ADDITIONAL INFORMATION: .4 Record the following AJE's in die General Journal and then post to the approprrate Ledger accounts. When posting to the Ledger, be sure to cell reference re debit or credit column using the ROW IN BETWEEN THE UNADJUSTED AND ADJUSTED BALANCE lN EACH T- ACCOUNT. Posting in this row will automatically update your TB Worksheet columns labeled 'Adjusimenrsw p 1. Wages eamed but employees during the last half of December and to be paid on January 1, were $12,400 and salaries to ofcers were $15,000. Associated payroll taxes on these wages and salaries were $2,81tl,u .J 2. Ofthe Deferred Revenue account, 5% have now been earned. d 3. Uncollectible accounts are estimated to be 4% of ending Accounts Receivable. (round your answer to the nearest whole dollar )4 4. Desert prepays for some insurance and advertising. The prepaid expense account has a balance of $26,774 at year end, but betore adjustment This balance includes $12,240 for an 18-month casualty insurance poicy purchased on March 1, 2017 OI the rema rig prepaid balance, 60% of the advertiing has now been used. (round to the nearest whole dollar.)'J 5. Desert records depreciation & amortization on imited lite tangible & intangible assets _o_r_i_a_i_ mggjhjy basis using the straightrline method. ('refer to the footnotes for more details on original cost, salvage value and rrsei'ul'lives).J .4 6. The long-ten" liabilities were outstanding tor all ot2017 and accrue interest at 6% APR. Desert records accrued interest on long-term debt guartedy [interest was last updated on Sept. 30.) The company is required to pay the interest annually each January 15'. Desert also accrued interest on short-tenn notes payable 0 .J 7. At the end of December, a physical count was taken of Desert's inventories ll. supplies. lt revealed the following intonnationw a. Inventories Apparel: there were 1,310 units of apparel (t-shirts, tanks and hoodies) on hand at year end with an original cost of $17,420. .4 b. Oice Supplies: There was 57%!) ofch Supplies on hand as of December315U 8. Desert received notice that accrued interest on the long-term investment had been sent and the check should arrive in eady ml: 2018 At December 31, the Long-Tenn Investment (Available for Sale Securities) had a fair value of $204,700. Deserts tax rate is 3095 {record as two separate AJEsF .J 9. Income tax is based on a 30% tax rate J .4 .4 After resenting and posting these AJE's to the joumal and ledger, check your TB Worksheet to make sure each palrolcolumhs is wand they match the Check Figures posterior! Bl). Once you know the balances are correct, you are ready to prepare the formal nancial statements and prepare yourclosing entriesy PERPETUAL INVENTORY METHODe 'Perpetuar means \"to keep a running total" ol the amount ofinventory you have on hand at any point in time. a .4 To follow the \"Perpetual Method', every time the company makes a purchase of additional inventory, you need to increase (debit) the inventory account, and credit either cash or account payable, depending ifthe company paid cash or \"on account\". *4 .4 Every time the company makes a sale ofmerchandise to a customer, it requires {2) joumal entries to update the accounting recordsg1) the tirstjoumal entry is required to record the sale itseli, whether cash or credit sale, and (2) the second is needed to update the inventory records to show that some goods have lett inventory and the account should be reduced. Once Inventory has been sold, it is now recorded as COGS (debit Cost of Goods Sold... an expense on the Income Statement? .4 Record a Purchase of Inventoryw .4 Inventory :0an Account Payable row ,4 TO RECORD THE SALE OF MERCHANDISEW p 1. Record the Sale: Recordthe Revenue at the Selling Price (Retail?J .4 Cash or NR row Sales Revenue row .4 2. Update the \"Inventing" Account: Reduce the Inventory at the Cost ofthe merd'iandise that has now been sold}J .1 COGS xx-J Inventory XXH .J *Joomal entries (f) it. {2) must ALWAYS be done together for gaghggeygix sale of merchandise to a Customer. .4 WHAT HAPPEN 5 AT THE END OF THE MONTHNEAREW When a company uses the perpetual method to keep track otits inventory, the accounting records can be used to tell management how much inventory they should have on hand at the end ofthe period, based on the sales recorded The company would always want to take a physical count of the inventory to ven'fy how much merchandise is actually pr! hand. Once the physical count is taken, it is then compared to the ending balance for inventory in the accounting records. lfthere is a difference, management knows they have sutfered some type ofthefL loss, or shrinkage of merchandise during the period. All losses are reported on the Income atement and should be recorded with an NE at month end. For a retailer, these losses are not unusual and therefore can be included as part ol COGS. The following AJE would be recorded for any shortagesw COGS x20 Inventory xxe .4 The dollar amount of the loss is determined by the difference between the physical count and the balance in hhe lnventory account at year end. A \fCase 1 A Practice Problem in Accounting .4 Desert Fitness Corporation .4 In Chapters 34. we disco: the Accounting byes-motion Symzn! ma mfarmalmialmm which result The mcmiug cycle represent the maps a company would use to ctgmme 52}! 911k; Museum mm over ape-4w ofine that are necessary to mmaznmpm themal'mcial 51mm; The propose of this case i: to have you build an integrated Etcel gymnast that simulate: Desert tness Corporation '5 mcamiog righmaon .syriem .4 .4 You win be requiredh: mam! frmsoctiorrs in Me Gemaermr, post to the (-aceorm in mledgrr, rmrdAayumng Journal Entries, [meals a Trial 3m: .3be awdArr mmm using a Wei-ism: recora'CtosDrg mtg: andprepwe azrmalret afnmiciatrtarmentr ingoodme .4 To buildanmegrawd with\4 The following events took place during the month ammo? affecting Desert Fitness. H .4 - InstructionsJ .4 Use the following TRANSACTIONS AND ADDITIONAL INFORMATION to complete the General Journal, Ledger, Worksheet and Financial Statements for the last month of operations for Desert Fitness. Use the Perpetual Inventnry method for all sales of merchandise (See the last page for a detailed example of how the Perpetual Method recorded and used).4 .J I TRANSACTIONS4 .4 Dec 1 gthe beginning of December, the two principal owners invested an additional $80,000 each in exchange for shares of stock in preparation to expand their operations in the near future. The shares were trading at SSIshare on December 1 H .J Dec 1 Purchased land for $70,000 to be used for a new gym tacility with constmction planned tor 201 3. Desert paid 20% down and signed a 9-month, 5% note tor the balance. Principal and interest is to be paid at maturity on August 31, 2018.4 ,4 Dec 1 The Company purchased additional equipment for $164,800, paying 25% down and giving a one-year, 6% note for the balance, with principal 8x interest payable at matun'ty.4 ,4 Dec 1 Employees are paid on the 1St and 15'" of each month. Paid the balance of what was owed at November 30, 2017. H .4 Dec 1 Sold a piece ofequipment tor$5,42l] cash pmceeds. The equipment had an original cost of$24,000 and was 80% depreciated. All equipmerd is depreciated on a straight-line basis and have a 10% salvage value. 4 .J Dec 2 Purchased on account a total of 320 t-shirls and tanks with a silkscreened Desert logo trom T6hirt Creations at a price of 58 per shirt. These shirts are available for resale to customers.4 .4 Dec 2 Received a bill for $2,550 from Deserl's attomey for legal services rendered, to be paid tgr January 2, 201thJ .4 Dec 4 Purchased ofce suppliafor $750 on account from Max Ofce Supplies. Desert has 30 days to pay for the supplies.4 .4 Dec 5 During the rst week of December, sold eighty, six-month memberships for an introductory price of $100 each. AI membership few were collected in cash;J ,4 Dec 5:30\" twenty tshirts to a corporate member, Allen &Associates for $20 each. Collected Dec}r Dec 15 $100 in cash and the balance was charged to the customer's account. The original cost of the apparel was $160.4 .; During the rst week of December, provided 210 hours of personal training services to members. Fees are charged at a rate of 5204'hour. Of these fees, $700 was collected in rash and the balance was billed to individual membefs accounts. 4 .J g the rst half of December, provided a variety of group exercise programs. Each member is dlarged $1 (liclass and 720 members participated during this time. Billed the indvidual members' accounts lorservices provided.4 l Dec 15 Dec 15 .4 Dec 18 .4 Dec21 Dec 22 .4 Dec 26 .4 Dec 27 .4 Dec 31 Paid wages to employees 01510200 and salaries to oicers of$15,000; associated payroll taxes on these wages I} salaries are $2,041. (You can record in two separate journal entries Payroll taxes are an expense to the company for unemployment benets and recorded as a payable to the slate and federal taxing authority on a quarterly basis They will be paid on Jan 1)~' Sold f'dty, six-month memberships for$180 each. Collected the fees in rash. 4 Paid the total amounts due to Thirt Creations, Desert's attorney and Max Ofce Supplies. (record as onejoumal entry) 4 Through the rst three weeks in December, sold apparel to members for a retail selling price at $3,800. The original cost of the merchandise sold was $2,120. Collected 40% in cash, the balance was biled to each customers account.4 Desert declared a rash dividend of$0.20 per share, payable January 30, 2018.4 Collected the balance of what was owed on account from Allen & Associates. Also colected 40% ofthe fees for group exercise classes & personal training services billed to customer accounts during the rst hall of December 4 Received a utility bill that totaled $1,750 for the month and a telephone bill for 5356. Both were paid;J Desert Fitrl ess provided you with the following information regarding the remaining activities forthe month of Decemben4 a. Fees for group classes for the last half of December4 (billed to members' accounts) $ 8,700.4 b. Fees for personal training sessions completed 4 during December (60% collected in cash) 4,9004 c Cash sales of apparel (original cost of apparel was 4 $34n) 1,6004 d. Credit sales for apparel during the 4 last half ofDecember. 2,8404 Cost of apparel sold from Dec. 15-30 1,4364 e. Cash received during Dec. lorservices previously4 billed to members' accounts. 52,9504 f Ofthe amounts owed to suppliers on account. $12,400 4 Represent repairs that were made to the heating I} cooling 4 System ofthe gym in November This account was paid. 12,4004 9. Desert was notied that one of their corporate account4 Members had declared bankruptcy. Desert wrote o4 The account. g 1:!!4 .4