Professional Documents
Culture Documents
ACC101
Group Assignment Guideline (20%)
A. Group Formation
- Group of 5-6 students, less than 4 or more than 6 students per group will lead to a deduction of 20% group
mark.
B. Assessment Criteria
2. Brief Introduction
5. Report must be typed and 1.5 lines with 12-point font. The submission will be in PDF form.
7. The report must be submitted together with A Cover Sheet and Team Evaluation Form
8. All detailed calculations should be attached in appendices to your report, and are not included in the word
limit.
10. The report must be proof-read to minimize grammar and vocabulary errors.
▪ You must identify the most appropriate literature for your discussion supported by relevant reference sources.
Sources in the report must be supported by both in-text reference and bibliography at the end of the text in
Harvard Reference Style. More to be found at: https://www.open.ac.uk/library/referencing-and-
plagiarism/quick-guide-to-harvard-referencing-cite-them-right
▪ Academic journals are encouraged. Websites are not considered proper academic references.
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- An edited volume by a reputable source (such as Academic Press, MIT Press, and others), or is written by a
major expert in the field
- Online encyclopedias such as Wikipedia, social feeds or personal blogs ARE NOT an acceptable source
C. Assessment Questions
Topic Contents
Topic 1: Adjusting Accounts and Preparing Financial Statements (Chapter 1-3) ..........................3
Topic 2: Adjusted TB to Completing the Accounting Cycle (Chapter 1-4) ......................................6
Topic 3: Merchandising journal entries (Chapter 5) .........................................................................9
Topic 4: Cash, Accounting Inventories (Chapter 6, 8) ....................................................................12
Topic 5: Receivable and Plant (Chapter 8,9,10) ..............................................................................14
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Topic 1: Adjusting Accounts and Preparing Financial Statements (Chapter 1-3)
On October 1, 2021, Harvey Ross (H. Ross) launched a computer services company called Pearson Solutions,
which provides consulting services, computer system installations, and custom program development. Ross
adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial
statements on December 31, 2021. The company’s initial chart of accounts follows.
Oct. 1 H. Ross invested $65,000 cash, a $25,000 computer system, and $10,000 of office equipment in the
company.
2 The company paid $4,800 cash for four months’ rent in advance.
3 The company purchased $1,620 of computer supplies on credit from 3M Office Products.
5 The company paid $2,350 cash for one year’s premium on a property and liability insurance
policy.
6 The company billed Kexim Leasing $5,800 for services performed in installing a new web server.
8 The company paid $1,620 cash for the computer supplies purchased from 3M Office Products on October 3.
10 The company hired Donna Zane as a part-time assistant for $135 per day, as needed.
12 The company billed Kexim Leasing another $1,700 for services performed.
15 The company received $5,800 cash from Kexim Leasing as partial payment on its account.
31 The company paid $945 cash for Donna Zane’s wages for seven days’ work.
Nov
1 The company paid $905 cash to repair computer equipment that was damaged when moving it.
3 The company received $1,700 cash from Kexim Leasing on its account.
5 The company paid $1,823 cash for advertisements published in the local newspaper.
15 Pearson Solutions agreed to do a special four-month service contract (starting immediately) for a Louis LLC.
The contract calls for a monthly fee of $1,500, and the client paid the first three months’ fees in advance. When
the cash was received, the Unearned Service Fees account was credited.
22 The company donated $300 cash to the Save The Children in the company’s name.
28 The company billed HUT Company $5,210 for services performed.
29 The company reimbursed H. Ross in cash for business automobile mileage allowance (Ross
logged 1,000 miles at $0.42 per mile).
31 H. Ross withdrew $3,900 cash from the company for personal use.
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Dec.
1 The company received $5,673 cash from Liu Corporation for computer services performed.
4 The company purchased computer supplies for $1,725 cash from 3M Office Products.
8 The company billed Newton Co. $6,778 for services performed.
13 The company received notification from Witney’s Engineering Co. that Pearson Solutions bid of
$5,550 for an upcoming project is accepted.
18 The company received $5,210 cash from HUT Company as partial payment of the November 28 bill.
24 The company completed work for Witney’s Engineering Co. and sent it a bill for $5,550.
25 The company sent another bill to HUT Company for the past-due amount of $3,000.
26 The company reimbursed H. Ross in cash for business automobile mileage (1,200 miles at $0.42
per mile).
27 The company paid $1,890 cash for Donna Zane’s wages for 14 days’ work.
30 H. Ross withdrew $3,000 cash from the company for personal use.
REPORT REQUIREMENTS:
1. Prepare journal entries to record each of the following transactions for Pearson Solutions.
2. Open ledger accounts (in balance column format) and post the journal entries from part 1 to them.
4. The following additional facts are collected for use in making adjusting entries prior to preparing
financial statements for the company’s first three months:
a. The December 31 inventory count of computer supplies shows $580 still available.
b. Two months have expired since the 12-month insurance premium was paid in advance.
c. As of December 31, Donna Zane has not been paid for four days of work at $135 per day.
d. The computer system, acquired on Oct 1, is expected to have a four-year life with no salvage value.
e. The office equipment, acquired on Oct 1, is expected to have a five-year life with no salvage value.
g. The unearned services fee for Louis LLC. must be adjusted to reflected the services days passing until 31
December 2021
Prepare adjusting entries to reflect a through f. Post those entries to the accounts in the ledger.
- Income statement for the three months ended December 31, 2021.
- Statement of owner’s equity for the three months ended December 31, 2021.
PRESENTATION QUESTIONS:
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1. Why is the accrual basis of accounting generally preferred over the cash basis?
2. Which accounts are generally required for adjustment before annual financial statements can be
prepared? Illustrate with examples from your case study above
3. Describe the adjusting entries associate with the accounts in (2) respectively? Illustrate with examples
from your case study above
4. Describe financial statement preparation processes. What information are covered in each report. Illustrate
with examples from your case study above
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Topic 2: Adjusted TB to Completing the Accounting Cycle (Chapter 1-4)
The following unadjusted trial balance is for Harvey Energy Company (HE) as of the end of its November 30, 2021.
Nick Yong is the owner of the company. Fiscal year 2021 ends at 31 December 2021.
Harvey Energy Company had the following transactions and events in December 2021.
Dec. 3 Paid $500 cash for minor repairs to the company’s computer.
4 Received $2,711 cash from Beta’s Engineering Co. for the receivable from November.
10 Paid cash to Donna Zane (an employee) for six days of work at the rate of $135 per day.
15 Harvey Energy agreed to do a special six-month service contract (starting immediately) for a Lee Sang
LLC. The contract calls for a monthly fee of $1,200, and the client paid the first four months’ fees in advance.
16 Purchased $1,100 of computer supplies on credit from 3M Office Products.
17 Sent a reminder to Gomez Co. to pay $1,500 fee for services recorded in account receivable.
20 Completed a project for Chow Corporation and received $5,625 cash.
22–26 Took the week off for the holidays.
28 Received $3,800 cash from Kow Lin Co. on its receivable.
29 Reimbursed N. Yong for business automobile mileage (600 miles at $0.52 per mile).
31 N. Yong withdrew $7,000 cash from the company for personal use.
REPORT REQUIREMENTS:
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1. Prepare and complete a 10-column work sheet for fiscal year 2021, starting with the unadjusted trial
balance and including adjustments based on these additional facts.
a. The supplies available at the end of fiscal year 2021 had a cost of $6,900.
b. The cost of expired insurance for the fiscal year is $9,600.
c. Annual depreciation on equipment is $6,000.
d. The April utilities expense of $800 is not included in the unadjusted trial balance because the bill
arrived after the trial balance was prepared. The $800 amount owed needs to be recorded.
e. The company’s employees have earned $2,000 of accrued wages at fiscal year-end.
f. The rent expense incurred and not yet paid or recorded at fiscal year-end is $3,000.
g. Additional property taxes of $550 have been assessed for this fiscal year but have not been paid or recorded
in the accounts.
h. The long-term note payable bears interest at 12% per year. The unadjusted Interest Expense account equals
the amount paid for the first 11 months of the 2021 fiscal year. The $300 accrued interest for December has not
yet been paid or recorded. (Note that the company is required to make a $10,000 payment toward the note
payable during the 2022 fiscal year.)
i. The unearned services fee for Lee Sang LLC. must be adjusted to reflected the services days passing until 31
December 2021
k. On Feb 15, Harvey Energy agreed to perform a demolition service (beginning immediately) for ANX Company
for $1,400 fee per month payable when work is completed. The work started on Feb 15, but no payment has yet
been received. (Harvey Energy’s accruals are applied to the nearest half-month; for example, a period from Feb
15 to Feb 28 is recognized as one-half month accrual.)
2. Using information from the completed 10-column work sheet in part 1, journalize the adjusting entries
and the closing entries.
3. Prepare financial statements:
- Income statement for the three months ended April 30, 2020.
- Statement of owner’s equity for the three months ended April 30, 2020.
- Balance sheet as of April 30, 2020.
4. Analyze the following separate errors and describe how each would affect the 10-column work sheet.
Explain whether the error is likely to be discovered in completing the work sheet and, if not, the effect
of the error on the financial statements.
a. Assume the adjusting entry to reflect expiration of insurance coverage for the period was recorded with a
$2,000 credit to Prepaid Insurance and a $2,000 debit to Insurance Expense. The adjustment should have
been for $9,600.
b. When the adjusted trial balance in the work sheet was completed, assume that the $4,700 Repairs Expense
account balance is extended to the Debit column of the balance sheet columns.
PRESENTATION QUESTIONS:
1. Which accounts are generally required for adjustment before annual financial statements can be
prepared? Illustrate with examples from your case study above
2. Describe the adjusting entries associate with the accounts in (2) respectively? Illustrate with examples
from your case study above
3. Describe financial statement preparation processes. What information are covered in each report.
Illustrate with examples from your case study above
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4. What are the steps in recording closing entries? What accounts are affected by closing entries? What accounts
are not affected? Illustrate with examples from your case study above
5. Analyze the following separate errors and describe how each would affect the 10-column work sheet. Explain
whether the error is likely to be discovered in completing the work sheet and, if not, the effect of the error on
the financial statements.
a. Assume the adjusting entry to reflect expiration of insurance coverage for the period was recorded with a
$2,000 credit to Prepaid Insurance and a $2,000 debit to Insurance Expense. The adjustment should have
been for $9,600.
b. When the adjusted trial balance in the work sheet was completed, assume that the $4,700 Repairs Expense
account balance is extended to the Debit column of the balance sheet columns.
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Topic 3: Merchandising journal entries (Chapter 5)
Rachel Chen created Acute Solutions on October 1, 2019. The company has been successful, and its list of customers
has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each
customer. The following chart of accounts includes the account number used for each account and any balance as
of December 31, 2020. Rachel Chen decided to add sub-account to 106 main account Accounts Receivable account.
This change allows the company to continue using the existing chart of accounts.
In response to requests from customers, R. Chen will begin selling computer software. The company will extend
credit terms of 1/10, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash
discount is available on consulting fees. Additional accounts (Nos.119, 413, 414, 415, and 502) are added to its
general ledger to accommodate the company’s new merchandising activities. Also, Acute Solutions does not use
reversing entries and, therefore, all revenue and expense accounts have zero beginning balances as of January
1, 2021. Its transactions for January through March follow:
Jan. 4 The company paid cash to Donna Zane for five days’ work at the rate of $135 per day. Four of the five
days relate to wages payable that were accrued in the prior year.
5 R. Chen invested an additional $27,000 cash in the company.
7 The company purchased $7,800 of merchandise from Texas Corp. with terms of 1/10, n/30, FOB shipping
point, invoice dated January 7.
9 The company received $2,778 cash from Gomez Co. as full payment on its account.
11 The company completed a five-day project for Cloe’s Engineering Co. and billed it $7,500,
which is the total price of $9,000 less the advance payment of $1,500 (in account 236).
13 The company sold merchandise with a retail value of $5,370 and a cost of $4,560 to Liu Corp., invoice
dated January 13.
15 The company paid $600 cash for freight charges on the merchandise purchased on January 7.
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16 The company received $4,000 cash from Delta Co. for computer services provided.
17 The company paid Texas Corp. for the invoice dated January 7, net of the discount.
20 Liu Corp. returned $400 of defective merchandise from its invoice dated January 13. The returned
merchandise, which had a $220 cost, is discarded. (The policy of Acute Solutions is to leave the cost of
defective products in Cost of Goods Sold.)
22 The company received the balance due from Liu Corp., net of both the discount and the credit for the
returned merchandise.
24 The company returned defective merchandise to Texas Corp. and accepted a credit against future
purchases. The defective merchandise invoice cost, net of the discount, was $532.
26 The company purchased $8,000 of merchandise from Texas Corp. with terms of 1/10, n/30, FOB
destination, invoice dated January 26.
26 The company sold merchandise with a $4,740 cost for $5,930 on credit to KC, Inc., invoice dated January
26.
31 The company paid cash to Donna Zane for 10 days’ work at $135 per day.
Feb. 1 The company paid $3,000 cash to Vincom Mall for another three months’ rent in advance.
3 The company paid Texas Corp. for the balance due, net of the cash discount, less the $532 amount in the
credit memorandum.
5 The company paid $650 cash to the local newspaper for an advertising insert in today’s paper.
11 The company received the balance due from Cloe’s Engineering Co. for fees billed on January 11.
15 R. Chen withdrew $3,800 cash from the company for personal use.
23 The company sold merchandise with a $3,660 cost for $4,250 on credit to Delta Co., invoice dated
February 23.
26 The company paid cash to Donna Zane for eight days’ work at $135 per day.
27 The company reimbursed R. Chen for business automobile mileage (600 miles at $0.42 per mile).
Mar. 8 The company purchased $1,950 of computer supplies from 3M Office Products on credit, invoice dated
March 8.
9 The company received the balance due from Delta Co. for merchandise sold on February 23.
11 The company paid $960 cash for minor repairs to the company’s computer.
16 The company received $5,260 cash from Dream, Inc., for computing services provided.
19 The company paid the full amount due to Harris Office Products, consisting of amounts created on
December 15 (of $1,210 in Account Payable) and March 8.
24 The company billed Easy Leasing for $9,047 of computing services provided.
25 The company sold merchandise with a $2,010 cost for $2,910 on credit to Wildcat Services,
invoice dated March 25.
30 The company sold merchandise with a $2,048 cost for $3,120 on credit to IFM Company, invoice dated
March 30.
31 The company reimbursed R. Chen for business automobile mileage (400 miles at $0.42 per mile).
The following additional facts are available for preparing adjustments on March 31 prior to financial statement
preparation:
a. The March 31 amount of computer supplies still available totals $1,010.
b. Three more months have expired since the company purchased its annual insurance policy at a $2,220 cost
for 12 months of coverage.
c. Donna Zane has not been paid for seven days of work at the rate of $125 per day.
d. Three months have passed since any prepaid rent has been transferred to expense. The monthly rent
expense is $1,000.
e. Depreciation on the computer equipment for January 1 through March 31 is $1,250.
f. Depreciation on the office equipment for January 1 through March 31 is $400.
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g. The March 31 amount of merchandise inventory still available totals $704.
REPORT REQUIREMENTS:
1. Prepare journal entries to record each of the January through March transactions.
2. Post the journal entries in part 1 to the accounts in the company’s general ledger. (Note: Begin with the ledger’s
post-closing adjusted balances as of December 31, 2020.)
3. Prepare a partial work sheet consisting of the first six columns (similar to the one shown in Exhibit 5B.1) that
includes the unadjusted trial balance, the March 31 adjustments (a) through (g), and the adjusted trial balance. Do
not prepare closing entries and do not journalize the adjustments or post them to the ledger.
4. Prepare an income statement (from the adjusted trial balance in part 3) for the three months ended March 31,
2021. Use a single-step format. List all expenses without differentiating between selling expenses and general and
administrative expenses.
5. Prepare a statement of owner’s equity (from the adjusted trial balance in part 3) for the three months ended
March 31, 2021.
6. Prepare a classified balance sheet (from the adjusted trial balance) as of March 31, 2021
PRESENTATION QUESTIONS:
1. In comparing the accounts of a merchandising company with those of a service company, what additional
accounts would the merchandising company likely use, assuming it employs a perpetual inventory system?
2. Distinguish between cash discounts and trade discounts. What is the difference between a sales discount and
a purchase discount? Illustrate with examples from your case study above
3. Why would a company’s manager be concerned about the quantity of its purchase returns if its suppliers allow
unlimited returns?
4. What is the difference between the single-step and multiple-step income statement formats? Illustrate with
examples from your case study above
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Topic 4: Cash, Accounting Inventories (Chapter 6, 8)
Part A:
Pearson Goods Company sold 2,000 units of its data analytic software at $112 per unit in year 2021 and incurred
operating expenses of $19 per unit in selling the units. It began the year with 960 units in inventory and made
successive purchases of its product as follows.
REPORT REQUIREMENTS:
1. Prepare comparative income statements similar to Exhibit 6.8 for the three inventory costing methods of
FIFO, LIFO, and weighted average. (Round all amounts to cents.) Include a detailed cost of goods sold section
as part of each statement. The company uses a periodic inventory system, and its income tax rate is 40%.
2. How would the financial results from using the three alternative inventory costing methods change if the
company had been experiencing decreasing prices in its purchases of inventory?
3. What advantages and disadvantages are offered by using (a) LIFO and (b) FIFO? Assume the continuing
trend of increasing costs.
Part B:
Simon Ross of Pearson Goods is evaluating his inventory to determine whether it must be adjusted based on lower
of cost or market rules. Pearson Goods has three different types of software in its inventory and the following
information is available for each.
Per Unit
Inventory Items Units Cost Market
Office productivity.......................... 20 $ 90 $ 89
Desktop publishing........................... 25 113 112
Accounting................................... 15 210 214
REPORT REQUIREMENTS:
5. Compute the lower of cost or market for ending inventory assuming Ross applies the lower of cost or market
rule to inventory as a whole. Must Ross adjust the reported inventory value? Explain.
6. Assume that Ross had instead applied the lower of cost or market rule to each product in inventory. Under
this assumption, must Ross adjust the reported inventory value? Explain.
Part C
Selected accounts and balances for the three months ended March 31, 2021, for Pearson Goods follow
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REPORT REQUIREMENTS:
7. Compute inventory turnover and days’ sales in inventory for the three months ended March 31, 2021.
8. Assess the company’s performance if competitors average 15 times for inventory turnover and 25 days for
days’ sales in inventory
Part D
Simon Ross receives the March bank statement for Pearson Goods on April 11, 2021. The March 31 bank
statement shows an ending cash balance of $68,576. A comparison of the bank statement with the general ledger
Cash account, No. 101, reveals the following.
a. S. Ross notices that the bank erroneously cleared a $700 check against her account in March that she did not
issue. The check documentation included with the bank statement shows that this check was actually issued by a
company named Pearson Hardman.
b. On March 25, the bank issued a $57 debit memorandum for the safety deposit box that Pearson Goods agreed
to rent from the bank beginning March 25.
c. On March 26, the bank issued a $95 debit memorandum for printed checks that Pearson Goods ordered from
the bank.
d. On March 31, the bank issued a credit memorandum for $97 interest earned on Pearson Goods’s checking
account for the month of March.
e. S. Ross notices that the check she issued for $250 on March 31, 2021, has not yet cleared the bank.
f. S. Ross verifies that all deposits made in March do appear on the March bank statement.
g. The general ledger Cash account, No. 101, shows an ending cash balance per books of $69,081 as of March
31 (prior to any reconciliation).
REPORT REQUIREMENTS:
9. Prepare a bank reconciliation for Business Solutions for the month ended March 31, 2021.
10. Prepare any necessary adjusting entries. Use Miscellaneous Expenses, No. 677, for any bank charges.
Use Interest Revenue, No. 404, for any interest earned on the checking account for the month of March.
PRESENTATION QUESTIONS:
1. Describe how costs flow from inventory to cost of goods sold for the following methods: (a) FIFO and (b)
LIFO. What advantages and disadvantages are offered by using (a) LIFO and (b) FIFO? Assume the
continuing trend of increasing costs. Illustrate with examples from your case study above
2. If costs are declining, will the LIFO or FIFO method of inventory valuation yield the lower cost of goods
sold? Why?
3. What is the meaning of market as it is used in determining the lower of cost or market for inventory?
Illustrate with examples from your case study above
4. List the seven broad principles of internal control. Explain the internal control to cash receipts and
disbursements.
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ACC101
Topic 5: Receivable and Plant (Chapter 8,9,10)
Part A
On January 1, Bennett Company purchases a used machine for $170,000 and readies it for use the next day at a
cost of $3,520. On January 4, it is mounted on a required operating platform costing $5,600, and it is further readied
for operations. Management estimates the machine will be used for seven years and have an $18,110 salvage
value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its sixth year of use,
the machine is disposed of.
REPORT REQUIREMENTS:
1. Prepare journal entries to record the machine’s purchase and the costs to ready and install it. Cash is paid
for all costs incurred.
2. Prepare journal entries to record depreciation of the machine at December 31 of (a) its first year in
operations and (b) the year of its disposal.
3. Prepare journal entries to record the machine’s disposal under each of the following separate assumptions:
(a) it is sold for $28,500 cash; (b) it is sold for $51,000 cash; and (c) it is destroyed in a fire and the
insurance company pays $27,000 cash to settle the loss claim.
Part B
REPORT REQUIREMENTS:
4. Prepare journal entries to record these transactions and events. (Round amounts to the nearest dollar.)
Analysis Component
5. What reporting is necessary when a business pledges receivables as security for a loan and the loan is
still outstanding at the end of the period? Explain the reason for this requirement and the accounting
principle being satisfied.
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PRESENTATION QUESTIONS:
1. What characteristics of a plant asset make it different from other assets? Illustrate with examples from
your case study above
2. Why does the direct write-off method of accounting for bad debts usually fail to match revenues and
expenses?
3. Explain why writing off a bad debt against the Allowance for Doubtful Accounts does not reduce the
estimated realizable value of a company’s accounts receivable. Illustrate with examples from your case
study above
4. What is the general rule for cost inclusion for plant assets? Why is the cost of a lump-sum purchase
allocated to the individual assets acquired? Illustrate with examples from your case study above
5. Does the balance in the Accumulated Depreciation—Machinery account represent funds to replace the
machinery when it wears out? If not, what does it represent?
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