CCOUNTING OCIETY The Business This practice set is designed in five parts. In the first part, the student will complete the journal entries for the month in a manual accounting system for Maverick's Boards. In the second part, the student will record the adjusting journal entries. Here, the necessary adjusting month-end entries are entered. Part three consists of preparing the balances in a T-Account for each account. Part four consists of preparing a bank reconciliation. Additionally, journal entries related to the reconciliation are entered into the system. Lastly the trial balance, Income Statement, Statement of Stockholders' Equity and Balance Sheet are prepared. Background Maverick's Boards is a surf shop started in January of 2020 by Blaise Maverick. He has saved over $70,000 to invest in the business. He has had a meeting with his lawyer and his Certified Public Accountant (CPA) and they have determined that the business should be organized as a corporation. The CPA has agreed to help Mr. Maverick set up his accounting system. He provided to Mr. Maverick a chart of accounts. He will be using a Perpetual Inventory System. Chart of Accounts Numbering System \" \" \" ALPHAR ACCOUNTING SOCIETY Below is the Chart of Accounts that will be used in the journal entries. Use the account numbers listed below. Chart of Accounts Current Assets Current Liabilities 10000 Cash 2000 Accounts Payable 11000 Accounts Receivable 21100 Note Payable - Wells Fargo 12000 Inventory - Surfboards 21200 Note Payable - Computer Equip. 12100 Inventory - Wakeboards 23100 Wages Payable 13100 Office Supplies 23200 Interest Payable 13200 Shipping Supplies 23300 Sales Tax Payable 14000 Prepaid Rent 23400 Utility Payable 14100 Prepaid Insurance Stockholders' Equity 39003 Common Stock Long-Term Assets 39005 Retained Earnings 15000 Furniture and Fixtures 39007 Dividends 17000 Accumulated Depreciation - Furniture and Fixtures Revenue 15100 Computer Equipment 40000 Sales 17100 Accumulated Depreciation - Computer Equipment Expenses 50000 Cost of Goods Sold 60850 Registration & Dues Fee 60100 Legal Expense 60150 Office Supplies Expense 60200 Shipping Supply Expense 60300 Insurance Expense 60350 Wage Expense 60400 Credit Card Expense 60450 Delivery Expense 60500 Advertising and Promotion Expense 60550 Utility Expense 60600 Rent Expense 60650 Depreciation Expense 60700 Interest Expense 60750 Bank Service Fee 60800 Gasoline ExpenseCCOUNTING ocrETr Part One Instructions Record the January 2020 transactions in the general journal (last section of this practice set) using the following events. No explanation is required for the journal entries. Instead of recording the names of the accounts use the account number. Prepare the journal entries as shown in the practice set. Transactions Check No. 1. 1/02/2020 Blaise met with his lawyer and CPA for advice on starting the business. The lawyer told Mr. Maverick to register the company name Maverick's Boards with the County of El Paso. In addition, Mr. Maverick will get an employer identification number (EIN) from the Internal Revenue Service and get a sales tax permit from the state of Texas. 1/02/2020 Deposit #1 Mr. Maverick opened a business checking account at Wells Fargo Bank by depositing $70,000. The corporation issued him a stock certificate for 7,000 shares of common stock with no par value. 1/03/2020 Ck #1001 Mr. Maverick signed a one-year rental. He was required to pay $9,000 for i-- rent for the months ofJanuary 1, 2020 June 30, 2020. 1/03/2020 Ck #1002 Arranged for a general business liability insurance policy and paid $4,000 to H-- State Penn Insurance. This premium is for twelve months coverage. 1/03/2020 Purchased a new computer system that cost $5,200 from Computer Inc. for use in the business. Mr. Maverick signed a 6 month, 10% note payable for the cost of the system. The computer system has an estimated useful life of five years the residual (salvage) value is $400. This will be recorded as Computer Equipment. Depreciation will be an adjusting entry using straight- line depreciation. 1/05/2020 Deposit #2 Signed a note payable to borrow $10,000 from Wells Fargo bank. Interest is 12% annually and the note is to be repaid with interest in twelve months. Interest will be an adjusting entry. 1/05/2020 Ck #1003 Paid $1,100 for shipping supplies. 1/05/2020 Ck #1004 Paid $14,600 for furniture and fixtures. The estimated service life of these assets is 8 years. The residual (salvage) value is $200. These items will be recorded as Furniture and Fixtures and depreciated accordingly. Depreciation will be done in the adjustingjournal entries using straight-line depreciation. 1/06/2020 Ck #1005 Arranged for Sun City Movers to make the delivery of the computer system and paid the delivery charge of $750. This charge should be added to the cost of the computer equipment purchased and depreciated on the same 4|Page TA ALPHAD CCOUNTING SOCIETY basis as the computer equipment. The depreciation will be calculated in the adjusting journal entries. 10. 1/08/2020 Ck #1006 Purchased $450 of office supplies for cash from Office Supplies Co. 11. 1/08/2020 Purchased $8,000 of merchandise inventory (surfboards) on account. The vendor did not extend credit terms. 12. 1/09/2020 Purchased $6,000 of merchandise inventory (wakeboards) on account. There were no credit terms for prompt payment. 13. 1/13/2020 Ck #1007 Mr. Maverick received and paid the $940 charge from lawyer. 14. 1/14/2020 Maverick's Boards is now open for business. 15. 1/14/2020 Deposit #3 Sold merchandise for $7,200 cash. Sales Tax was $594. The cost of the Surfboards is $3,000; the cost of the Wakeboards is $1, 100. Part of this sale must be delivered to the customer. The merchandise will be shipped FOB destination. 16. 1/16/2020 Ck #1008 Paid $250 to ship the merchandise. 17. 1/16/2020 Purchased additional surfboards on account for $4,500. Credit terms were 2/15, n/30. 18. 1/20/2020 Deposit #4 Recorded cash sales that totaled $8,300. Sales tax is $685. The cost of merchandise sold was $4,500 (surfboards were $2,500; wakeboards were $2,000). 1/22/2020 Ck #1009 Mr. Maverick joined the El Paso Chamber of Commerce. He paid the registration fee of $200. 20. 1/23/2020 Mr. Maverick participated in a surfboard exhibition held at the convention center. He felt this was a good way to publicize his new business. 21. 1/23/2020 Convention Center charged Mr. Maverick $800. He will pay the bill later. He considers this an advertising and promotion expense. 22. 1/26/2020 Ck #1010 Mr. Maverick paid the Convention Center rental. 23. 1/26/2020 Ck #1011 Paid for the wakeboards purchased on 1/09/2020. 24. 1/27/2020 Deposit #5 Mr. Maverick recorded cash sales totaling $9,000. Sales tax is $743. The cost of the merchandise sold was $4,500 (surfboards $3,000; wakeboards $1,500). 25. 1/27/2020 Ck #1012 Paid the balance due for the surfboards. There are two invoices. 26. 1/30/2020 American Express sent bill for $235 for gasoline. This was automatically deducted from Blaise's checking account as a debit memo. 27. 1/30/2020 Received but did not pay the utility bill for the month, $445. 28. 1/30/2020 Ck #1013 Paid the first monthly installment on the computer equipment. The payment amount is $910. Of this amount, $43.33 is for interest and $866.67 is for principal. 5 | PageMTA ALPHAPS CCOUNTING DOCIETY 29. 1/30/2020 Deposit #6 Recorded sales made for the last week of the month. Sales tax is $248. Total cash sales were $3,000. The cost of the merchandise sold was $1,800 (surfboards $1,100; wakeboards $700). 30. 1/31/2020 Ck #1014 Paid the sales tax to the proper taxing authority. 1/31/2020 Ck #1015 Declared and paid a cash dividend of $650 to Mr. Maverick. 6 |PageCCUUNTING UCIETY Part Two Instructions Once all journal entries are recorded in the practice set, record the eight adjusting journal entries below and round to the nearest cent if necessary. The following are the adjusting journal entries for the month of January. Record all adjusting entries on January 31, 2020. Record Adjusting Entries: Record the following month end adjusting entries for the month of January. Write the journal entries in the practice set after the original journal entries. Round all answers to the nearest cent. a. $70 of office supplies remained on hand. b. $200 of shipping supplies remained on hand. c. $1,300 of wages for the parttime help from Irene's Temp Services for January should be accrued. Do not worry about payroll taxes; Temp Services Inc. will handle these. 0!. Make the necessary adjusting entries for one month's depreciation for the Computer Equipment using Straight Line Depreciation. 9. Make the necessary adjusting entry for one month's depreciation for the furniture and fixtures using Straight Line Depreciation. f. One month of the prepaid insurance has expired. g. One month of the prepaid rent has expired. h. Record the interest for the loan from Wells Fargo for one month. Make sure you prepare the journal entries and the adjusting entries and write them in the practice set. Part Three Instructions All Taccounts with the correct balances should be prepared. (There is an example of how to set up the TAccounts in Excel at the end of the practice set. Make sure all accounts that were used in the Chart of Accounts are included and if they have a zero balance that you place the zero on the normal balance side.) Blackboard Instructions: When entering in the journal entries into Blackboard please follow the examples below exactly. 1. There will be a box where you will enter each transaction on one line. First the debit and then the credit. Do NOT enter any account names only account CCUUNTING OCIETY numbers, Use Dr for Debit and Cr for Credit with m period. Also please put the cents even if it is zero. See example below: Dr 10000 $50,000.00 Cr 39003 $50,000.00 Notice that the account numbers do NOT have commas and the dollar amounts have commas and dollar signs and all dollar amounts have the cents even if it is zero. . If there is more than one debit or credit enter the debits first with the smallest account number(s) listed first and then the credits with the smallest account number listed first. Make sure that you enter Dr or Cr before each account number. See example below: Dr 12000 $8,000.00 Cr 10000 $1,000.00 Cr 20000 $7000.00 For all sales, list the Sale entry first then the Cost of Goods Sold entry second. The entire entry for both should be on one line. First the sale, as shown below, then the cost of the inventory. Again, put the smallest account number first, Dr 10000 $30,000.00 Cr 23300 $500.00 Cr 40000 $29,000.00 Dr 50000 $15,000.00 Cr 12000 $8,000.00 Cr 12100 $7,000.00. Both entries should all be on one line. . If there is no journal entry and you only need to put in a number, please enter the amount as the dollar amount or as a number as the example below. $15,000.00 or 15,000 . When entering the ending balances for the TAccounts enter the debit or credit first and the amount last. You do not need to enter the account number. See example below. Dr $10,000.00 or Cr $10,000.00 . If there is no journal entry to be written, please write No JE for no journal entry. See below for example. No JE CCOUNTING OCIETY Part Four Instructions In This part of The practice set, The student will prepare a Bank Reconciliation for The month of January. Prepare it in Word or Excel and use the ending balance in your cash account for The cash for your books. Be prepared to Turn in The Bank Reconciliation after answering The questions in Blackboard. Requirements 1. Make sure you have corrected any errors on yourjournal and adjusting journal entries and have The correct balance for the cash account before starting the Bank Reconciliation. 2. Bank Reconciliation: Using the cash balance per books and the bank statement, prepare a bank reconciliation. A template you can use to create a Bank reconciliation is located at the back of this practice set. 3. Record Bank Reconciliation Adjustments: After you have prepared the bank reconciliation you must make any adjusting journal entries to your cash account by entering them in the general journal of the practice set so That The general ledger cash account agrees with The bank reconciliation. Part Five Instructions Prepare Financial Statements listed below. Once you complete the Financial Statements and answer the questions on Blackboard, you should print the financial statements and turn them in for grading: a. Trial Balance b. Income Statement c. Statement of Retained Earnings d. Balance sheet CCOUNTING oIETY General Iournal: See how to enter information in Example #1. Example #2 shows you how to enter a Sale and the COGS and Inventory amount. *Notice how the smaller account number is first when there is more than one debit or credit. Example #3 If No Journal Entry. All examples are in the instructions in the Blackboard Instructions on page 7. Transaction Dr Account Dollar Cr Account Dollar Date # No. Amount No. Amount 1/2/2020 Example#1 Dr 10000 $35 1/2/2020 Example #2 Dr $10,500.00 Cr 1 $5,000.00 $2,500.00 $2,500.00 Example #3 RTA ALPHARS CCOUNTING SOCIETY Bank Statement Wells Fargo Bank Page 1 PO Box 12345 El Paso, Texas 79998-2345 Maverick's Boards 123 Main Avenue El Paso, Texas 79945 WELLS FARGO BANK STATEMENT "Maverick's Boards" Balance, beginning 01/01/2020 $0 Deposits and other credits January $ 106,522 Checks and other debits January $37,145 Balance on statement date 01/31/2020 $69,377 Deposits Added 1/2/2020 Deposit 1 |$70,000 1/5/2020 Deposit 2 |$10,000 1/20/2020 Deposit 3 $7,794 1/23/2020 Deposit 4 $8,985 1/28/2020 Deposit 5 $9,743 Wells Fargo Bank Statement - Checks Paid and other Debts 1001 $9,000 1007 $490 1002 $4,000 1008 $250 1003 $1,100 1009 $200 1004 $14,600 1011 $6,000 1005 $750 DM $70 Check Printing Fee 1006 $450 DM $235 Debit Memo *Assume any errors are made by the bank.CCOUN TING ocIETY Bank Statement Part 4: Prepare a Bank Reconciliation using the Bank Statement and the temptate below. Template for Bank Reconciliation Wells Fargo Bank Balance "Maverick's Boards\" Ending Cash Balance Ending Cash Balance Deposits in Transit Adjustments or Errors +/- Outstanding Checks Reconciled Balance Adjustments or Errors +/- Reconciled Balance