ACC120 Study Guide - Final Guide: Negative Number, Petty Cash, Quickbooks
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To complete this practice set, you will:
Account for current liabilities.
Journalize corporate transactions.
Prepare financial statements for corporation.
Journalize debt transactions.
Prepare statement of cash flows.
Three journal entries are requiredeach payroll period: 1) record the payroll, 2) record payments ofthe total net pay, and 3) record the employerâs payroll taxes.
December Transactions
December 1 | Sale of 5,000 shares of common stock for $35 per share. Articlesof incorporation authorized 40,000 shares of $20 par common stock.A check is received for the proceeds of this sale. Remember totrack the number of shares of outstanding stock. | ||||||||||||||||||||||||||||||||||||
December 1 | Acquire land with a fair market value of $25,000 in exchange for1,100 shares of its $20 par common stock. | ||||||||||||||||||||||||||||||||||||
December 1 | Issue $100,000, 7% (contract rate), 10-year bond that paysinterest annually at an effective interest rate of 8% (marketrate). A check is received for the proceeds of this issuance. Round this calculation to the nearest penny. | ||||||||||||||||||||||||||||||||||||
December1 | Make a deposit using the deposit ticket below. Include all ofthe checks received to date. Remember to record this deposit inthe checkbook.
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December 1 | Issue Check #1 for $180,000 to Rapid Buildersfor a building. The building will be depreciated over 40 yearsusing straight-line depreciation. Salvage value is $20,000. | ||||||||||||||||||||||||||||||||||||
December 1 | Issue Check #2 for $12,000 to Hom Furniture foroffice equipment. Office equipment will be depreciated usingdouble-declining balance. The expected life of the equipment is 5years. | ||||||||||||||||||||||||||||||||||||
December 1 | Issue Check #3 for $450 to MyFavorite CPAs fordrafting the articles of incorporation. Charge this expense toOrganization Expense account. | ||||||||||||||||||||||||||||||||||||
December 1 | Issue Check #4 for $20 to Wisconsin Departmentof Revenue for a sellerâs permit. Charge this expense toMiscellaneous Administrative Expense account. | ||||||||||||||||||||||||||||||||||||
December 1 | Purchase store equipment for $30,000 from Foreign Photo Supply,invoice #444, terms net 10. Store equipment will be depreciatedusing double-declining balance. The expected life of the equipmentis 5 years. | ||||||||||||||||||||||||||||||||||||
December 1 | Issue Check #5 for $150.00 to Samantha Jones,the petty cash fund custodian, to establish a petty cash fund. | ||||||||||||||||||||||||||||||||||||
December 1 | Issue Check #6 for $1,440 to Best Insurance topay for a 12-month business insurance policy effective December1. | ||||||||||||||||||||||||||||||||||||
December 1 | Purchase office supplies for $2,300 and store supplies for$1,000 from Photo Equipment Unlimited, invoice #6000, terms net10. | ||||||||||||||||||||||||||||||||||||
December 1 | Purchase inventory from Photo Equipment Unlimited, invoice#6101. The cost of each item sold must be calculated by usingFIFO inventory valuation method.
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December 2 | Purchase inventory from Foreign Photo Supply, invoice#23655.
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December 2 | Purchase inventory from Printers Unlimited, invoice #20455.
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December 3 | Sell merchandise to Mason Photo, invoice #1000, Terms n/30.
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December 5 | Sell merchandise to General City Hospital, invoice #1001, Terms2/10, n/30.
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December 6 | Purchase inventory from Photo Equipment Unlimited, invoice#6300.
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December 9 | Sell merchandise to Sandy Murray, invoice #1002, Terms n/30.
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December 10 | Issue Check #7 to Foreign Photo Supply forinvoice #444, dated December 1. | ||||||||||||||||||||||||||||||||||||
December 10 | Issue Check #8 to Photo Equipment Unlimited forthe amount due on invoices #6000 and #6101. Both invoices weredated December 1. | ||||||||||||||||||||||||||||||||||||
December 11 | Return item purchased on invoice #23655 to Foreign PhotoSupply.
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December 12 | Issue Check #9 to Foreign Photo Supply for theamount due on invoice #23655 less returned item on December 11. | ||||||||||||||||||||||||||||||||||||
December 12 | Issue Check #10 to Printers Unlimited for theamount due on invoice #20455, December 2. | ||||||||||||||||||||||||||||||||||||
December 13 | Receive payment from Mason Photo in payment of invoice#1000. |
December 14 Make a deposit using the depositticket below. Include the checks received from last deposit through today. Rememberto record this deposit in the checkbook.
MY Bank | ||
Eau Claire, WI | ||
Amount | ||
Chippewa Valley Photo, Inc. | Cash | |
December 14 | Checks | |
Deposit Ticket | ||
Total | ||
December 14 | Complete Payroll Register for hours worked December 1-14. Samantha Jones, Office Salary Expense for 88 hours. IssueCheck #11. Jennifer Sells, Sales Salary Expense for 86 hours. IssueCheck #12. NOTE: Overtime is paid at time and one-half for hours workedover 80. Post earnings to Employeesâ Earnings Records. Journalize payroll in the General Journal. Record the checks in the Cash Payments Journal. | ||||||||||||||||||||||||||||||||||||||||||||||||
December 15 | Receive payment from General City Hospital for invoice #1001,less the discount taken. | ||||||||||||||||||||||||||||||||||||||||||||||||
December 16 | Sandy Murray Photo returns item purchased on invoice #1002.Issue credit to Sandy Murray Photo. The quantity and total salecost amounts are entered in the Cost of Merchandise Sold columns inthe Merchandise Inventory Subsidiary Ledger as negativenumbers.
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December 18 | Sell merchandise to Robot Industries, invoice #1003. Termsn/30.
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December 20 | Account for the cash sale of the following merchandise tovarious cash customers:
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December 21 | Purchase inventory from Photo Equipment Unlimited, invoice#6400.
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December 21 | Purchase inventory from Foreign Photo Supply, invoice#24798.
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December 21 | Purchase inventory from Printers Unlimited, invoice #22544.
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December 22 | Sell merchandise to Mason Photo, invoice #1004, Terms n/30.
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December 22 | Sell merchandise to General City Hospital, invoice #1005, Terms2/10, n/30.
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December 23 | Mason Photo returns item purchased on invoice #1000. Issuecredit memo to Mason Photo. This item must be put back into theinventory account.
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December 23 | Return defective camera to Photo Equipment Unlimited. Thequantity and total sale cost amounts are entered in the Purchasescolumns in the Merchandise Inventory Subsidiary Ledger as negativenumbers.
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December 23 | Sell merchandise to Robot Industries, invoice #1006. Termsn/30.
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December 24 | Receive payment from Mason Photo for invoice #1004, less thecredit for return of camera. | ||||||||||||||||||||||||||||||||||||||
December 28 | Purchase 100 shares of treasury common stock for $2,100. Issuecheck #13 to Up & Down Investment, Inc. forpayment. | ||||||||||||||||||||||||||||||||||||||
December 28 Make a deposit using thedeposit ticket below. Include the checks received on
December 15, 20 and 24th. Remember to record thisdeposit in the checkbook.
MY Bank | ||
Eau Claire, WI | ||
Amount | ||
Chippewa Valley Photo, Inc. | Cash | |
December 28 | Checks | |
Deposit Ticket | ||
Total | ||
December 28 | Complete Payroll Register for hours worked December 15-28. Samantha Jones, Office Salary Expense for 82 hours. IssuedCheck #14. Jennifer Sells, Sales Salary Expense for 88 hours. IssuedCheck #15. NOTE: Overtime is paid at time and one-half for hours workedover 80. Post earnings to Employeesâ Earnings Records. Journalize payroll in the General Journal. Record the checks in the Cash Payments Journal. |
December 30 | The Board of Directors declare a 1/2% Stock Dividend toshareholders on record on December 30. The market price of thestock is $22.00 per share. | ||||||||
December 31 | Issue Check #16 to reimburse petty cash for thefollowing expenditures:
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December 31 | Issue the certificates for the dividends declared on December30. |
December 31 Prepare Bank Reconciliation. Record the adjustments in the GeneralLedger using Miscellaneous Administrative Expenses for any bankcharges credited by the bank and update the checkbook balance. Thebank statement and bank reconciliation form on the next page.
End of Month Instructions
In the Statements and Schedules booklet, complete the UnadjustedTrial Balance.
Prepare the adjusting entries. The adjusting entries should berecorded in the General Journal and posted to the respectiveaccounts in the General Ledger.
Merchandise Inventory: a physical inventorycount was taken which resulted in 1 more H2411-HP SCAN âJET 5300than in the perpetual inventory records. Record and post journalentry to add this item to the Merchandise Inventory account and tothe Subsidiary Ledger account.
Depreciation: calculate depreciation for thebuilding, office equipment and store equipment. Depreciationamounts should be calculated to the penny. See the December 1transactions for the depreciation method and expected life. Preparea Depreciation Schedule for the entire life of the office equipmentand store equipment. Use tables in the Depreciation Schedule in theLedgers and Schedules booklet. Record depreciation entry for themonth of December (one month only).
Uncollectable accounts: estimated uncollectableaccounts are ½ percent of the Accounts Receivable balance in theGeneral Ledger after all other monthly entries have beenposted. The allowance method is used to estimateuncollectable accounts.
Insurance: one month of the business insurancehas expired.
Store and Office Supplies: a physical count wastaken of the store supplies and $500 is remaining. A physical countwas taken of the office supplies and $575 is remaining.
Bond amortization: record the bond interestpayable and amortization of the discount for the month. Use theeffective interest method to amortize the premium. Round results tothe nearest penny. Prepare an amortization schedule for the entirelife of the bonds. A form is provided in the Ledgers and Schedulesbooklet.
Payroll: accrue the payroll expense from thelast pay period, December 28, to December 31. Each employee worked20 hours. The amount of the accrued payroll is immaterial;therefore, accrued taxes do not need to be calculated. Credit thesum of the two salaries expense accounts to Salaries Payable.
Income tax: the corporate Income tax for themonth of $285.
Customer Returns: You estimate that 5% of saleswill be returned next year. The estimated cost this merchandise is60% of sales.
After the Adjusting entries have been journalized and posted,prepare an Adjusted Trial Balance. The Adjusted Trial Balance isthe basis for all of your financial statements.
Prepare a Schedule of Accounts Receivable, Schedule of AccountsPayable and Schedule of Merchandise Inventory. Make sure the totalsof these schedules are equal to their general ledger accountbalance.
Prepare a Multiple-Step Income Statement, Statement of RetainedEarnings, Classified Balance Sheet, and Statement of Cash Flowsusing the indirect method. To model the formatting, each of thefinancial statements has a couple of the first line titles filledin with a dollar sign to serve as an indicator as to where to writethe dollar amount that corresponds to that line. Make sure to usedouble lines at the grand totals and to use appropriate dollarsigns at the correct places. Proper formatting is very important.The forms for the financial statements are in the Statements andSchedules booklet.
Record the entry to close the temporary accounts and post to theledger.
Prepare a Post-Closing Trial Balance in the form located in theStatements and Schedules booklet.
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 yourcharter from 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 firstmonthâs rent due immediately. You issue check #100 to OfficeBuilders for the first monthâs rent.
9/2 You then went to theApple store and purchased a new computer system for your business.Your Mac Pro cost $2700 and your new printer cost $450. You set upa 30-day account with Apple to make this purchase.
9/3 You ordered businesscards and stationary from Marketing Media on account. The ordertotaled $250 and will be shipped FOB Destination. (Record allpurchases of supplies in the Supplies on Hand account).
9/4 You decided to purchasea new 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 KEMSupply to purchase supplies for your business at a cost of $600.KEM opened a customer charge account for you. The payment terms onyour account will be 2/10, net 30. The time period for determiningthe payment 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 first client, Red Fische, came intoday needing assistance with filing the appropriate paperwork tostart his new seafood restaurant. You issued invoice #1 to RedFische and he paid you an initial $2,000 Engagement Fee. Red Fischealso agreed to contract with you to provide accounting services for$2,500 per month.
9/12 You issue check #101 to YOUR AccountingCorp to establish a $500 Petty Cash Fund. You will use this accountto make small cash purchases.
9/12 You reimburse yourself for the filingfees associated with forming your corporation.
9/14 You paid KEM Supply by issuing check #102
9/15 You hire an administrative assistant,Mandi Handi, she will be paid a monthly salary of $1500. You havedecided that all pay periods will end on the last day of the monthand that checks will be issued on the 5th of eachmonth.
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 Media delivered your businesscards and stationary. Check #103 was issued to pay for thesupplies.
9/20 You visited a new client, Anita Cooke, toset up a Quickbooks accounting system for her new business, CookingFor You. You gave Anita and invoice #2 for the Engagement Fee andshe paid you by issuing a check in the amount of $2,000. Anita alsoagreed to a monthly fee of $1,500 for you to handle her ongoingaccounting needs.
9/22 You purchased $50 of fuel for your newSUV from Get ân Go. You charged this to your Get ân Go account.
9/30 Mandi sent pro-rated invoices, #3  , to Red Fische and Cooking For You for Monthly AccountingServices. The payment terms are 1/10, net 30.
9/30 You accrued interest on the Pig E. Banknote. Accrue interest based on the number of days in the month.
9/30 You computed and accrued the payroll forSeptember.
9/30 You received monthly bills for thefollowing:
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 |
Accumulated Depreciation â ComputerEquipment | 221 |
Cell Phone | 230 |
Accumulated Depreciation â CellPhone | 231 |
Vehicles | 240 |
Accumulated Depreciation - Vehicles | 241 |
Accounts Payable | 310 |
Customer Deposits (Unearned Revenue) | 320 |
SUTA Payable | 330 |
FICA Payable | 332 |
FUTA Payable | 334 |
Federal Income Tax Payable | 336 |
State Income Tax Payable | 338 |
Current Maturities of Long-Term Debt | 375 |
Notes Payable (long-term) | 410 |
Interest Payable | 420 |
Salaries Payable | 425 |
Common Stock ($2 par value) | 520 |
Additional Paid-in Capital on Common Stock | 521 |
Retained Earnings | 550 |
Dividends | 560 |
Engagement fees | 605 |
Monthly Accounting Services Revenue | 610 |
Hourly Accounting Services Revenue | 620 |
Tax Services Revenues | 612 |
Sales Discounts | 614 |
Advertising & Promotion Expense | 725 |
Depreciation Expense | 727 |
Rent Expense | 730 |
Insurance Expense | 735 |
Supplies Expense | 740 |
Meals & Entertainment | 745 |
Taxes and Licenses | 767 |
Telephone Expense | 770 |
Utilities Expense | 775 |
Fuel Expense | 780 |
Interest Expense | 820 |
Payroll Tax Expense | 825 |
Salaries Expense | 830 |
Income Summay | 900 |
ASSIGNMENT
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.