Foundations of Accounting I
Accounting Project
Written by: Karen Pitsch
David’s Entertainment is a merchandising business. Their accountbalances as of November 30, 2012 (unless otherwise indicated), areas follows:
110 Cash $ 73,920
112 AccountsReceivable 34,250
113 Allowance for DoubtfulAccounts 11,000
115 MerchandiseInventory 123,900
116 PrepaidInsurance 3,750
117 StoreSupplies 2,850
123 StoreEquipment 100,800
124 Accumulated Depreciation-StoreEquipment 20,160
210 AccountsPayable 21,450
211 SalariesPayable 0
218 InterestPayable 0
220 Note Payable (Due2017) 15,000
310 D. Williams, Capital (January 1,2012) 73,260
311 D. Williams,Drawing 50,000
312 IncomeSummary 0
410 Sales 853,445
411 Sales Returns andAllowances 20,020
412 SalesDiscounts 13,200
510 Cost of MerchandiseSold 414,575
520 Sales SalariesExpense 74,400
521 AdvertisingExpense 18,000
522 DepreciationExpense 0
523 Store SuppliesExpense 0
529 Miscellaneous SellingExpense 2,800
530 Office SalariesExpense 40,500
531 RentExpense 18,600
532 InsuranceExpense 0
533 Bad DebtExpense 0
539 Miscellaneous AdministrativeExpense 1,650
550 InterestExpense 1,100
David’s Entertainment uses the perpetual inventory system andthe First-in, First-out costing method. Transportation-in andpurchase discounts should be added to the Inventory Control Sheet,but since this will complicate the computation of the First-in,First-out costing method, please ignore this step in the process.They also use the Allowance Method for bad debt.
The Accounts Receivable and Accounts Payable Subsidiary Ledgersalong with the Inventory Control Sheet should be updated as eachtransaction affects them (daily).
David’s Entertainment sells four types of televisionentertainment units.
The sale prices of each are:
TV A: $3,500
TV B: $5,250
TV C: $6,125
PS D: $9,000
During December, the last month of the accounting year, thefollowing transactions were completed:
Dec. 1. Issued check number 2632 for theDecember rent, $2,600.
Purchased three TV C units on account from Prince Co., terms2/10, n/30, FOB shipping point, $11,100.
Issued check number 2633 to pay the transportation changes onpurchase of December 3, $400. (NOTE:Do not include shipping andpurchase discounts to the Inventory Control sheet for thisproject.)
Sold four TV A and four TV B on account to Albert Co., invoice891, terms 2/10, n/30, FOB shipping point.
Sold two projector systems for cash.
Purchased store supplies on account from Matt Co., terms n/30,$580.
Issued check to Prince Co. number 2634 for the full amount due,less discount allowed.
Issued credit memo for one TV A unit returned on sale ofDecember 6.
Issued check number 2635 for advertising expense for last halfof December, $1,500.
Received cash from Albert Co. for the full amount due (lessreturn of December 14 and discount).
19. Issued check number 2636 to buy two TV C units, $7,600.
19. Issued check number 2637 for $6,100 to Joseph Co. onaccount.
Sold five TV C units on account to Cameron Co., invoicenumber
892, terms 1/10, n/30, FOBshipping point.
For the convenience of the customer, issued check number 2638for shipping charges on sale of December 20, $700.
Received $12,250 cash from McKenzie Co. on account, nodiscount.
Purchased three projector systems on account from Elisha Co.,terms 1/10, n/30, FOB destination, $15,600.
24. Received notification that Marie Co. has been grantedbankruptcy with no
amount of recovery. We are to write-off her amount due. (Note:See page
402 for entry required.)
Issued a debit memo for return of $5,200 because of a damagedprojection
system purchased onDecember 21, receiving credit from the seller.
Issued check number 2639 for refund of cash on sales made forcash, $600.(Customer was going to return goods until an allowancewas arranged.)
27. Issued check number 2640 for sales salaries of $1,750 andoffice
salaries of $950.
Purchased store equipment on account from Matt Co., terms n/30,FOB
destination, $1,200.
Issued check number 2641 for store supplies, $470.
Sold four TV C units on account to Randall Co., invoice number893,
terms 2/10, n/30, FOB shipping point.
Received cash from sale of December 20, less discount, plustransportation
paid on December 20. (Roundcalculations to the nearest dollar.)
Issued check number 2642 for purchase of December 21, lessreturn
of December 25 and discount.
Issued a debit memo for $300 of the purchase returned from
December 28.
Instructions:
Enter the balances of each of the accounts in the appropriatebalance column of a four-column account (General Ledger).WriteBalance in the item section, and place a check mark (x) in the PostReference column.
Journalize the transactions in a sales journal, purchasesjournal, cash receipts journal, cash payments journal, or generaljournal as illustrated in chapter 7.Also post to the AccountsReceivable and Accounts Payable Subsidiary ledgers and InventoryControl Sheet as needed.
Total each column on the special journals and prove thejournal.
Post the totals of the account named columns and individuallypost the “other” columns as well to the General Ledger.
Prepare the Schedule of Accounts Receivable and the Schedule ofAccounts Payable (their total amount must equal the amount in theircontrolling general ledger account).
Prepare the unadjusted trial balance on the worksheet.
Complete the worksheet for the year ended December 31, 2012,using the following adjustment data:
a. Merchandise inventory on December31 $90,800
b. Insurance expired during theyear 1,250
c. Store supplies on hand on December31 975
d. Depreciation for the current year needs tobe calculated. The business uses
the Straight-line method, the store equipment has a useful life of10 years
with no salvage value. (NOTE: the purchase and return will not beincluded
as the dates of the transactions were after the 15th ofthe month).
e. Accrued salaries on December 31:
Salessalaries $1,400
Officesalaries 760 2,160
f. The note payable terms are at 8%, payment is notbeing made until Jan. 3, 2013. Interest must be recognized for onemonth.
g. Net realizable value of Accounts Receivable is determined tobe $27,950.
8. Prepare a multiple-step income statement, a statement ofowner’s equity, and a
classified balance sheet in goodform. (Recommend review of “Current Liabilities” on pages 166 &167 and “Current Maturities of Long-term Debt” on page 480.)
9. Journalize and post the adjusting entries.
Journalize and post the closing entries.Indicate closed accountsby inserting a line
in both balance columns opposite the closing entry.
Prepare a post-closing trial balance.
Check Figures for Accounting Project:
Cash Receipts Journal; Cash Column: 97,939
Unadjusted Trial Balance Total: 1,080,620
Net Income: 264,350
Post-Closing Trial Balance: 347,490
