CASE STUDY Events During January Event Date Description of Event Employees are paid monthly on the first business day of the month 1 January 3 for work done in the previous month. The total payroll for the previous month equals the balance in account 300700. (lgnore payroll taxes for this assignment.) Accounting wrote and distributed the paychecks GBI received $55,792 in safety product inventory and $37,228 in raw materials from Dallas Bike Basics. This inventory was ordered on December 28. The payment terms for the invoice total are net 10 days GBl paid the CWX shipping company $550 with a manual check for the shipment of the goods. The bill of lading showed that the safety product inventory arrived in 6 boxes with a total weight of 120 lbs and the raw materials came on a pallet and weighed 100 Ibs Windy City Bikes in Chicago, IL ordered $22,500 of bicycle accessories from GBI The cost of the accessories (to GBl) is $15,380. The goods were shipped to Windy City immediately via UPS using Windy City's UPS shipping number. The terms of payment for Windy City's order are 2/10 net 30 days 4 January 7 5 January 9 6 January 10 GBI received payment of $16,550 from Northwest Bikes in Seattle WA for the balance due on their account GBl paid February's rent of $4,500 for the office and warehouse space in San Diego GBI's account on the utility company website is updated at the end of each month when the meter is read GBl uses this data to accrue the expenses at the end of each month (in this case on December 31*) This allows recognition of the expense in the correct period Expenses are usually accrued at the end of the month as Accrued Expenses". GBI paid the December utility bill of in the amount of the applicable account balance via the company's autormatic electronic bill pay program. GBI's advertisement in the English language edition of Italian Cycling Journal was published today. This ad was prepaid at the end of July for six months of advertising, August through January iLma monthc of arhrarticinn haua alroads hoon.ucod and the you need to eal, s sdiet GBl's office. GBI has an account with Staples and payment terrms are net 10. Operating supplies expense is figured at the end of the month determined by the amount of supplies used during the month GBI ordered $99,618 in raw materials from Space Bike Composites in Houston, TX. Terms of payment to Space Bikes are net 30 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 GBI paid the appropriate amount via bank transfer for the inventory order that they received from Dallas Bike Basics January 3 10 11 January 12 In order to better track inventory, GBI ordered a bar-coding and 12 January 13 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 $5,895 (including sales tax) and CSI will charge GBI $1.200 for the installation and tests. GBI paid a deposit of $3,200 on the system and the remainder is due and payable when the system is installed. GBI will classify the bar-coding system as "Production Machinery, Equipment and Fuxtures GBI paid an invoce from Lightbulb Accessory Kits for ordered goods that were received on December 20. The amount of the invoice from Lightbulb is $17 025 due net 30 The city of Denver will be hosting a decathlon at the end of February The event is expected to create demand for high quaity bikes Rocky Mountain Bikes in Denver, CO placed an order with GBI for $128,530 worth of bicycles to be delivered immediately Rocky Mountain will pay the shipping The bikes cost GBI $79,941 GBI shipped the order immediately so that Rocky Mountain can start promoting the bikes. Because Rocky Mountain is a good customer GBl is giving them special terms of net 45 days on this order GBI received raw materials inventory ordered from Space Bike Composites January 11 Shipping charges of S807 were included in the $100,425 invoice from Space Bike 13 January 17 14 15 GBI received notice that Bunky's Bicycle Emporium had declared section 13 bankruptcy which meant GBI would not be able to collect the $1,650 that Bunky's owed them GBl received a $91,960 funds transfer from Silicon Valley Bikes in Palo Alto for the balance due on their account 16 17 January 18 GBl paid Staples for the office supplies they received January 11 18 January 19 xB 9 J CASE STUDY SoCal Bikes in Irvine, CA placed an order for $2,320 in bicycle helmets for a special event in February. The merchandise cost GBI $1,390 SoCal sent a truck to the GBI distribution center in San 19 Diego, CA and picked up the merchandise directly from GBI's warehouse. Terms of payment are net 30 (Don't forget to charge sales tax of 8 75% for this order Beantown Bikes in Boston, MA placed an order with GBI for $28,450 in bicycles The cost of the bicycles is $18,092. Beantown Bikes is a new customer Its buyers saw GBI's booth at a trade show Because Beantown is a new customer, they must ether wait until their credit can be approved or pay for the order before GBl will ship the bikes to them 20 January 24 GBl 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 GBl to get additional recognition. The advertising will start in February. GBl wrote a check for $18,000 for three months of advertising GBI received notification from their bank that $28,450 had been transferred to their account from Beantown Bikes, so GBI's warehouse personnel shipped Beantown's order. Beantown will be responsible for paying Fed X $360 for shipping the order 21 January 25 22 January 26 23 January 27 The county approved GBI's building plans for their new warehouse. Estimated building costs are $1,050,000 which will be funded via a mortgage from Bank of America. GBI plans to break ground on the new building April 18h of this year GBI sent a $30,390 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 locatior n New York and needs to stock the new location. GBI received a phone order from Big Apple for $235,315 in bicycles and $107,690 in bicycle accessories and safety gear at special discount prices The cost of the bicycles in this order is $168,586 and the cost of the accessories is $65,794 Big Apple will have a contract trucking company pick up the order when it is ready The order is sent to GBl's warehouse for picking and packing which may take a couple days. Payment terms to Big Apple for this order are net 30 GBI pays sales tax once a quarter via the state's electronic filing and payment system. GBI filed its return and paid sales tax for the quarter ending December 31 in the amount of the credit balance in account number 320000 on that date CSI installed and tested the new barcode system. The warehouse mananer aonroved the installation and commented that he thinks it. 26 January 31 12 5 6 8 9 0 CASE STUDY paid deposit and gave it to the instaler Big Apple's truck arrived at GBr's warehouse and picked up the order from January 27 28 Adjustment information as of January 31, not already given in the original transaction(s): 1. (AJE 1) Based on experience GBl estimates that approximately % of the net credit sales (gross credit sales minus retums of credit sales) for the month will become bad debt. GBI writes off bad debts as they occur and recognizes bad debt expense based on anticipated bad debts as an adjusting entry each month. 2 (AJE 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 trading goods inventory was taken at the end of January It was determined that the value of the trading goods on hand was $38,710 3. (AJE 3) GBl counted the office 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 $640 4. (AJE 4) Production Machinery, Equipment and Fixtures were placed in service on January 1, 2008, are expected to last fifteen years with no salvage value. The bar-code system has a five-year life and no salvage value. GBI depreciates fixed assets on a straight-ine basis and those assets acquired in the first half of the month 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 doillar and assets are depreciated on a monthly. hasis (ie. number of days in the month is not of consequence) 5. (AJE 5) GBI used the Intenet to revieww the monthly charges for utlities the business consumed billed by the utilities company for during January Based on the intermet report, the amount to be January usage is $1,084 6. (AJE 6) Liability insurance for the six-month period ending on February 28 in the amount of $15,000 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 (AJE 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 and assume all labor costs will be expensed ) Account Balances as of December 3T" Credit Balance Debit Balance Account N Account Deseription 752,637 100000 Bank Account 110100 Accounts Receivable (Direct Posting Account) 110150 Alloeance for Bad Debtg 110200 Interest Receivable 200600 Inventorg-Operating Supplies 200900 Inventory-Raw Materials (Direct Post) 281,513 66,712 200910 Inventory-Finished Goods (Direct Post) 200920 Inventory-Trading Goods (Direct Post) 200930 Inventory Semi-inished Goods (Direct Post) 210000 Prepaid Insurance 211000 Prepaid Supplies 212000 Prepaid Advertising 215000 Prepaid Rent 216000 Deposits 220000 Notes Receivable 220110 Land (Direct Post) 220210 Production Machinery Equip & Fistures(Dir Post) 220310 Accumulated Depreciation-Machinery (Direct Post) 220400 Orfice Furniture 305,000 220500 Accumulated Depreciation-Office Furniture 220600 Difice Equip and Computers 220700 Accumulated Depreciation- Office Equipment 300100 Payables-Income Tates 300200 Accounts Pagable (Direct Posting Account) 48410 300300 Payables-Interest 300400 Payables-Short-Term Notes 3 300500Payables Long-Term Notes 4 300600 Payables-Commissions 300700 Pagables-Salaties and Vages 300800 Accrued Expense 110,595 310000 Goods Receipt Invoice Receipt Account 320000 Aocrued Tau Output 321000 Accrued Tau- Input 322000 Unearned Revenues 329000 Common Stock 1000,697 323100 edditional Psid-in-Capital 330010 FRetsined Earnings (Direot Posting) 2599 456 2593 456 Starting Trial Balance Journal Entries T-Accounts Trial Ready O Type here to search 1. Record the daily transactions if appropriate, (some events may not involve joumal entries), as general journal entries into Excel. Also, post these journal entries into t-accpunts and then calculate account balances using cell formulas in Excel. Link the t-account balances 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 CASE STUDY Events During January Event Date Description of Event Employees are paid monthly on the first business day of the month 1 January 3 for work done in the previous month. The total payroll for the previous month equals the balance in account 300700. (lgnore payroll taxes for this assignment.) Accounting wrote and distributed the paychecks GBI received $55,792 in safety product inventory and $37,228 in raw materials from Dallas Bike Basics. This inventory was ordered on December 28. The payment terms for the invoice total are net 10 days GBl paid the CWX shipping company $550 with a manual check for the shipment of the goods. The bill of lading showed that the safety product inventory arrived in 6 boxes with a total weight of 120 lbs and the raw materials came on a pallet and weighed 100 Ibs Windy City Bikes in Chicago, IL ordered $22,500 of bicycle accessories from GBI The cost of the accessories (to GBl) is $15,380. The goods were shipped to Windy City immediately via UPS using Windy City's UPS shipping number. The terms of payment for Windy City's order are 2/10 net 30 days 4 January 7 5 January 9 6 January 10 GBI received payment of $16,550 from Northwest Bikes in Seattle WA for the balance due on their account GBl paid February's rent of $4,500 for the office and warehouse space in San Diego GBI's account on the utility company website is updated at the end of each month when the meter is read GBl uses this data to accrue the expenses at the end of each month (in this case on December 31*) This allows recognition of the expense in the correct period Expenses are usually accrued at the end of the month as Accrued Expenses". GBI paid the December utility bill of in the amount of the applicable account balance via the company's autormatic electronic bill pay program. GBI's advertisement in the English language edition of Italian Cycling Journal was published today. This ad was prepaid at the end of July for six months of advertising, August through January iLma monthc of arhrarticinn haua alroads hoon.ucod and the you need to eal, s sdiet GBl's office. GBI has an account with Staples and payment terrms are net 10. Operating supplies expense is figured at the end of the month determined by the amount of supplies used during the month GBI ordered $99,618 in raw materials from Space Bike Composites in Houston, TX. Terms of payment to Space Bikes are net 30 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 GBI paid the appropriate amount via bank transfer for the inventory order that they received from Dallas Bike Basics January 3 10 11 January 12 In order to better track inventory, GBI ordered a bar-coding and 12 January 13 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 $5,895 (including sales tax) and CSI will charge GBI $1.200 for the installation and tests. GBI paid a deposit of $3,200 on the system and the remainder is due and payable when the system is installed. GBI will classify the bar-coding system as "Production Machinery, Equipment and Fuxtures GBI paid an invoce from Lightbulb Accessory Kits for ordered goods that were received on December 20. The amount of the invoice from Lightbulb is $17 025 due net 30 The city of Denver will be hosting a decathlon at the end of February The event is expected to create demand for high quaity bikes Rocky Mountain Bikes in Denver, CO placed an order with GBI for $128,530 worth of bicycles to be delivered immediately Rocky Mountain will pay the shipping The bikes cost GBI $79,941 GBI shipped the order immediately so that Rocky Mountain can start promoting the bikes. Because Rocky Mountain is a good customer GBl is giving them special terms of net 45 days on this order GBI received raw materials inventory ordered from Space Bike Composites January 11 Shipping charges of S807 were included in the $100,425 invoice from Space Bike 13 January 17 14 15 GBI received notice that Bunky's Bicycle Emporium had declared section 13 bankruptcy which meant GBI would not be able to collect the $1,650 that Bunky's owed them GBl received a $91,960 funds transfer from Silicon Valley Bikes in Palo Alto for the balance due on their account 16 17 January 18 GBl paid Staples for the office supplies they received January 11 18 January 19 xB 9 J CASE STUDY SoCal Bikes in Irvine, CA placed an order for $2,320 in bicycle helmets for a special event in February. The merchandise cost GBI $1,390 SoCal sent a truck to the GBI distribution center in San 19 Diego, CA and picked up the merchandise directly from GBI's warehouse. Terms of payment are net 30 (Don't forget to charge sales tax of 8 75% for this order Beantown Bikes in Boston, MA placed an order with GBI for $28,450 in bicycles The cost of the bicycles is $18,092. Beantown Bikes is a new customer Its buyers saw GBI's booth at a trade show Because Beantown is a new customer, they must ether wait until their credit can be approved or pay for the order before GBl will ship the bikes to them 20 January 24 GBl 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 GBl to get additional recognition. The advertising will start in February. GBl wrote a check for $18,000 for three months of advertising GBI received notification from their bank that $28,450 had been transferred to their account from Beantown Bikes, so GBI's warehouse personnel shipped Beantown's order. Beantown will be responsible for paying Fed X $360 for shipping the order 21 January 25 22 January 26 23 January 27 The county approved GBI's building plans for their new warehouse. Estimated building costs are $1,050,000 which will be funded via a mortgage from Bank of America. GBI plans to break ground on the new building April 18h of this year GBI sent a $30,390 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 locatior n New York and needs to stock the new location. GBI received a phone order from Big Apple for $235,315 in bicycles and $107,690 in bicycle accessories and safety gear at special discount prices The cost of the bicycles in this order is $168,586 and the cost of the accessories is $65,794 Big Apple will have a contract trucking company pick up the order when it is ready The order is sent to GBl's warehouse for picking and packing which may take a couple days. Payment terms to Big Apple for this order are net 30 GBI pays sales tax once a quarter via the state's electronic filing and payment system. GBI filed its return and paid sales tax for the quarter ending December 31 in the amount of the credit balance in account number 320000 on that date CSI installed and tested the new barcode system. The warehouse mananer aonroved the installation and commented that he thinks it. 26 January 31 12 5 6 8 9 0 CASE STUDY paid deposit and gave it to the instaler Big Apple's truck arrived at GBr's warehouse and picked up the order from January 27 28 Adjustment information as of January 31, not already given in the original transaction(s): 1. (AJE 1) Based on experience GBl estimates that approximately % of the net credit sales (gross credit sales minus retums of credit sales) for the month will become bad debt. GBI writes off bad debts as they occur and recognizes bad debt expense based on anticipated bad debts as an adjusting entry each month. 2 (AJE 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 trading goods inventory was taken at the end of January It was determined that the value of the trading goods on hand was $38,710 3. (AJE 3) GBl counted the office 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 $640 4. (AJE 4) Production Machinery, Equipment and Fixtures were placed in service on January 1, 2008, are expected to last fifteen years with no salvage value. The bar-code system has a five-year life and no salvage value. GBI depreciates fixed assets on a straight-ine basis and those assets acquired in the first half of the month 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 doillar and assets are depreciated on a monthly. hasis (ie. number of days in the month is not of consequence) 5. (AJE 5) GBI used the Intenet to revieww the monthly charges for utlities the business consumed billed by the utilities company for during January Based on the intermet report, the amount to be January usage is $1,084 6. (AJE 6) Liability insurance for the six-month period ending on February 28 in the amount of $15,000 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 (AJE 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 and assume all labor costs will be expensed ) Account Balances as of December 3T" Credit Balance Debit Balance Account N Account Deseription 752,637 100000 Bank Account 110100 Accounts Receivable (Direct Posting Account) 110150 Alloeance for Bad Debtg 110200 Interest Receivable 200600 Inventorg-Operating Supplies 200900 Inventory-Raw Materials (Direct Post) 281,513 66,712 200910 Inventory-Finished Goods (Direct Post) 200920 Inventory-Trading Goods (Direct Post) 200930 Inventory Semi-inished Goods (Direct Post) 210000 Prepaid Insurance 211000 Prepaid Supplies 212000 Prepaid Advertising 215000 Prepaid Rent 216000 Deposits 220000 Notes Receivable 220110 Land (Direct Post) 220210 Production Machinery Equip & Fistures(Dir Post) 220310 Accumulated Depreciation-Machinery (Direct Post) 220400 Orfice Furniture 305,000 220500 Accumulated Depreciation-Office Furniture 220600 Difice Equip and Computers 220700 Accumulated Depreciation- Office Equipment 300100 Payables-Income Tates 300200 Accounts Pagable (Direct Posting Account) 48410 300300 Payables-Interest 300400 Payables-Short-Term Notes 3 300500Payables Long-Term Notes 4 300600 Payables-Commissions 300700 Pagables-Salaties and Vages 300800 Accrued Expense 110,595 310000 Goods Receipt Invoice Receipt Account 320000 Aocrued Tau Output 321000 Accrued Tau- Input 322000 Unearned Revenues 329000 Common Stock 1000,697 323100 edditional Psid-in-Capital 330010 FRetsined Earnings (Direot Posting) 2599 456 2593 456 Starting Trial Balance Journal Entries T-Accounts Trial Ready O Type here to search 1. Record the daily transactions if appropriate, (some events may not involve joumal entries), as general journal entries into Excel. Also, post these journal entries into t-accpunts and then calculate account balances using cell formulas in Excel. Link the t-account balances 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