each are: :(( -att #icro-a&e: /+:: +((( -att #icro-a&e: /*:: +*(( -att #icro-a&e: /1:: During Dece#ber) the last #onth of the accounting year) the follo-ing transactions -ere co#pleted: Dec" +" Issued check nu#ber *2'* for the Dece#ber rent) /*)*((" *" Sold t-o +*(( -att #icro-a&es for cash" 1" Purchased four +((( -att #icro-a&es on account fro# 5att !o") ter#s *?+() n?'() F=> shipping point) /4:2" 4" Issued check nu#ber *2'' to pay the transportation charges on purchase of Dece#ber 1) /3:" ,%=$6: Debit 5erchandise In&entory" Do not include shipping and purchase discounts to the In&entory !ontrol sheet for this project". 2" Sold si< +((( -att #icro-a&es and four +*(( -att #icro-a&es on account to >riana !o") in&oice 3:+) ter#s *?+() n?'() F=> shipping point" 3" Issued check nu#ber *2'1 for refund of cash on sales #ade for cash) /+4(" ,!usto#er -as going to return goods until an allo-ance -as arranged". +(" Purchased store supplies on account fro# Prince !o") ter#s n?'() /'+(" +(" Issued check to 5att !o" nu#ber *2'4 for the full a#ount due) less discount allo-ed" , ound discount to nearest dollar". ++" Paid Prince !o" full a#ount due) check nu#ber *2'2" +*" Issued credit #e#o for one +((( -att #icro-a&e returned on sale of Dece#ber 2" ,%=$6: Assu#e the returned #icro-a&e -as fro# the ++?'( in&entory. +'" Issued check nu#ber *2'0 for ad&ertising e<pense for last half of Dece#ber) /')(((" +1" ecei&ed cash fro# >riana !o" for the full a#ount due ,less return of Dece#ber +* and discount@ round to nearest dollar." +:" Issued check nu#ber *2'3 to buy fi&e :(( -att #icro-a&es) /1:4" +:" Issued check nu#ber *2': for /4:2 to 9oseph !o" on account" *(" Sold se&en :(( -att #icro-a&es on account to !a#eron !o") in&oice nu#ber 3:*) ter#s +?+() n?'() F=> shipping point" *(" $o e<pedite sale on Dec" *() issued check nu#ber *21( for shipping charges on sale to !a#eron on Dece#ber *() /+*( ,%=$6: !a#eron !o" -ill be rei#bursing us for this shipping cost." *+" ecei&ed /+)':2 cash fro# 5cKenAie !o" on account) no discount" *+" Purchased three +*(( -att #icro-a&es on account fro# 6lisha !o") ter#s +?+() n?'() F=> shipping point) /010) shipping /03 ,%=$6: Debit 5erchandise In&entory /3*4) but only put /010 in the In&entory !ontrol Sheet." *1" ecei&ed notification that 5arie !o" has been granted bankruptcy -ith no a#ount of reco&ery" We are to -rite8off her a#ount due" ,%ote: See page '24 for entry re7uired". *2" Issued a debit #e#o for return of /*1: because of da#age to one +*(( -att #icro-a&e purchased on Dece#ber *+) recei&ing credit fro# the seller"

*0" Issued check nu#ber *21+ for sales salaries of /*)(4( and office salaries of /+)1((" *3" Purchased store e7uip#ent on account fro# 9oseph !o") ter#s n?'() F=> destination) /+)*((" *:" Issued check nu#ber *21* for store supplies) /0(" *:" Purchased se&en +((( -att #icro-a&e fro# Prince !o) ter#s +?+() n?'() F=> shipping point) for /+)++' on account) shipping /+(0" '(" Sold eight +((( -att #icro-a&es on account to >riana !o") in&oice nu#ber 3:') ter#s *?+() n?'() F=> shipping point" '(" ecei&ed cash fro# sale of Dece#ber *() less discount) plus transportation paid on Dece#ber *(" , ound calculations to the nearest dollar". '+" Issued check nu#ber *21' for purchase of Dece#ber *+) less return of Dece#ber *4 and discount" , ound discount to the nearest dollar". '+" Issued a debit #e#o for /*(( of the purchase returned fro# Dece#ber *3" Instructions: +" 6nter the balances of each of the accounts in the appropriate balance colu#n of the ;eneral Ledger ,>8S and I8S Ledger." Write >alance in the ite# section) and place a ,<. in the Post eference colu#n" *" 9ournaliAe the transactions in a sales journal) purchases journal) cash receipts journal) cash pay#ents journal) or general journal as illustrated in chapter 0" Also post to the Accounts ecei&able and Accounts Payable Subsidiary ledgers and In&entory !ontrol Sheet as needed" '" $otal each colu#n on the special journals and pro&e the journals" 1" Post the totals of the account na#ed colu#ns and indi&idually post the B=ther AccountsC colu#ns as -ell to the ;eneral Ledger" 4" Prepare the Schedule of Accounts ecei&able and the Schedule of Accounts Payable ,their total a#ount #ust e7ual the a#ount in their controlling general ledger account." 2" Prepare the unadjusted trial balance on the -orksheet" 0" !o#plete the -orksheet for the year ended Dece#ber '+) *(+*) using the follo-ing adjust#ent data: a" 5erchandise in&entory on Dece#ber '+ /+)(:( b" Insurance e<pired during the year *)*4( c" Store supplies on hand on Dece#ber '+ 34( d" Depreciation for the current year needs to be calculated" $he business uses the Straight8line #ethod) the store e7uip#ent has a useful life of +( years -ith no sal&age &alue" ,%=$6: the purchase and return -ill not be included as the dates of the transactions -ere after the +4 th of the #onth." e" Accrued salaries on Dece#ber '+: Sales salaries /+)(04 =ffice salaries 41( /+)2+4 f" $he note payable ter#s are at 3D) pay#ent is not being #ade until 9an" ') *(+'" Interest #ust be recogniAed for one #onth" g" !alculate the >ad Debt adjust#ent a#ount@ net realiAable &alue of Accounts ecei&able is deter#ined to be /2)'+'" 3" Prepare a #ultiple8step inco#e state#ent) a state#ent of o-nerEs e7uity) and a classified balance sheet in good for#" , eco##end re&ie- of B!urrent LiabilitiesC on page +1:".

:" 9ournaliAe and post the adjusting entries" +(" 9ournaliAe and post the closing entries" Indicate closed accounts by inserting a Aero in both balance colu#ns opposite the closing entry" ++" Prepare a post8closing trial balance"

Check Figures for Accounting Project: Cash Receipts Journal; Cash Column: 7,3 ! "na#juste# $rial %alance $otal: ! &, ' (et Income: ),!!) Post Closing $rial %alance: ' ,)7*