ACTG 1P91 Lecture Notes - Lecture 18: List Of Auto Parts
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You have been hired as an accountantfor B&G Co., a corporation performing diverse consultingservices in Detroit, Michigan. B&G Co. prepares financialstatements on monthly bases.
ProjectScope: You are to record the transactions forDecember, prepare the monthly adjustments, and prepare thefinancial statements using the Excel workbook provided. Then youwill close the fiscal year and prepare the books for next year.
Directions: The assignment encompasses twofiles: Directions and Transactions (this Word document)and Forms (a separate Excel workbook). Your solutionshould be worked in Excel and the completed Excel workbooksubmitted for grading.
You should use Excel formula whereappropriate and cell references to carry forward values and numbersbetween worksheets within the workbook. Simply typing values inExcel will result in a reduced score, even if the correctsolution is provided. You should use formula whereverpossible.
Analyze the narrative to prepare and record the transactions forDecember to the General Journal.
Post the journal entries to ledger accounts using T-accounts(Donât forget the opening balances from the information given onthe post-closing trial balance on Nov. 30th.)
Prepare Income Statement and the Retained Earnings Statement forthe month ended December 31, 2016 and Balance Sheet as of December31, 2016 in good forms. Use the multi-step format for the IncomeStatement.
Close the temporary accounts, posting any net income or loss toretained earnings.
Due Date: Dec.8th.
Transactionsin December 2016:
Dec. | 1 | The equipment was completely destroyed by the regional earthquake. âLoss by earthquakeâ was recognized. |
1 | Lent cash to another company and received a 2 year, $20,000zero-interest-bearing note. The market rate of interest for a noteof similar risk is 9 percent. | |
1 | Purchased new equipment that costs $12,000 and issued 1,000shares of common stock (no-par stock) to the equipment seller. | |
3 | Cash payment on accounts payable amounted to $6,000. | |
4 | Sold land for $13,000 cash. | |
10 | Collected $15,000 as payment for amounts previously billed(suppose the payment was made within the discount period). | |
13 | One of the customers went bankrupt. B&G wrote off $2,000account receivable. | |
15 | Paid monthly salaries of $20,000 to employees | |
16 | Issued 1,000 shares of preferred stock at $10 per share | |
17 | Purchased 500 shares of ABC corporationâs common stock at $15(per share) and classify the securities as available-for-salessecurities | |
20 | Found that the company incorrectly overstated its Novemberaccount receivable and sales revenue by $1,000 and made a journalentry to correct the error. | |
29 | Performed services for a customer for $30,000 cash | |
30 | Performed $30,000 services on account with the following terms:2/15, n/30. B&G records credit sales using the net method | |
31 | Dividends of $5,000 were declared and paid. $ 1,025 is paid topreferred stockholders and the rest is paid to the common stockholders. | |
31 | ABC corporation declared $ 5 dividend per share (to common stockholders). It will be paid in 2017. |
* Additional information
1. Ignoretax effect.
2. Salariesexpenses incurred but not paid prior to Dec. 31sttotaled $10,500.
3. Thecompany received the bill for utility services (electricity) thatthe firm used during December in the amount of $6,000. The companywill pay the bill in Jan. 2016.
4. $3,000 ofsupplies remained at the end of December.
5. Thecompany use the âAllowanceâ method for possible accounts receivablewrite-offs in the future and estimated that 5% of the outstandingaccount receivable will not be collected.
6. The equipmentpurchased on Dec. 1st depreciates $200 per month.
7. Thecommon stock price of ABC Corporation on December 31st is still $15 per share.
In proper General Journal format,record the transactions for the month; include descriptions of eachtransaction with your journal entry. Use only the accounts shown inthe chart of accounts.
8/1 YOUfiled a charter with the State of Louisiana to form the YOURAccounting Corporation. The charter authorizes you to issue 5000shares of $2 par common stock. The state charged you a $75 fee tofile the charter. Since your business is not yet approved, you hadto pay this fee using personal funds.
9/1 Youreceived your charter from the State of Louisiana and officiallyopened your business. Your first order of business wasto become a shareholder of YOUR Accounting Corp. To do this, youpurchased 500 shares of common stock by issuing a check to YOURAccounting Corp for $10,000. You used this money to open a checkingaccount at First Funds Bank.
9/1 Yourented an office for YOUR Accounting Corp. The monthly rent is$500, with the first monthâs rent due immediately. You issue check#100 to Office Builders for the first monthâs rent.
9/2 Youthen went to the Apple store and purchased a new computer systemfor your business. Your Mac Pro cost $2700 and your new printercost $450. You set up a 30-day account with Apple to make thispurchase.
9/3 Youordered business cards and stationary from Marketing Media onaccount. The order totaled $250 and will be shipped FOBDestination. (Record all purchases of supplies in the Supplies onHand account).
9/4 Youdecided to purchase a new vehicle for your business. Upon visitingPro-Auto, you decide on a new SUV at a cost of $55,000. Thisvehicle will be used 100% for business purposes. You finance thevehicle with Pig E Bank at a rate of 5% for 6 years. Your firstmonthly payment is due on October 4.
NOTE: You will need to create a loan amortization schedule todetermine the amount of the monthly note and the interest expensefor each month. You can use a website such as www.bankrate.com tocreate the schedule. When recording your journal entries, round allamounts to the nearest dollar.
9/5 Youwent to the KEM Supply to purchase supplies for your business at acost of $600. KEM opened a customer charge account for you. Thepayment terms on your account will be 2/10, net 30. The time periodfor determining the payment amount begins on the purchase date.
9/6 Youpurchased a one-year auto insurance policy from InsureMart for$1200. InsureMart will send you a bill for the policy. YOURAccounting Corporation capitalizes all insurance policies on thedate of purchase and records the necessary expense at year-end asan adjusting entry.
9/10 Your firstclient, Red Fische, came in today needing assistance with filingthe appropriate paperwork to start his new seafood restaurant. Youissued invoice #1 to Red Fische and he paid you an initial $2,000Engagement Fee. Red Fische also agreed to contract with you toprovide accounting services for $2,500 per month.
9/12 You issue check#101 to YOUR Accounting Corp to establish a $500 Petty Cash Fund.You will use this account to make small cash purchases.
9/12 You reimburseyourself for the filing fees associated with forming yourcorporation.
9/14 You paid KEM Supply by issuingcheck #102
9/15 You hire anadministrative assistant, Mandi Handi, she will be paid a monthlysalary of $1500. You have decided that all pay periods will end onthe last day of the month and that checks will be issued on the5th of each month.
NOTE: Assume the following rates when preparing the payroll:federal income tax 15%, state income tax 5%, and FICA 7.65%.
YOUR Accounting Corp. has state and federal unemployment insurancerates of 1% (FUTA) and 2% (SUTA) on the first $7,700 of wages peremployee. The employer FICA rate is 7.65%.
9/16 Marketing Mediadelivered your business cards and stationary. Check #103 was issuedto pay for the supplies.
9/20 You visited anew client, Anita Cooke, to set up a Quickbooks accounting systemfor her new business, Cooking For You. You gave Anita and invoice#2 for the Engagement Fee and she paid you by issuing a check inthe amount of $2,000. Anita also agreed to a monthly fee of $1,500for you to handle her ongoing accounting needs.
9/22 You purchased$50 of fuel for your new SUV from Get ân Go. You charged this toyour Get ân Go account.
9/30 Mandi sentpro-rated invoices, #3 & #4 , to Red Fische and Cooking For Youfor Monthly Accounting Services. The payment terms are 1/10, net30.
9/30 You accruedinterest on the Pig E. Bank note. Accrue interest based on thenumber of days in the month.
9/30 You computedand accrued the payroll for September.
9/30 You receivedmonthly bills for the following:
Max Power Company - $100, terms n/30
WaterWorks #1 - $20, terms n/30.
CHART OF ACCOUNTS:
| Cash | 105 | ||
| Petty Cash | 107 | ||
| Accounts Receivable | 110 | ||
| Supplies on Hand | 130 | ||
| Prepaid Insurance | 140 | ||
| Computer Equipment | 220 | ||
| AccoumulatedDepreciation - Computer Equipment | 221 | ||
| Cell Phone | 230 | ||
| AccoumulatedDepreciation - Cell Phone | 231 | ||
| Vehicles | 240 | ||
| AccumulatedDepreciation - Vehicles | 241 | ||
| Accounts Payable | 310 | ||
| Customer Deposits (UnearnedRevenue) | 320 | ||
| SUTA Payable | 330 | ||
| FICA Payable | 332 | ||
| FUTA Payable | 334 | ||
| Federal Income TaxPayable | 336 | ||
| State Income Tax Payable | 338 | ||
| Current Maturities ofLong-Term Debt | 375 | ||
| Notes Payable (long-term) | 410 | ||
| Interest Payable | 420 | ||
| Salaries Payable | 425 | ||
| Common Stock ($2 parvalue) | 520 | ||
| Additional Paid-in Capital onCommon Stock | 521 | ||
| Retained Earnings | 550 | ||
| Dividends | 560 | ||
| Engagement Fees | 605 | ||
| Monthly Accounting ServicesRevenue | 610 | ||
| Hourly Accounting ServicesRevenue | 620 | ||
| Tax Services Revenue | 612 | ||
| Sales Discounts | 614 | ||
| Advertising & PromotionExpense | 725 | ||
| Depreciation Expense | 727 | ||
| Rent Expense | 730 | ||
| Insurance Expense | 735 | ||
| Supplies Expense | 740 | ||
| Meals & Entertainment | 745 | ||
| Taxes & Licenses | 767 | ||
| Telephone Expense | 770 | ||
| Utilities Expense | 775 | ||
| Fuel Expense | 780 | ||
| Interest Expense | 820 | ||
| Payroll Tax Expense | 825 | ||
| Salaries Expense | 830 | ||
| Income Summary | 900 | ||
