A client, OC Ranger, asks you to record the accounting transactions for his new business, College Textbook Company. College Textbook Company is a merchandising company that buys college textbooks from publishers and sells the textbooks to local colleges and universities, as well as to students. College Textbook Company uses the perpetual inventory system and special journals for sales, cash receipts, purchases and cash disbursements.

There are 4 different worksheets you will be using to complete this exam:

Special Journal

Inventory Worksheet

Petty Cash Worksheet

Bank Reconciliation Worksheet

Part 1 - Information

A client, OC Ranger, asks you to record the accounting transactions for his new business, College Textbook Company. College Textbook Company is a merchandising company that buys college textbooks from publishers and sells textbooks to local colleges and universities, as well as to students. College Textbook Company uses the perpetual inventory system and special journals for sales, cash receipts, purchases, and cash disbursements.

1. Analyze the following transactions, calculate the amount of each entry, and record each entry in the applicable special journal in the attached working papers, which include: 1) Credit Sales and Sales Returns, 2) Cash Receipts, 3) Purchases and Purchase Returns and 4) Cash Disbursements.

2. When all the transactions have been recorded, foot and cross foot each journal to verify that the debit columns equal the credit columns on each journal.

12/2/2019 OC Ranger invests $25,000 cash into a new business, College Textbook Company.

12/2/2019 College Textbook Company issues check #101 payable to cash for $150 to establish a petty cash account.

12/2/2019 College Textbook Company issues check #102 payable to Rentals For You for one months rent in the amount of $500.

12/2/2019 College Textbook Company purchases 60 textbooks at $100 each for $6,000 total on December 2 from School Books and More Company on credit with terms 1/10, n/30.

12/3/2019 College Textbook Company discovers that 5 of the textbooks received from School Books and More Company are the wrong textbooks and returns the textbooks for a full refund of $500. School Books and More Company applies the refund to College Textbook Companys account.

12/3/2019 College Textbook Company purchases 35 textbooks at $110 each for $3,850 total on December 3 from School Books Specialty Company on credit with terms 2/15, n/30.

12/5/2019 College Textbook Company sells 30 textbooks at $200 each for $6,000 total on Invoice #101 to Local Community College on December 5 on credit with terms 1/10, n/30. Using the Specific Identification Method for valuing cost of goods sold, the cost of the textbooks sold was $100 each for a total cost of $3,000.

12/6/2019 College Textbook Company purchases 20 textbooks at $115 each for $2,300 total on December 6 from Textbooks-R-Us on credit with terms 2/10, n/30.

12/7/2019 College Textbook Company sells 10 textbooks at $200 each for $2,000 total on Invoice #102 to Local University on December 7 on credit with terms 1/10, n/30. Using the Specific Identification Method for valuing cost of goods sold, the cost of the textbooks sold was $110 each for a total cost of $1,100.

12/7/2019 College Textbook Company issues check #103 to pay Safe Freight Shipping $50 for shipping charges on the textbooks shipped to Local University. College Textbook Company has agreed to pay the shipping on this order.

12/8/2019 Local University discovers that they ordered 2 math textbooks too many and asks to return the textbooks for a refund of $400. College Textbook accepts the return and applies the refund to Local Universitys account. Using the Specific Identification Method for valuing the cost of goods sold, the cost of the textbooks returned was $110 each for a total cost of $220.

12/10/2019 College Textbook Company records cash receipts from cash sales of 25 textbooks to students in the amount of $5,175. Using the Specific Identification Method for valuing the cost of goods sold, 12 of the books sold cost $100 each, 4 of the books sold cost $110 each and 9 of the books sold cost $115 each. The total cost of the text books sold was $2,675.

12/12/2019 College Textbook Company issues check # 104 to pay the amount owed to School Books and More Company for the December 2 purchase, less the return and the discount.

12/13/2019 College Textbook Company issues check #105 to pay the amount owed to School Book Specialty Company for the December 3 purchase, less the discount.

12/15/2019 College Textbook Company receives a check from Local Community College for the amount due on the December 5 sale, less the discount.

12/15/2019 College Textbook Company issues check #106 to pay the amount owed to Textbooks-R-Us for the December 6 purchase, less the discount.

12/17/2019 College Textbook Company receives a check from Local University for the amount due on the December 7 sale, less the return and the discount.

12/20/2019 College Textbook Company records cash receipts from cash sales of 10 textbooks to students in the amount $2,075. Using the Specific Identification Method to value cost of goods sold, 5 of the books sold cost $100 each and 5 of the books sold cost $115 each. The total cost of the textbooks sold was $1,075.

12/20/2019 College Textbook Company issues check #107 to pay $800 to a part-time employee, Wanna B. Rich, for wages earned December 1 through December 15.

12/24/2019 College Textbook Company purchases 10 textbooks at $110 each for a total of $1,100 from School Books Specialty Company on credit with terms 2/15, n/30.

12/30/2019 College Textbook Company records cash receipts from cash sales of 5 textbooks to students for a total of $1,500. Using the Specific Identification Method to value cost of goods sold, the cost of the textbooks sold was $100 each for a total cost of $500.

12/31/2019 College Textbook Company issued check #108 payable to US Phone, for $210 to pay the telephone bill.

12/31/2019 College Textbook Company uses a store credit card to charge the purchase of $750 of office equipment at Everything Office.

OC Ranger thinks he should use the Specific Identification method for valuing cost of goods sold and ending inventory, but has heard that there are alternative methods. For comparison purposes, he would like you to calculate College Textbook Companys cost of goods sold and ending inventory using the following accounting methods:

• 1. Specific Identification

  2. Weighted Average

  3. FIFO

  4. LIFO

Note: For your calculations, use the inventory purchases and the sales invoice amounts listed in the December accounting transactions above, less any returns. Do not include the discounts in your calculations. Round all calculations to the nearest dollar. Working papers are attached for your calculations.

As indicated in the December accounting transactions identified in Question 1, College Textbook Company established and maintains a $150 petty cash fund.

• 1. Record the following cash transactions paid out of the petty cash fund during the month of December, 2019 in the Petty Cash Record, which is included in the attached working papers.

  2. Prepare a journal entry to record the reimbursement of Petty Cash.

12/5/2019 Pay $50 to a student artist, Talent Aplenty, who created advertising flyers for College Textbook Company.

12/10/2019 Pay $15 to US Postmaster for postage stamps.

12/28/2019 Pay $20 to The Office Supply Store for office supplies used during the month of December.

12/30/2019 Pay $10 mileage to part-time employee, Wanna B. Rich, for going to the post office.

12/31/2019 Replenish the Petty Cash Account.

OC Ranger would like you to reconcile the bank statement for College Textbook Company for the month of December, 2019.

• 1. Complete the bank reconciliation form in the attached working papers to reconcile the checking account bank balance to the checking account book balance.

  2. Prepare a journal entry to record the corrections to the checking account book balance.

• College Textbook Companys general ledger shows a checking account balance of $25,217.

• The bank statement shows a checking account balance of $23,592.

• The December 30 deposit of $1,500 is not listed on the bank statement.

• Check # 108 for $210 has not cleared the bank yet.

• The bank charged College Textbook Company a check printing charge of $40.

• The bank charged College Textbook Company a monthly bank account fee of $15.

• A $250 check received from a student was returned by the bank for non-sufficient funds.

• The bank charged an NSF fee of $30 for this returned check.