Congratulations, you have just been hired by Karla C. to do her accounting work. Karla is a strict boss and likes her stuff done right, which is why she only hires bright accounting students (that's why she hired YOU. Please, don't let her down! You will work as her accountant during the first quarter of the year. Karla told you during the interview that her company uses a perpetual inventory system. You are so excited!!! She told you that she would like the following completed: Colored Journal Entries from steps 2, 5, and 8 of the accounting cycle Colored Ledger Accounts (T-Accounts) from steps 3, 5, and 8 of the accounting cycle A Completed Worksheet in color for steps 4, 5, 6, and 7 of the accounting cycle Colored Financial Statements. This should include a multi-step income statement, a statement of retained earnings, and a classified statement of financial position. A post-closing trial balance in color. Additional things to consider: Karla's Kurvy Kite's prepares adjusting and closing entries, as well as, her financial statements on a quarterly basis. This is her first quarter of operations. Only 1 T-Account needs to be created for each account. See Chart of Accounts When doing journal entries, remember that debits come before credits and that both must equal. Remember, each time you post to the ledger account, you should put the reference number in your general journal. Assume the year is 2020 for your transactions and financial statements. Do not procrastinate; it will only make things harder on you!! Grading: This is an individual project, however, you are always encouraged to work with a friend. DO NOT simply copy your friends work, do your own work!! This accounting cycle is worth a total of 90 points. On Wednesday, April 8 you will be required to turn in your project at the start of class. Late Fees turned in late, but during class = 3 points, after class, but before Noon - 10 points; after Noon, but before handed back = 20 points. Failure to use color will cost you up to 30 points. This accounting cycle should be organized in the same order that the other accounting cycles were. Failure to organize correctly will cost you up to 20 points. L Create a T-Account for all accounts listed below. Don't forget to put them in color Karla's Kurvy Kite's Chart of Accounts Ledger # 101 102 Account ASSETS Cash Accounts Receivable Inventory Supplies Prepaid Insurance Land Building Accum Depr.- Building Kite Machine Accum Depr. - Kite Machine Account LIABILITIES Accounts Payable Notes Payable Interest Payable Salaries Payable Income Tax Payable 103 105 106 107 OWNER'S EQUITY Common Stock Retained Earnings Dividends 110 REVENUES Sales Sales Returns & Allowances Sales Discounts 403 EXPENSES Cost of Goods Sold Salaries Expense Freight-Out Depr. Exp. - Building Utilities Expense Supplies Expense Depr. Exp. - Kite Machine Interest Expense Insurance Expense Income Tax Expense 505 506 507 1. Karla's Kurvy Kite's Transactions January 1: Stockholder's invest $156,050 into the company in exchange for Billy Bob's Bikes common stock 2. January 1: Karla C. bought some land in her hometown for $51,666. January 1: Karla C. purchased a building for $323,575 using $23.575 cash and then borrowing the rest from the bank. The loan from the bank will be paid off over the next 24 years (1/24 of the principal will be paid off at the end of each year). The loan carries an interest rate of 8.88% Interest accrued will be paid off at the end of every year. The building has an expected life of 55 years, a salvage value of $269,455, and will be depreciated using the straight-line method. January 1: Karla C.paid in advance for a 10-month insurance policy, which will begin today. She paid $4,680 cash for the policy. January 7: Karla C. purchased 175 kites from Kite's of Bargains. Each kite cost $5.60 and the credit terms are 5/15, n 30. (Note: Kites are considered Inventory) January 8: Kite's of Bargains paid FedEx S27 cash to ship the kites to Karla C. 7. January 13: Karla C. purchased $179 worth of supplies from Dirt Cheap Supplies paying cash. January 17: Karla C. sold 102 kites to Super Kite's for $22.50 each with credit terms of 2/10, n/30. The total cost of the kites was figured out to be $571. 9. January 18: Karla C. paid UPS S33 cash to ship the kites to Super Kite's 10. January 21: Karla C. paid off the balance due from Kite's of Bargains. 11. January 24: Super Kite's returned ten of the kites because they were tom. The cost of the kitesto Karla C. was figured out to be $56. 12. February 1: Karla C. purchased 757 more kites from Kite's of Bargains. Each kite cost S6 and the credit terms are 5/10 EOM. n 90. 13. February 1: Karla C. paid UPS 554 cash to ship the kites she bought from Kite's of Bargains 14. February 1: Karla C. bought a Kite Making Machine for $49.500 using $4.500 cash and then borrowing the rest from the bank. The loan will be paid off over the next 6 years (1/6 of the paid at the end of each year). The loan carries an interest rate of 7.20 percent. Interest accrued will be paid off at the end of every year. The Kite Making Machine has an expected life of 10 years, no salvage value and will be depreciated using the straight-line method. 15. February 6: Karla C. returned 17 of the kites she bought from Kite's of Bargains. They credited $102 to her account. 16. February 12: Super Kite's paid their balance off for the kites they purchased. 17. February 19: Karla C's pay period ends and she now owes her employees $656 in salaries. These salaries will be paid on March 5. 18. February 22: Karla's Kurvy Kite's paid cash dividends of $175. 19. February 25: Karla C. hires Karl Kiter for promotional purposes. She estimates his salary to be $10/hour. He will probably work 8 hours a week. 20. February 28: Karla C. sold 800 kites to Big Flying Kites for S27 each with credit terms of 3/20, n/60. The cost of the kites was determined to be $4,607. 21. February 28: Big Flying Kites paid FedEx $144 to ship the kites they just bought. 22. March 5: Karla C. paid her employees the $656 in salaries owed. 23. March 8: Karla C. paid a utilities bill in the amount of $576. 24. March 9: Karla C. paid off the balance due from Kite's of Bargains. 25. March 15: Big Flying Kites paid their balance off for the kites they purchased. 26. March 22: Karla C. purchased 1,864 kites from Kites R' Us. Each kite cost $6.25 and the credit terms are 1/10 EOM, n/90. 27. March 23: Karla C. paid FedEx $180 to have the kites shipped to her. 28. March 28: Karla C. sells 1,580 kites to The Kite Surplus Store for $31.75 each with credit terms of 3/10, n/30. The cost of the kites was determined to be $10,011. 29. March 29: Karla C. paid FedEx $202 to ship the kites to The Kite Surplus Store. Adjustments On March 31, you notice the following: a) You have $44 worth of supplies on hand b) You need to recognize depreciation on the building c) You need to recognize interest accumulated on the 2 bank loans (do as one entry) d) You need to recognize insurance used e) You need to recognize depreciation on the kite making machine 1) You have accrued salaries of $477 g) You need to recognize/accrue federal income taxes of 25%. Round to the nearest dollar if needed. Hint: compute adjusted income based on all preceding information, and then determine and record income tax expense. The Accounting Cycle 1. Analyze business transactions 2. Journalize the transactions 3. Post to ledger accounts 4. Prepare a trial balance 5. Journalize and post adjusting entries 6. Prepare an adjusted trial balance 7. Prepare the financial statements (I/S, Stmt of RE, B/S) 8. Journalize and post closing entries 9. Prepare a post-closing trial balance Congratulations, you have just been hired by Karla C. to do her accounting work. Karla is a strict boss and likes her stuff done right, which is why she only hires bright accounting students (that's why she hired YOU. Please, don't let her down! You will work as her accountant during the first quarter of the year. Karla told you during the interview that her company uses a perpetual inventory system. You are so excited!!! She told you that she would like the following completed: Colored Journal Entries from steps 2, 5, and 8 of the accounting cycle Colored Ledger Accounts (T-Accounts) from steps 3, 5, and 8 of the accounting cycle A Completed Worksheet in color for steps 4, 5, 6, and 7 of the accounting cycle Colored Financial Statements. This should include a multi-step income statement, a statement of retained earnings, and a classified statement of financial position. A post-closing trial balance in color. Additional things to consider: Karla's Kurvy Kite's prepares adjusting and closing entries, as well as, her financial statements on a quarterly basis. This is her first quarter of operations. Only 1 T-Account needs to be created for each account. See Chart of Accounts When doing journal entries, remember that debits come before credits and that both must equal. Remember, each time you post to the ledger account, you should put the reference number in your general journal. Assume the year is 2020 for your transactions and financial statements. Do not procrastinate; it will only make things harder on you!! Grading: This is an individual project, however, you are always encouraged to work with a friend. DO NOT simply copy your friends work, do your own work!! This accounting cycle is worth a total of 90 points. On Wednesday, April 8 you will be required to turn in your project at the start of class. Late Fees turned in late, but during class = 3 points, after class, but before Noon - 10 points; after Noon, but before handed back = 20 points. Failure to use color will cost you up to 30 points. This accounting cycle should be organized in the same order that the other accounting cycles were. Failure to organize correctly will cost you up to 20 points. L Create a T-Account for all accounts listed below. Don't forget to put them in color Karla's Kurvy Kite's Chart of Accounts Ledger # 101 102 Account ASSETS Cash Accounts Receivable Inventory Supplies Prepaid Insurance Land Building Accum Depr.- Building Kite Machine Accum Depr. - Kite Machine Account LIABILITIES Accounts Payable Notes Payable Interest Payable Salaries Payable Income Tax Payable 103 105 106 107 OWNER'S EQUITY Common Stock Retained Earnings Dividends 110 REVENUES Sales Sales Returns & Allowances Sales Discounts 403 EXPENSES Cost of Goods Sold Salaries Expense Freight-Out Depr. Exp. - Building Utilities Expense Supplies Expense Depr. Exp. - Kite Machine Interest Expense Insurance Expense Income Tax Expense 505 506 507 1. Karla's Kurvy Kite's Transactions January 1: Stockholder's invest $156,050 into the company in exchange for Billy Bob's Bikes common stock 2. January 1: Karla C. bought some land in her hometown for $51,666. January 1: Karla C. purchased a building for $323,575 using $23.575 cash and then borrowing the rest from the bank. The loan from the bank will be paid off over the next 24 years (1/24 of the principal will be paid off at the end of each year). The loan carries an interest rate of 8.88% Interest accrued will be paid off at the end of every year. The building has an expected life of 55 years, a salvage value of $269,455, and will be depreciated using the straight-line method. January 1: Karla C.paid in advance for a 10-month insurance policy, which will begin today. She paid $4,680 cash for the policy. January 7: Karla C. purchased 175 kites from Kite's of Bargains. Each kite cost $5.60 and the credit terms are 5/15, n 30. (Note: Kites are considered Inventory) January 8: Kite's of Bargains paid FedEx S27 cash to ship the kites to Karla C. 7. January 13: Karla C. purchased $179 worth of supplies from Dirt Cheap Supplies paying cash. January 17: Karla C. sold 102 kites to Super Kite's for $22.50 each with credit terms of 2/10, n/30. The total cost of the kites was figured out to be $571. 9. January 18: Karla C. paid UPS S33 cash to ship the kites to Super Kite's 10. January 21: Karla C. paid off the balance due from Kite's of Bargains. 11. January 24: Super Kite's returned ten of the kites because they were tom. The cost of the kitesto Karla C. was figured out to be $56. 12. February 1: Karla C. purchased 757 more kites from Kite's of Bargains. Each kite cost S6 and the credit terms are 5/10 EOM. n 90. 13. February 1: Karla C. paid UPS 554 cash to ship the kites she bought from Kite's of Bargains 14. February 1: Karla C. bought a Kite Making Machine for $49.500 using $4.500 cash and then borrowing the rest from the bank. The loan will be paid off over the next 6 years (1/6 of the paid at the end of each year). The loan carries an interest rate of 7.20 percent. Interest accrued will be paid off at the end of every year. The Kite Making Machine has an expected life of 10 years, no salvage value and will be depreciated using the straight-line method. 15. February 6: Karla C. returned 17 of the kites she bought from Kite's of Bargains. They credited $102 to her account. 16. February 12: Super Kite's paid their balance off for the kites they purchased. 17. February 19: Karla C's pay period ends and she now owes her employees $656 in salaries. These salaries will be paid on March 5. 18. February 22: Karla's Kurvy Kite's paid cash dividends of $175. 19. February 25: Karla C. hires Karl Kiter for promotional purposes. She estimates his salary to be $10/hour. He will probably work 8 hours a week. 20. February 28: Karla C. sold 800 kites to Big Flying Kites for S27 each with credit terms of 3/20, n/60. The cost of the kites was determined to be $4,607. 21. February 28: Big Flying Kites paid FedEx $144 to ship the kites they just bought. 22. March 5: Karla C. paid her employees the $656 in salaries owed. 23. March 8: Karla C. paid a utilities bill in the amount of $576. 24. March 9: Karla C. paid off the balance due from Kite's of Bargains. 25. March 15: Big Flying Kites paid their balance off for the kites they purchased. 26. March 22: Karla C. purchased 1,864 kites from Kites R' Us. Each kite cost $6.25 and the credit terms are 1/10 EOM, n/90. 27. March 23: Karla C. paid FedEx $180 to have the kites shipped to her. 28. March 28: Karla C. sells 1,580 kites to The Kite Surplus Store for $31.75 each with credit terms of 3/10, n/30. The cost of the kites was determined to be $10,011. 29. March 29: Karla C. paid FedEx $202 to ship the kites to The Kite Surplus Store. Adjustments On March 31, you notice the following: a) You have $44 worth of supplies on hand b) You need to recognize depreciation on the building c) You need to recognize interest accumulated on the 2 bank loans (do as one entry) d) You need to recognize insurance used e) You need to recognize depreciation on the kite making machine 1) You have accrued salaries of $477 g) You need to recognize/accrue federal income taxes of 25%. Round to the nearest dollar if needed. Hint: compute adjusted income based on all preceding information, and then determine and record income tax expense. The Accounting Cycle 1. Analyze business transactions 2. Journalize the transactions 3. Post to ledger accounts 4. Prepare a trial balance 5. Journalize and post adjusting entries 6. Prepare an adjusted trial balance 7. Prepare the financial statements (I/S, Stmt of RE, B/S) 8. Journalize and post closing entries 9. Prepare a post-closing trial balance