ACC201 - PRINCIPLES OF ACCOUNTING

TRIMESTER 3 2022

GROUP ASSIGNMENT
ACC201 – Principles of Accounting Group Assignment T3.2022

DATE November 20th, 2022

TIME 9:00 am – 12:15 pm
SECTION

• PART A 30 marks

• PART B 30 marks

• PART C 30 marks

• Presentation
• Calculation process 10 marks
• Assignment cover sheet

Important:
• Groups that found copying each other will receive zero for both groups.
• Late submissions will receive minus 20+.

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ACC201 – Principles of Accounting Group Assignment T3.2022

PART A

ABC Company monthly ledger includes the following accounts: Supplies, Supplies expense, Prepaid
Insurance, Insurance Expense, Service Revenue, Unearned Service Revenue, Allowance for Doubtful
Account, Bad debts expense.
The following transactions occurred during the fiscal year:

Supplies:
- On January 1, 2021, the company’s Supplies account reported a cost of $12,000.
- On April 1, the business purchased additional supplies at a cost of $140,000 and recorded these
in the account Supplies Expense. At the end of the year, a physical count indicated that the
supplies on hand had a cost of $15,000.

Insurance:
- On January 1, 2021. The company’s Prepaid Insurance account had a debit balance of $12,340
for a policy that ends on 31 August.
- On August 1, a company obtained its first insurance policy covering its property. The policy is
for one year and it begins immediately on August 1. The insurance premium for this 12-month
period is $2,400 and it was paid on August 1.

Service Revenue:
- On January 1, 2021, the company’s Unearned Service Revenue account had a credit balance of
$128,000. Of this balance, $57,000 is for the services expiring at the end of March and $71,000
is for the services expiring at the end of November.
- On April 1, 2021. The company received $33,000 for the service lasting 11 months.
- On May 1, 2021. The company received $60,000 for the service lasting 3 months.
- On December 1, 2021. The company received $24,000 for the service lasting 12 months.

Allowance for bad debts:

- On January 1, 2021, the company’s Allowance for Doubtful Account has a credit balance of $900
and its aging of Accounts Receivable indicated that $3,000 is not likely to be collected.

Required: For each of the situation listed above

1) Prepare the necessary adjusting entries at December 31, 2021.
2) Open T-accounts and post the transactions directly to the account listed

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ACC201 – Principles of Accounting Group Assignment T3.2022

PART B

Crazy Snowy sells a snowboard, WhiteOut, that is popular with snowboard enthusiasts. Presented below
is information relating to Crazy Snowy’s purchases and sales of WhiteOut snowboards during July.
During the same month, 121 WhiteOut snowboards were sold at $170 each. Crazy Snowy uses a
perpetual inventory system.
Units Cost
Beginning Inventory, Jul 1 10 $120.00
Purchase, Jul 9 40 $125.00
Sale, Jul 12 20
Purchase, Jul 18 50 $130.00
Sale, Jul 19 20
Sale, Jul 21 30
Purchase, Jul 24 40 $132.00
Sale, Jul 30 20

Required:
(a) Compute the ending inventory at July 31 and cost of goods sold using the FIFO, LIFO and
moving average costing methods.
(b) Compare the effects of LIFO, FIFO, and moving average inventory costing methods on the
financial statements in periods of
(i) rising inventory costs AND
(ii) declining inventory costs.
The answer should be lowest, highest, or middle in the format given below:

Financial Statement Element: LIFO FIFO Moving Average

Cost of Goods Sold
Net Income
Ending Inventory

(c) Crazy Snowy is considering which inventory costing method it should use given that the owner
wants to maximize gross profit during this period of inflation. Which inventory method should
Crazy Snowy select? Discuss your selection.

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ACC201 – Principles of Accounting Group Assignment T3.2022

PART C

On May 1st, 2020, Design Factory Co. purchased a new machine at $128,000 with credit term of 2/10,
n/30. The company was given 10% trade discount for being a loyalty customer. Design Factory Co. also
paid for the following cost: delivery charge from seller’s allocation $1,600, sales tax $8,100, cost of test
run $2,900, training cost for workers who will operate the machine $1,800, normal repair $950 for the
machine in May 2020, insurance cost $4,500, extended warrantly taken out on the machine $5,700. The
company made their payment within a discounted period. The machine has a useful life of 6 years and a
salvage value of $4,400. Assuming the fiscal year ended at December 31st.

Required:
1) Compute the cost of the machine. Prepare journal entry to record the purchase.
2) Prepare the depreciation schedule to record depreciation expense during 6 years under:
a. Straight-line method
b. Double declining balance method
3) Prepare journal entry for the below transaction, using straight-line method:
a. Assuming Design Factory sold the machine on October 31,2024 for $30,050.
b. After 6 years, the company received $8,000 book value on the retirement of the machine.

THE END

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