ADM 1340 Chapter Notes - Chapter 3: Accounting Equation, Accounting Information System, Financial Statement

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ADM 1340 Full Course Notes

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Document Summary

Accounting transactions: analysing transactions, summary of transactions. The account: debit and credits, summary of debit and credit effects. The journal: recording process, general journal. The trial balance: limitations of a trial balance. Only the ones who causes changes in the assets, liabilities, or shareholders" equity. Criterion (is the financial position of the company changed?) Decrease assets (cash), decrease shareholders" equity (increase rent expense) If an individual asset is increased, there must be either a corresponding decrease in another assets, an increase in a specific liability and/or an increase in shareholders" equity. Assume that services of have been provided, where has been received in cash and the reminder is owed on account. An asset (cash) would increase , accounts receivable would also increase by . And shareholders; equity would (service revenue) increase by . Summary of transactions: the transactions numbers, the specific effects of each transactions, can and will be different for each company.

Related Questions

This is for AC1420: Week 2 trial balance (ITT Tech) not sureexactly where to start if someone can help

Based on the lesson presentation and readings for this week,prepare a one- to two-page document listing a minimum of fiveadjusting entries to a trial balance, explaining the purpose ofeach of these entries.
Make sure you include both the debit and credit entry for eachadjusting entry. Specify in your response whether these entrieswill increase or decrease the profits in the current period.

Accounting Information Systems
Throughout the chapters of this book, you have been keeping trackof Team Shirtsâ transactions using an accounting equation worksheet. We can do that in a simple world with a small number oftransactions. In the real world, that wouldnât work very well. Acompany in the real world needs a better system to keep track ofthe large number of transactions represented in the four basicfinancial statements. A company may have an accounting system thatgathers only accounting informationâjust recording the informationthat applies to the financial statementsâand other informationsystems gathering information for marketing, production, and otherparts of the company. Alternatively, a company may have a single,integrated information system in which all company information isrecordedâdata about suppliers, employees, operations; and theaccounting information is simply a small part.
The firmâs accounting information is kept in the firmâs generalledger. The general ledger is the collection of a companyâsaccounts where the amounts from the firmâs transactions areorganized and stored. You can think of it as a big book with a pagefor every asset, liability, equity, revenue, and expense account.Later in this appendix, you will learn how transactions getrecorded in a companyâs general ledger. For years, the generalledger system was maintained by the accounting department as aseparate information system; and the other functional areas of thebusinessâmarketing, production, sales, etc.âeach had its own systemfor keeping track of the information it needed. Since thedevelopment of computers and software programs that can managelarge amounts of information, more and more companies are using asingle, integrated information system. Thus, instead of keepingtheir data separately, accountants may get rprise-wide resourceplanning system (ERP).
No matter how it is related to the rest of a firmâs informationsystem, the accounting system is still called the general ledgersystem. The same financial statements are produced with both thegeneral ledger and the integrated types of information systems. Inthis appendix, we will use the general ledger system, which wasdesigned as a manual system, to demonstrate how transactions arerecorded, classified, and summarized for the financialstatements.
The General Ledger Accounting System
Keeping track of financial information with a traditionalrecord-keeping system is often called bookkeeping. As transactionsoccur, they are recorded chronologically by a bookkeeper in a bookcalled a journal. When we prepare an accounting equation work sheetshowing the effect of each transaction on the accounting equation,we are doing something similar to recording a transac- tion in ajournal. The resources exchanged are shown with their dollaramounts. The journal con- tains a record of each transaction as itoccurs. An example is shown in Exhibit B.1. In the next section,youâll learn how the âdebitsâ and âcreditsâ columns are used. Fornow, just notice that all of the accounts affected by thetransaction are used in a journal entry. Most companies use morethan one journal; each department may have its own journal. Commonjournals are the (1) sales journal, (2) cash receipts journal, and(3) cash disbursements journal. For simplicity, weâll use a single,general journal for all our transactions.

ge 4: General Journal
Ref.
J-1
J-2
Date Journal entry Debits Credits
June 1 Cash . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 65,000 Sales . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 65,000
To record the collection of cash for sales. June 4 Equipment . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 20,600
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 20,600 To record the purchase of equipment for cash.
The journal entries are recorded chronologically. Then, theindividual items are âregroupedâ by account as they are posted tothe general ledger. Trace the cash amounts in the journal entriesto the general ledger cash account shown in Exhibit B.2 on page566. The amounts for sales and equipment will be posted to theirown general ledger accounts

Because a company may have hundreds or even thousands oftransactions during an account- ing period, it would be difficult,probably impossible, to try to gather and use the information froma chronological record such as the journal. To be useful, theinformation needs to be reorganized, grouping together transactionsthat involve the same account. For example, when all the transac-tions that involve cash are grouped together, then the companyâscash balance can be easily deter- mined. As you can see from thatexample, it is useful for similar transactions to be groupedtogether. The transactions from the journal or journals aretransferred to another book called the general ledger through aprocess called posting the transactions to the general ledger.Posting is done periodically; it could be daily, weekly, ormonthly, depending on the size of the company.
The general ledger is the primary record of the financialinformation of the business. It is organized by accounts. As youread earlier in this book, an account is the basic classificationunit of accounting information. You can think of each financialstatement item as an account, and each account as a page in thegeneral ledger. On the page for a particular account, we record allthe additions to, and deductions from, that account.
For example, one account in the general ledger is cash. On the cashpage in the general ledger, we find every cash collection and everycash disbursement made by the company. If there are moredisbursements or collections than can fit on one page, they will berecorded on as many following pages as needed, all comprising thecash account. To make it easy to find the amount of cash on hand,the cash account has a running balance. That means a new balance iscalculated after every entry. Think about your own checkbookâthatâsthe record you keep of each check you write (a subtraction); eachdeposit you make (an addition); and the resulting total remainingin your checking account (thatâs your running balance). If you keepa running balance, it is much faster to find out how much cash youhave in your account. (Have you discovered what happens when youfail to keep your checkbook balance current?)
Accounts in the general ledger include cash, accounts receivable,inventory, prepaid insurance, equipment, accumulated depreciation,accounts payable, notes payable, contributed capital, and retainedearnings. (Notice, these are given in the order in which theyappear on the balance sheet.) How many accounts does a companyhave? Every company is different, and the number of accountsdepends on the detail the company wants in its financial records.For example, one company could have an account called utilitiesexpenses in which many different utility-related expenses could beaccumulated. Another company might prefer to have a separateaccount for each type of utility expenseâa separate page in thegeneral ledger for electricity expense, gas expense, water expense,etc. The number of accounts is determined by the amount of detail acompany wants to be able to retrieve from its records. If a companyuses very little gas or water, it would be a waste of time andspace to keep a separate account for those expenses. A company thatuses water in its production process, on the other hand, woulddefinitely want to keep a separate account for waterpurchases.
Companies also have subsidiary ledgers. These are detailed recordsthat support the bal- ances in the general ledger. For example, theaccounts receivable subsidiary ledger will have details about thecredit customersâsales, receipts, and account balances for everycustomer. The total dollar amount of accounts receivable in theaccounts receivable subsidiary ledger will be the total in thegeneral ledger.
Most companies have a large number of accounts, and they combinethe similar ones for the financial statements. When we look at thefinancial statements, we canât really tell how many individualaccounts a company has in its general ledger. Many smaller accountsmay be com- bined for financial statement presentation.
Anyone in the firm with access to the accounting records who wantsto know the balance in any account at any time can find it bylooking in the general ledger. A list of the balances in all theaccounts of a company is called a trial balance.
Before the financial statements can be prepared, adjustments to therecords must be made. We discussed those adjustments and how tomake them in Chapter 3. Adjustments are needed because of thenature of accrual accounting. On the financial statements, we needto include revenues that have been earned and expenses that havebeen incurred, even if we have not yet received the cash earned orpaid the cash for the expenses incurred during the accountingperiod. These adjustments are called accruals. The action has takenplace, but the dollars have not been exchanged.
We also need to be sure to include on the income statement for theperiod any revenue weâve earned or expenses weâve incurred forwhich the dollars were exchanged at a previous time. These arecalled deferrals. The dollars were already exchanged, and werecorded the receipt of the cash when we received the cash.However, we did not recognize any revenue or expense at that time.At the end of the accounting period, we have to recognize anyrevenue we have earned and any expenses that weâve incurred.
No matter what kind of accounting system a company uses, theinformation produced by that system must be adjusted before thefinancial statements can be prepared. After the adjustments aremade, the financial statements are prepared. We have actually doneall thisârecording the transac- tions, making the adjustments, andpreparing the financial statementsâusing the accounting equationwork sheet. The general ledger system is simply a more feasible wayto do it in an actual business.
Debits and Credits
To use the general ledger system and to understand the informationit makes available, we must learn a bit more accounting language.Donât panic over the terms debit and credit. You will find themeasy to understand, but only if first you get rid of any notions ofwhat you already think debit and credit mean. In accounting, eachterm has a very specific meaning that should not be confused withits more general meaning.
In accounting, when we say debit, we mean the left side; when wesay credit, we mean the right side. (This should be easy toremember.) Left is the only thing that the word debit means andright is the only thing that the word credit meansâunless we applythe terms to specific accounts.

A general ledger has been traditionally composed of amulticolumn page, similar to the one shown in Exhibit B.2. TheDebit column on the right shows the running balance in the cashaccount. You would almost never see a credit balance in thisaccount. The general ledger is often computerized in a similarformat.
In the balance columns, the column on the left is called the debit(DR) column, and the column on the right is called the credit (CR)column. As a shortcut to using formal preprinted two-column paper,accountants often draw a T-account to represent a page in thegeneral ledger. T-accounts shown in Exhibit B.3 are ourrepresentation of the general ledger shown in Exhibit B.2. OneT-account such as cash, shown next, represents a single page in thegeneral ledger. The left side of a T-account is the debit side, andthe right side of a T-account is the credit side.
Cash
Debit Credit
Numbers we put on the left side of the account are called debits,and putting a number in the left column is called debiting anaccount. Debit is a wonderful word that can be an adjective, anoun, or a verb. The same goes for the word credit. The right sideof the account is called the credit side, the numbers we put on theright side are called credits, and putting a number in the rightcolumn is called crediting an account.
In the fifteenth century, a monk named Fra Luca Paccioli wroteabout a system that uses debits and credits with the accountingequation. In his system, the accounting equation stays in balancewith each transaction and the monetary amounts of debits andcredits are equal for each transaction. Hereâs how it works:
1. For the accounting equation, the balance in the accounts on theleft side of the equa- tion (assets ) will increase with debits;and the balance in the accounts on the right side of the equation(liabilities and shareholdersâ equity ) will increase with credits.It follows that the balance in an asset account will decrease withcredits. Liability and equity account balances decrease withdebits. Putting that together,
â¢ asset accounts are increased with debits anddecreased with credits. â¢ liability and shareholdersâequity accounts are increased with credits and decreased
with debits.
This means that when we want to add an amount to our cash balance,we put the number of that amount on the left (in the left column ofthe two columns in the general ledger account for cash)âso thatâs adebit. When we disburse cash and want to subtract the amountdisbursed from the cash account, we put the number of that amounton the right sideâso thatâs a credit. The increase side of anaccount is called its ânormalâ balance. Cash has a normal debitbalance. Because we put the cash we receive on the debit side andthe cash we disburse on the credit side, it makes sense that ourcash account will normally have a debit balance. (Itâs not normalto dis- burse more cash than you haveâitâs pretty unusual.)
In accounting, we do not literally add and subtract from an accountbalanceâwe debit and credit an account to accomplish the samething. If we make an error, we do not erase the mistake and replaceit with the correct answer. Instead, we debit or credit the accountto cor- rect the error and make the account balance correct. Whenaccounting records are kept by hand, all entries are made in ink sothat no entries can be erased or changed. This has been traditionalin accounting to keep the records from being altered. Recordingevery increase to, and decrease from, an account balance gives acomplete record of every change made to the account.
2. Because shareholdersâ equity is increased with credits, allaccounts that increase share- holdersâ equity will increase withcredits. Revenue accounts increase with credits and decrease withdebits. When we make a sale, we credit the sales account.
3. Because shareholdersâ equity is decreased with debits, allaccounts that decrease share- holdersâ equity work in the oppositeway as revenue accounts work. For example, expense accountsâwhere alist of our expenses is keptâincrease with debits. As we incurexpenses, we put the amounts on the left side of expenseaccounts.

The Accounting Cycle
The process that starts with recording individual transactions,produces the four basic financial statements, and gets our generalledger ready for the next accounting period is called theaccounting cycle. Some of the steps in the accounting cycle wonâtmake any sense to you yet, but this appendix examines each indetail. By the end of this appendix, you should be able to explainand perform each step. The steps in the accounting cyclefollow:
1. Record transactions in the journal, the chronological record ofall transactions, from source documents such as invoices. These arecalled journal entries.
2. Post the journal entries to the general ledger. 3. At the end ofthe accounting period, prepare an unadjusted trial balance. 4.Prepare adjusting journal entries and post them to the generalledger. 5. Prepare an adjusted trial balance. 6. Prepare thefinancial statements. 7. Close the temporary accounts. 8. Prepare apostclosing trial balance.
Letâs look at each of these steps in detail.
Step 1: Recording Journal Entries
In the normal course of business, many transactions must berecorded in the accounting system. Letâs look at how thetransactions for a companyâs first year of business would berecorded in a jour- nal. The transactions for the first year ofClintâs Consulting Company, Inc., are shown in Exhibit B.4.

Step 1: Recording Journal Entries
In the normal course of business, many transactions must berecorded in the accounting system. Letâs look at how thetransactions for a companyâs first year of business would berecorded in a jour- nal. The transactions for the first year ofClintâs Consulting Company, Inc., are shown in Exhibit B.4.
The first transaction in Clintâs first year of business is his owncontribution of

graymouse341

Hello...I am in need of help with the adjusting entries please 100000	Bank Account
110100	Accounts Receivable (Direct Posting Account)
110150	Allowance for Bad Debts
110200	Interest Receivable
200600	Inventory-Operating Supplies
200900	Inventory-Raw Materials (Direct Post)
200910	Inventory-Finished Goods (Direct Post)
200920	Inventory-Trading Goods (Direct Post)
200930	Inventory-Semi-finished Goods (Direct Post)
210000	Prepaid Insurance
211000	Prepaid Supplies
212000	Prepaid Advertising
215000	Prepaid Rent
216000	Deposits on Purchases
220000	Notes Receivable
220110	Land (Direct Post)
220210	Production Machinery, Equip & Fixtures (Dir.Post)
220310	Accumulated Depreciation-Machinery (Direct Post)
220400	Office Furniture
220500	Accumulated Depreciation-Office Furniture
220600	Office Equipment and Computers
220700	Accumulated Depreciation - Office Equipment
300100	Payables-Income Taxes
300200	Accounts Payable (Direct Posting Account)
300300	Payables-Interest
300400	Payables-Short-Term Notes
300500	Payables-Long-Term Notes
300600	Payables-Commissions
300700	Payables-Salaries and Wages
300800	Accrued Expenses
310000	Goods Receipt / Invoice Receipt Account
320000	Accrued Tax â Output
321000	Accrued Tax- Input
322000	Unearned Revenues
329000	Common Stock
329100	Additional Paid-in-Capital
330010	Retained Earnings (Direct Post)
600000	Sales Revenue
610000	Sales Discount
620000	Miscellaneous Revenue
630000	Revenue Deductions
640000	Gain or Loss on Sale of Assets
650000	Customer Service Revenue
650100	Customer Service Revenue Settlement
700000	Labor
720000	Raw Material Consumption Expense
720100	Finished Product Consumption Expense
720200	Trading Good Consumption Expense
720300	Semi-Finished Consumption Expense
740000	Supplies Expense
740100	Telephone and Internet Expense
740200	Legal and Professional Expense
740300	Rent Expense
740400	Insurance Expense
740500	Payroll Expense-Office
740600	Payroll Expense-Administrative
740700	Sales Expense
740800	Tax Expense - Property
740900	Tax Expense- Income
741000	Miscellaneous Expense
741200	Bad Debt Expense
741300	Information Technology Expense Account
741400	Production Order Variance Expense Account
741500	Utilities (electricity & phone) Expense
741600	Manufacturing Output settlement
741700	Manufacturing Output Settlement Variance
741800	Depreciation Expense
741900	Advertising Expense
742000	Vendor Discounts Missed
742100	Shipping Expense
760000	Purchase Price Difference
760100	Production Variance
770000	Research and Development
780000	Cost of Goods Sold

Detailed Assignment Requirements

The next few pages show the balances in GBI accounts as of December 31st and then the descriptions of events occurring during January for which you are to make general journal entries in a manual accounting system. Your manual accounting system needs to include a general journal, Pivot Tables (that acts as a General Ledger), and a trial balance, all of which will be generated in Excel, (see the sample problem for the format).

After you have created your entries in your manual system, you will enter all the data into the SAP ERP system. When you enter your data into the SAP system the resulting financial information from the manual system and the SAP system should match exactly.

Assignment Steps

Record the daily transactions if appropriate, (some events may not involve journal entries), as general journal entries into Excel. Summarize the effects of the journal entries in a Pivot Table summary. Link the Pivot Table into your Excel worksheet as a trial balance. You should create links between your spreadsheets to expedite this process and minimize the risk of an error in data entry. Looking over the answer to the sample problem may be helpful in reviewing your Excel skills.

The next step is to record the adjusting entries into the general journal and then summarize them into a Pivot Table and then the trial balance.

Record closing entries in your trial balance as if this were a year-end close. (Do not enter the closing entries in your General Journal).

Prepare the SAP ERP system for data entry.

Now use the SAP ERP system to make all above entries using the general ledger system in SAP. This should be done in a series of steps as follows:

Examine the GLXX chart of accounts where XX is your assigned SAP student login ID#. (Whenever you see XX in the instructions, substitute your SAP login ID#.)

Record beginning account balances in the SAP general ledger. This should be done as one composite journal entry (the first journal entry). Use January 1, as the journal entry date for the beginning account balances. Be sure to compare this to your Excel spreadsheet to make sure the entries are correct.

Display the trial balance (you should compare this to your manual entries). If the trial balance does not match your manual entries, research the errors and make necessary corrections.

Record the daily transactions for January in the SAP general ledger (do each journal entry as a separate entry, not as one giant composite entry, be sure to use appropriate dates â this allows for a good audit trail).

Display the trial balance (you should compare this to your manual entries).

Record the adjusting entries.

Display the trial balance (you should compare this to your manual entries).

Simulate closing the books as of January 31 using the SAP utility. (Do not enter closing entries into the general ledger. These entries would be done automatically through the SAP month-end closing function.)

Instructions for using the SAP ERP system start on page 13 of this document.

Account Balances as of December 31^st


		Debit Balance	Credit Balance
100000	Bank Account	$300,318
110100	Accounts Receivable (Direct Posting Account)	94,670
110150	Allowance for Bad Debts		2,600
200600	Inventory-Operating Supplies	8,832
200900	Inventory-Raw Materials (Direct Post)	52,000
200910	Inventory-Finished Goods (Direct Post)	281,298
200920	Inventory-Trading Goods (Direct Post)	66,474
210000	Prepaid Insurance	3,000
212000	Prepaid Advertising	2,400
220110	Land (Direct Post)	528,000
220210	Production Machinery, Equip & Fixtures (Dir.Post)	915,000
220310	Accumulated Depreciation-Machinery (Direct Post)		408,000
300200	Accounts Payable (Direct Posting Account)		48,000
300700	Payables-Salaries and Wages		94,313
300800	Accrued Expenses		2,200
320000	Accrued Tax â Output		4,000
329000	Common Stock		1,010,000
329100	Additional Paid-in-Capital		52,870
330010	Retained Earnings (Direct Posting)		630,009

Events During January

Event Date Description of Event

1	January 3	Employees are paid monthly on the first business day of the month for work done in the previous month. (Ignore payroll taxes for this assignment.) Accounting wrote and distributed the paychecks.
2		GBI received $60,000 in safety product inventory and $40,000 in raw materials from Dallas Bike Basics. This inventory was ordered on December 28. The payment terms for the invoice total of $100,000 are net 10 days. GBI paid the CWX shipping company $1500 with a manual check for the shipment of the goods base on the weight. The bill of lading showed that the safety product inventory arrived in 5 boxes with an average weight of 40 lbs per box. and the raw materials came on a pallet and weighed 300 lbs.
3		Windy City Bikes in Chicago, IL ordered $22,500 of bicycle accessories from GBI. The cost of the accessories (to GBI) is $15,000. The goods were shipped to Windy City immediately via UPS using Windy Cityâs UPS shipping number. The terms of payment for Windy Cityâs order are 3/10 net 30 days.
4	January 7	GBI received payment of $24,000 from Northwest Bikes in Seattle, WA for the balance due on their account.
5	January 10	GBIâs account on the utility company website is updated at the end of each month when the meter is read. GBI uses this data to accrue the expenses at the end of each month (in this case on December 31^st.) This allows recognition of the expense in the correct period. Expenses are usually accrued at the end of the month as âAccrued Expensesâ. GBI paid the December utility bill via the companyâs automatic electronic bill pay program.
6		GBIâs advertisement in the English language edition of Italian Cycling Journal was published today. This ad was prepaid at the end of August for six months of advertising, September through February, (Four months of advertising have already been used.)
7	January 11	The office manager in San Diego ordered $380 of office (operating) supplies from Staples. While on the way back from a delivery, one of the warehouse staff picked up the Staples order and brought it to GBIâs office. GBI has an account with Staples and payment terms are net 10. Operating supplies expense is figured at the end of the month determined by the amount of supplies used during the month.
8		GBI ordered $75000 in raw materials from Space Bike Composites in Houston, TX. Terms of payment to Space Bikes are net 30.
9		GBI received payment from Windy City Bikes for their order from January 3. Windy City paid the invoice amount less the discount for paying within 10 days.
10	January 12	GBI paid for the inventory order (via bank transfer) that they received from Dallas Bike Basics back on January 3.
11	January 13	In order to better track inventory, GBI ordered a bar-coding and tracking system which will be installed and tested by Computer Specialists, Inc. (CSI). The system will allow employees to track inventory using mobile devices and special software which will link into their new computerized accounting system. The barcode system costs $7,500 (including sales tax) and CSI will charge GBI $1,300 for the installation and tests. GBI paid a deposit of $2,000 on the system and the remainder is due and payable when the system is installed. GBI will classify the bar-coding system as âProduction Machinery, Equipment and Fixturesâ.
12	January 17	GBI paid an invoice from Lightbulb Accessory Kits for ordered goods that were received on December 20. The amount of the invoice from Lightbulb is $15,890 due net 30.
13		The city of Denver will be hosting a decathlon at the end of February. The event is expected to create demand for high quality bikes. Rocky Mountain Bikes in Denver, CO placed an order with GBI for $128,000 worth of bicycles to be delivered immediately. Rocky Mountain will pay the shipping. The bikes cost GBI $78,000. GBI shipped the order immediately so that Rocky Mountain can start promoting the bikes. Because Rocky Mountain is a good customer, GBI is giving them special terms of net 45 days on this order.
14		GBI received raw materials inventory ordered from Space Bike Composites January 11. Shipping charges of $600 were included in the invoice from Space Bike.
15		GBI received notice that Bunkyâs Bicycle Emporium had declared section 13 bankruptcy which meant GBI would not be able to collect the $4,200 that Bunkyâs owed them.
16	January 18	GBI received a $90,000 funds transfer from Silicon Valley Bikes in Palo Alto for the balance due on their account.
17	January 19	GBI paid Staples for the office supplies they received January 11.
18		SoCal Bikes in Irvine, CA placed an order for $2,750 in bicycle helmets for a special event in February. The merchandise cost GBI $1,300. SoCal sent a truck to the GBI distribution center in San Diego, CA and picked up the merchandise directly from GBIâs warehouse. Terms of payment are net 30. (Donât forget to charge sales tax of 7.75% for this order.)
19	January 24	Beantown Bikes in Boston, MA placed an order with GBI for $27,000 in bicycles. The cost of the bicycles is $17,000. Beantown Bikes is a new customer. Its buyers saw GBIâs booth at a trade show. Because Beantown is a new customer, they must either wait until their credit can be approved or pay for the order before GBI will ship the bikes to them.
20	January 25	GBI has been offered the opportunity to advertise in the Bicycle Times online magazine for a reduced price if they pay for three months in advance. In light of the upcoming Tour de France, the advertising is a great opportunity for GBI to get additional recognition. The advertising will start in February. GBI wrote a check for $9,000 for three months of advertising.
21	January 26	GBI received notification from their bank that Beantown Binkes had transferred funds into their account for their prior order, so GBIâs warehouse personnel shipped Beantownâs order. Beantown will be responsible for paying Fed-X $400 for shipping the order.
22	January 27	The county approved GBIâs building plans for their new warehouse. Estimated building costs are $1,300,000 which will be funded via a mortgage from Bank of America. GBI plans to break ground on the new building April 18^th of this year.
23		GBI sent a $32,000 check to Night Rider Aluminum Products for an order of bicycle parts GBI received December 30th.
24		Big Apple Bikes in New York City is expanding to another location in New York and needs to stock the new location. GBI received a phone order from Big Apple for $250,000 in bicycles and $108,500 in bicycle accessories and safety gear at special discount prices. The cost of the bicycles in this order is $185,000 and the cost of the accessories is $65,000. Big Apple will have a contract trucking company pick up the order when it is ready. The order is sent to GBIâs warehouse for picking and packing, which may take a couple days. Payment terms to Big Apple for this order are net 30.
25	January 31	GBI pays sales tax once a quarter via the stateâs electronic filing and payment system. GBI filed its return and paid its sales tax for the quarter ending December 31.
26		GBI paid Februaryâs rent of $4,000 for the office and warehouse space in San Diego.
27		CSI installed and tested the new barcode system. The warehouse manager approved the installation and commented that she thinks it works great. GBI wrote a check to CSI for the balance owed and gave it to the installer.
28		Big Appleâs truck arrived at GBIâs warehouse and picked up the order from January 27^th.

Adjustment information as of January 31, not already given in the original transaction(s):

1.Based on prior experience, GBI estimates that approximately 1.5 % of the credit sales from each month will become bad debt. GBI writes off bad debts as they occur and recognizes bad debt expense based on percentage of credit sales as an adjusting entry each month.

2. As a control measure, physical inventories are taken on a periodic basis alternating between the raw materials inventory, finished goods inventory and trading goods inventory. Physical inventory of the finished goods inventory was taken at the end of January. It was determined that the value of the finished goods merchandise on hand was $1,200.

3. GBI counted the office (operating) supplies on hand after the close of business on the last day of the month and determined the cost of the unused office supplies to be $1000.

4. Production Machinery, Equipment and Fixtures were placed in service on January 1, 2013, with no salvage value. The bar-code system has a 5-year life and no salvage value. GBI depreciates fixed assets on a straight-line basis and those assets placed in service in the first half of the months are depreciated for the entire month, while fixed assets placed in service during the last half of the month are not depreciated until the second month. Depreciation is rounded to the nearest dollar and assets are depreciated on a monthly basis (i.e. number of days in the month is not of consequence).

5. GBI used the Internet to review the monthly charges for utilities the business consumed during January. Based on the Internet report, the amount to be billed by the utilities company for January usage is the same as was billed for December.

6. Liability insurance for the six-month period ending on January 31 was paid last August on the first of the month. Liability insurance is assumed to be utilized uniformly over the six-month policy period.

7. GBI needs to recognize the wages expense for the month. Since all employees are paid salaries and no changes have been made, this amount is the same as the previous month salaries. (For purposes of this assignment, ignore manufacturing, office, and administrative payrolls and assume all wages expense is towards labor expense.)

****Hello, there was a comment that said "Lack of information on year". For this case study you can use 2018 for all the January transactions and 2017 for anything refering to December. All adjustments need to be dated January 31, 2018. Thank you

viridianreindeer995

Billâs Lawn Care Mini Practice Part 4

In June, Bill commented to you that he could never figure outhis bank statement, âit never matches the

balance in my accounting recordsâ he tells you. So you explainthat a bank reconciliation is a tool used

to balance the bank statement to the accounting books. He givesyou his bank statement for June, 2014

(shown below). The general ledger shows a balance for theaccount cash of $14,319.00 on June 30,

2014 (detail transactions below). Billâs business only has onechecking account and no other cash

accounts.

Bill has begun to have problems collecting some of his creditaccounts and is considering writing off a

couple of customer account balances. He asks you how these baddebts should be recorded and has

asked you to begin recording bad debt using the allowance methodfor June, 2014. Selected account

balances at the end of June, 2014 are:

Sales $7,200

Sales on Credit $2,900

Accounts Receivable $3,200

As a result of increased focus on collecting accountsreceivable, Bill has decided to extend credit for one

customer, Alan Jones, who owes Billâs Lawn Care $500. Bill andAlan have agreed to a 90-day 6% note

for $500 issued on June 5, 2014.

Instructions:

1. Using the bank statement and the general ledger, prepare abank reconciliation for Billâs Lawn

Care as of June 30, 2014. Record the necessary journal entriesto adjust the books for the

appropriate reconciling items. Start with Page 6 for the journalentries. Explanations are

optional.

2. Using the information given above, calculate the amount ofbad debt using:

Using the chart of accounts, record the journal entry for baddebt expense for Billâs Lawn Care

using the percentage of sales on credit method.

3. Using the note receivable information above and the chart ofaccounts, record the following

entries in the general journal (continue these entries on Page6):

a. Percentage of Sales on Credit = 1.5%

b. Percentage of Accounts Receivable = 1%

a. Receipt of the note in payment of the accounts receivablebalance.

b. Adjusting entry at the end of June, 2014 for the notereceivable. (Round interest

calculations to two decimals)

c. Assume that Alan pays the note and interest in full on thedue date, record the necessary

journal entry. Assume that interest has been accrued at the endof each month.

d. Assume that Alan defaults on the note and interest on the duedate, record the necessary

journal entry. Assume that interest has been accrued at the endof each month.

CHECKING ACCOUNT DETAIL:

DATE	TRANSACTION TYPE & NUMBER	AMOUNT	BALANCE
BEGINNING BALANCE			$12,850.00
6/2/2014	CHECK #1570	226.00	12,624.00
6/5/2014	CHECK #1571	83.00	12,541.00
6/6/2014	EFT #43	127.00	12,414.00
6/10/2014	DEPOSIT #104	1,550.00	13,964.00
6/15/2014	CHECK #1572	145.00	13,819.00
6/15/2014	CHECK #1573	185.00	13,634.00
6/20/2014	DEPOSIT #105	885.00	14,519.00
6/24/2014	EFT #44	143.00	14,376.00
6/28/2014	CHECK #1574	87.00	14,289.00
6/28/2014	CHECK #1575	95.00	14,194.00
6/30/2014	DEPOSIT #106	425.00	14,619.00
6/30/2014	CHECK #1576	155.00	14,464.00
6/30/2014	CHECK #1577	145.00	$14,319.00

BANK STATEMENT:

FIRST NATIONAL BANK
ACCOUNT SUMMARY JUNE 30, 2014
BEGINNING BALANCE	$12,850.00
PAYMENTS	$1,021.00
DEPOSITS	2,440.00
FEES	20.00
ENDING BALANCE	$14,249.00
PAYMENTS
DATE	REFERENCE	AMOUNT
6/5/2014	1570	$266.00
6/9/2014	1571	83.00
6/10/2014	43	127.00
6/19/2014	1572	145.00
6/28/2014	1573	185.00
6/28/2014	NSF	120.00
6/30/2014	1575	95.00
TOTAL PAYMENTS		$1,021.00
DEPOSITS
DATE	REFERENCE	AMOUNT
6/11/2014	104	$1,550.00
6/23/2014	105	885.00
6/30/2014	INTEREST	5.00
TOTAL DEPOSITS		$2,440.00
FEES
6/30/2014	SVC CHG	$20.00
TOTAL FEES		$20.00

Additional Information: Check #1570 waswritten for $266.00, but was recorded incorrectlyin the general ledger. The check was for fuel.

Billâs Lawn Care

Chart of Accounts

Classification	Account Number	Account Name
ASSETS	101	Cash
	110	Accounts Receivable
	112	Allowance for Doubtful Accounts
	115	Notes Receivable
	116	Interest Receivable
	120	Supplies
	130	Prepaid Insurance
	140	Inventory
	150	Equipment
	155	Accumulated Depreciation â Equipment
LIABILITIES	201	Accounts Payable
	220	Notes Payable
	225	Interest Payable
OWNERâS EQUITY	301	Ownerâs Capital
	305	Ownerâs Drawings
	310	Income Summary
REVENUES	401	Lawn Service Revenue
	410	Sales Revenue
	415	Sales Returns and Allowances
	420	Interest Income
COST OF GOODS SOLD	501	Purchases
	505	Purchase Returns and Allowances
EXPENSES	620	Supplies Expense
	630	Fuel Expense
	640	Repair and Maintenance Expense
	650	Advertising Expense
	660	Insurance Expense
	670	Depreciation Expense
	680	Interest Expense
	690	Bad Debt Expense
	695	Miscellaneous Expense

Please answer for the following

Bank reconciliation




Cash balanceper bank statement







Adjusted cashbalance per bank

Cash balanceper books





Adjusted cashbalance per books

General Ledger

	GENERALJOURNAL			Page
DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT

Bad Debt Calculations

Term ofNote

TotalInterest on Note

AccruedInterest June 30, 2014

Notes Receivable Calculation

Percentage ofSales on Credit



Percentage ofAccounts Receivable

Expert Answer

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