CRIM 135 Lecture : 4. The Hierarchy of Courts

The following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow.

Jan. 2 Issued Ck. No. 6981 for monthly rent, $775.

2 J. Hammond, the owner, invested an additional $3,500 in the business.

4 Bought merchandise on account from Valencia and Company, invoice no. A691, $2,930; terms 2/10, n/30; dated January 2.

4 Received check from Vega Appliance for $980 in payment of $1,000 invoice less discount.

4 Sold merchandise on account to L. Paul, invoice no. 6483, $850.

6 Received check from Petty, Inc., $637, in payment of $650 invoice less discount.

7 Issued Ck. No. 6982, $588, to Fischer and Son, in payment of invoice no. C1272 for $600 less discount.

Jan. 7 Bought supplies on account from Doyle Office Supply, invoice no. 1906B, $108; terms net 30 days.

7 Sold merchandise on account to Ellison and Clay, invoice no. 6484, $787.

9 Issued credit memo no. 43 to L. Paul, $54, for merchandise returned.

11 Cash sales for January 1 through January 10, $4,863.20.

11 Issued Ck. No. 6983, $2,871.40, to Valencia and Company, in payment of $2,930 invoice less discount.

14 Sold merchandise on account to Vega Appliance, invoice no. 6485, $2,050.

18 Bought merchandise on account from Costa Products, invoice no. 7281D, $4,854; terms 2/10, n/60; dated January 16; FOB shipping point, freight prepaid and added to the invoice, $147 (total $5,001).

21 Issued Ck. No. 6984, $194, to M. Miller for miscellaneous expenses not recorded previously.

21 Cash sales for January 11 through January 20, $4,591.

23 Issued Ck. No. 6985 to Forbes Freight, $96, for freight charges on merchandise purchased on January 4.

23 Received credit memo no. 163, $376, from Costa Products for merchandise returned.

29 Sold merchandise on account to Bruce Supply, invoice no. 6486, $1,835.

31 Cash sales for January 21 through January 31, $4,428. 31 Issued Ck. No. 6986, $53, to M. Miller for miscellaneous expenses not recorded previously.

31 Recorded payroll entry from the payroll register: total salaries, $6,200; employees’ federal income tax withheld, $872; FICA taxes withheld, $350.30.

31 Recorded the payroll taxes: FICA taxes, $474.30; state unemployment tax, $334.80; federal unemployment tax, $49.60.

31 Issued Ck. No. 6987, $4,977.70, for salaries for the month.

31 J. Hammond, the owner, withdrew $1,000 for personal use, Ck. No. 6988.

111 Cash 311 J. Hammond, Capital

113 Accounts Receivable 312 J. Hammond, Drawing

114 Merchandise Inventories

115 Supplies 412 Sales Returns and Allowances

116 Prepaid Insurance 413 Sales Discounts

121 Equipment 511 Purchases

212 Accounts Payable 512 Purchases Returns and Allowances

215 Salaries Payable 513 Purchases Discounts

216 Employees’ Federal Income Tax Payable 514 Freight In

217 FICA Taxes Payable 621 Salary Expense

218 State Unemployment Tax Payable 622 Payroll Tax Expense

219 Federal Unemployment Tax Payable 631 Miscellaneous Expense

Required

1. Post daily all entries involving customer accounts to the accounts receivable ledger.

2. Post daily all entries involving creditor accounts to the accounts payable ledger.

3. Post daily the general journal entries to the general ledger. Write the owner’s name in the Capital and Drawing accounts.

4. Prepare a trial balance.

5. Prepare a schedule of accounts receivable and a schedule of accounts payable. Do the totals equal the balances of the related controlling accounts?

The following events occurredin August and September:

8/1 YOU filed a charter withthe State of Louisiana to form the YOUR Accounting Corporation. Thecharter authorizes you to issue 5000 shares of $2 par common stock.The state charged you a $75 fee to file the charter. Since yourbusiness is not yet approved, you had to pay this fee usingpersonal funds.

9/1 You received your charterfrom the State of Louisiana and officially opened yourbusiness. Your first order of business was to become ashareholder of YOUR Accounting Corp. To do this, you purchased 500shares of common stock by issuing a check to YOUR Accounting Corpfor $10,000. You used this money to open a checking account atFirst Funds Bank.

9/1 You rented an office forYOUR Accounting Corp. The monthly rent is $500, with the firstmonth’s rent due immediately. You issue check #100 to OfficeBuilders for the first month’s rent.

9/2 You then went to the Applestore and purchased a new computer system for your business. YourMac Pro cost $2700 and your new printer cost $450. You set up a30-day account with Apple to make this purchase.

9/3 You ordered business cardsand stationary from Marketing Media on account. The order totaled$250 and will be shipped FOB Destination. (Record all purchases ofsupplies in the Supplies on Hand account).

9/4 You decided to purchase anew vehicle for your business. Upon visiting Pro-Auto, you decideon a new SUV at a cost of $55,000. This vehicle will be used 100%for business purposes. You finance the vehicle with Pig E Bank at arate of 5% for 6 years. Your first monthly payment is due onOctober 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 You went to the KEM Supplyto purchase supplies for your business at a cost of $600. KEMopened a customer charge account for you. The payment terms on youraccount will be 2/10, net 30. The time period for determining thepayment amount begins on the purchase date.

9/6 You purchased a one-yearauto insurance policy from InsureMart for $1200. InsureMart willsend you a bill for the policy. YOUR Accounting Corporationcapitalizes all insurance policies on the date of purchase andrecords the necessary expense at year-end as an adjustingentry.

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 the5^th 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 ‘n Go. You charged this toyour Get ‘n 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.

Assignment #1: For the Monthof September

· In proper General Journal format, record the transactions for themonth; include descriptions of each transaction with your journalentry. Use only the accounts shown in the chart of accounts.

· Post the journal entries for the month to the general ledgeraccounts, use appropriate posting references.

· Prepare a trial balance for the period ending September 30.

o Using proper format,create your trial balance in Microsoft Excel. Do not use any trialbalance templates. Include all accounts from the chart of accounts.Even those with zero balances. Your accounts in the trial balanceshould be in the exact order shown in the chart of accounts.