Holiday Jet Ski is a sole proprietorship, personal watercraft business owned by Aaron Larson.Holiday Jet Ski is located on the shore of Michigan Lake and is the exclusive dealer for Kawasaki Jet Ski personal watercraft. The business also sells other brands of personal watercraft and accessories, provides excellent service for all watercraft including parts and labors, and rents storage space to those who prefer to keep their watercraft equipment at the lake.

To complete the on-the-job training for your accounting course, you have been placed in a four-week internship program with Holiday Jet Ski. You will be responsible for all the accounting work for the month of June (June 3 to June 30) 2019 including recording the business transactions, auditing your work and correcting all accounting errors and preparing the trial balance for the month. Since this job is your first, it will provide you the opportunity to obtain your hands-on experience and practice your accounting skills.

The business has four revenues accounts: Watercraft, Accessories, and Parts Sales; Sales Returns and Allowances record all transactions involving the sale and return of merchandise items. Service Fees Earned accounts for fees earned in servicing customer watercraft. Sales tax (7%) charged on all merchandise and service sales.The revenue account Storage Fees Earned is adjusted at the end of each accounting period to reflect all of the storage fees that have been earned. The liability account, Unearned Storage Fees is used to record all of the cash receipts for storage of customer watercraft and equipment. Sales tax is not charged on storage fees.

Holiday Jet Ski accepts both bank credit cards and company credit cards. When a customer purchases merchandise using a bank card, the sale is entered as a cash sale. The credit card expense (1 - 4%) is recorded at the time of the sale. If a customer uses a company credit card, the sale is recorded as a sale on account with Accounts Receivable - Credit Card Companies being debited for the charge. The credit card expense is recorded when the cash is received from the credit card company. All cash sales and cash payment are deposited into the bank account on the same day.

Special attention to following accounts:

1.Accounts Receivable - Credit Card Companies records all company credit card sales.(All bank card sales are recorded as cash sales)

2.Storage Fee Receivable is used only for adjusting entries.

3.Merchandise Inventory is the inventory account for all watercraft, accessories and parts.

4.Prepaid Insurance is debited for the purchase of all insurance policies.

5.Prepaid Rent is debited for rent payment made for more than one month in advance.

6.Advertising Expense is debited directly for all advertising fees incurred.

7.Prepaid Advertising is used only for adjusting entries. All advertising costs are debited directly to the Advertising Expense account.

8.Store and Shop Supplies is used only for adjusting entries. Since more store and shop supplies are consumed during the period, the Store and Shop Supplies Expense account is debited for all store and shop supply purchases. The value of the small amount of supplies that remain at the end of the accounting period is adjusted to the Store and Shop Supplies account.

9.Sales Tax Payable is credited for the 7% sales tax that is charged for all Jet Ski, accessories, parts, and service sales.Sales tax is not charge on storage fees.

10.Unearned Storage Fees is a liability account and is credited directly for all storage fees received in advance. Sales tax is not charged on storage fees.

11.Aaron Larson, Withdrawals is the owner's equity account debited for all cash and asset withdrawals from the business made by Aaron Larson. At the end of each accounting period the account is closed into Aaron Larson, Capital.

12.Service Fees Earned is credited for all customer service and is billed at a rate of $56.00 per hour.

13.Storage Fees Earned is adjusted at the end of the accounting period for all storage fees that have been earned.

14.Purchases of Merchandise is the Cost Account debited for each purchase of watercraft, accessory items, or part.

15.Transportation-In is the Cost Account debited for all freight and delivery charges incurred in transporting merchandise to the Holiday Jet Ski receiving dock. Deliveries to customers are charged to Delivery Expense.

16.Store and Shop Supplies Expense is debited for all purchases of store and shop supplies. The value of any store and shop supplies that remain at the end of each accounting period is adjusted to the Store and Shop Supplies account.

17.Delivery Expense is debited for the delivery and freight charges incurred in shipping merchandise items to the company.

18.Credit Card Expense accounts for the bank and company credit card fees charged to Holiday Jet Ski for allowing customers to use their credit cards to purchase merchandise and services. These fees will be between 1 and 4 percent of the total amount (including sales tax) of the customer charge.

(An adjusting entry will be made at the end of the each accounting period for the credit card expense accrued on company credit card sales that have been recorded as receivables. This adjusting entry will require a debit to the Credit Card expense and a credit to Accounts Receivable - Credit Card Companies.)

19.Tools Expense is debited for all small purchases of store and ship tools.

20.Rent Expense is adjusted at the end of each accounting period.

21.Insurance Expense is adjusted at the end of each accounting period.

ASSETS

1.Cash

2.Petty Cash

3.Accounts Receivable

4.Accounts Receivable - Credit Card Companies

5.Notes Receivable

6.Storage Fees Receivable

7.Interest Receivable

8.Merchandise Inventory

9.Prepaid Insurance

10.Prepaid Rent

11.Prepaid Advertising

12.Store and Shop Supplies

13.Store Equipment and Fixtures

14.Accumulated Depreciation - Store Equipment and Fixtures

15.Shop Equipment

16.Accumulated Depreciation - Shop Equipment

17.Trucks

18.Accumulated Depreciation - Trucks

LIABILITIES

1.Accounts Payable

2.Notes Payable

3.Sales Tax Payable

4.Salaries and Wages Payable

5.Interest Payable

6.Unearned Storage Fees

OWNER'S EQUITY

1.Aaron Larson, Capital

2.Aaron Larson, Withdrawal

REVENUE

1.Watercraft, Accessories, & Parts Sales

2.Sales Returns & Allowances

3.Service Fees Earned

4.Storage Fees Earned

COST OF GOODS SOLD

1.Purchases of Merchandise

2.Purchases Returns & Allowances

3.Purchase Discounts

4.Transportation-In

OPERATING EXPENSES

1.Store & Shop Supplies Expense

2.Salaries & Wages Expense

3.Truck Operating Expense

4.Advertising Expense

5.Delivery Expense

6.Credit Card Expense

7.Tools Expense

8.Depreciation Expense - Store Equipment and Fixtures

9.Depreciation Expense - Shop Equipment

10.Depreciation Expense - Trucks

11.Rent Expense

12.Insurance Expense

13.Professional Services Expense

14.Electric and Gas Expense

15.Telephone Expense

16.Bank Service Charges

17.Cash Short & Over

18.Miscellaneous Expense

OTHER REVENUE

1.Interest Earned

OTHER EXPENSES

1.Interest Expense

INCOME SUMMARY

1.Income Summary

Transactions for June 3 - 29, 2019

June

3

Sold a wet suit to a Jet Ski customer and received a check for $126.26. The check

covered the selling price of the wet suit ($118) plus 7% sales tax.

June

3

Issued check number 22097 for $900 to Sanders & Crichton for three months rent

on a small inventory storage facility for expanding business activity.

June

3

Discovered that an entry for $21.00 of poster printing charges had been entered in

error to the Miscellaneous Expense account rather than the Advertising Expense

Account. The date of the original entry is June 1.

June

3

Issued check number 22098 and replenished the Petty Cash fund. Holiday Jet Ski

maintains a $75 petty cash fund to handle small miscellaneous expenditures that

occur frequently during normal business operations. A total of $3.75 remains in the

petty cash box at this time. A summary receipts and invoices shows the following

expenditures have been made to date from Petty Cash:

Store & Shop Supplies Expense$43.00

Advertising Expense11.75

Miscellaneous Expense16.50

June

3

Billed the Round Hill Ski Club $675.50 plus sales tax for accessories installed (for

no charge) on their racing craft. Round all sales tax calculations to the nearest

cent. For example: $47.285 = $47.29

June

4

Issued check number 22099 for $1,260 as payment in full of the May 4 invoice

from Messlinger Sports Equipment.

June

4

Issued check number 22100 for $235 to A.C. Barkley, Attorney-at-law, for

professional services received.

June

5

Purchased Jet Ski accessories and parts from a new supplier Thunder Lake

Supply. Issued check 22101 for $1,366 as payment in full. The goods were

FOB destination.

June

5

Aaron Larson withdrew $100 from the business for personal use (check #22102)

June

5

Purchased Jet Skis for inventory from Kawasaki, USA. The purchase price for the

merchandise totaled $41,450. The terms of the purchase are 2/10, n30 and the

goods were shipped FOB Destination.

June

5

Completed service work on a customer Jet Ski and received a check for the

balance due. Sales invoice lists $112 for two hours of labor, $423 for parts and

accessories, and 7% sales tax.

June

6

Sold for cash two Jet Skis to a cash customer for $5,975 each plus sales tax.

June

6

Received $76.50 cash from customer Beverly Kyle as payment in full on her

account.

June

6

Issued check number 22103 for $45.75 as payment in full of the Less Incorporated

invoice of May 27.

June

7

Purchased $2,212 in parts and merchandise accessories from Tumbleweed Sports.

The credit terms are 1/10, n30 and the goods are shipped FOB Shipping point via

a separate logistic company. The transportation costs will be paid later upon

receipt of the invoice.

June

7

Purchased store and shop supplies on account from Albright Supply for $97.55.

The credit term is net 10 days.

June

8

Received a check for $420 from the Browns Ravine Jet Skiers for storage fees on

their watercraft. This check prepays their storage fees for June, July and August.

June

8

Received $200 cash as a partial payment on the past-due account of customer

Alice Berry.

June

10

Sold a 3-passenger Kawasaki Jet Ski to customer Emma Larson for $7,100 plus

sales tax. (don't forget to include the sales tax) Ms. Larson paid $900 cash as a down payment and charged the balance to her account. The account will be paid

in full in 30 days.

June

10

Received a check for $4,212.71 from the Western National Credit Card Company

as payment in full on credit card invoices that had been received through June 2

and mailed on June 4. The invoices totaled $4,343 and the credit card company

charged a 3% fee for the use of their system.

June

10

Sold three (3) Kawasaki Jet Ski to Suzanne Fujico for cash. The two Jet Skis - A

sell for $4,750 each and the T145G model sells for $5,500 with added accessories.

Sales taxes were charged for the sales. (sales taxes not included yet)

June

10

Purchased three (3) Hero Jet Skis from Springview, Incorporated. The list price

of the jets is $3,575 each with a trade discount of 28%. The credit terms are n/30

and the merchandise is shipped FOB Destination.

June

11

Issued check #22104 for $124.55 to Rambis Freight for transportation fees on

the June 7 purchase from Tumbleweed Sports.

June

11

Purchased three (3) Shark personal watercraft for inventory from Yancy Sprintcraft.

Purchase price for the merchandise totaled $18,600 and the entire amount was

charged to the Holiday Jet Ski account. The credit terms offered by Yancy are

1/10, n30 and the goods are shipped FOB shipping point. A separate billing for

freight charges of $414 has also been received from Less, Inc., a local freight

carrier.Terms from Less Inc. are net 10.(Two journal entries are required.)

June

12

Issued check #22105 to Albright Supply for the $721.25 due today. Terms from

Albright Supply are net 10.

June

12

Sold four Kawasaki Super Jet Skis and miscellaneous accessories and parts to

the Browns Ravine Jet Skiers for $27,245 plus sales tax. The Browns Ravine Jet

Skiers paid $5,000 in cash and charged the balance on their account.

June

13

Issued debit memorandum #DM004 to Yancy Sprintcraft for $6,200 and returned

one Yancy Shark personal watercraft. The hull of this watercraft arrived with serious

damage that will require major repair or replacement at the factory. The purchase

was made on June 11.

June

13

Sold a Sprintcraft Jet Ski trailer to John Brandon for $795 cash plus sales tax.

Mr. Brandon paid for his purchase by using a Bank Credit Card. The bank charged

Holiday Jet Ski a 2% credit card fee.

June

14

Received a check for $20,163 from customer Charles Montero as payment in full

on his account. The payment was for the May 15 transaction.

June

14

Issued check #22106 for $37.50 to the U.S. Postal Service for stamps and other

store supplies.

June

14

Purchased $402.25 in store supplies from Albright Supply and charged the total to

the business account. Credit terms are net 10.

June

14

Issued check #22107 for $52.44 for the purchase of miscellaneous tools to be used

in the service shop.

June

14

Purchased shop supplies from Sons & Sons Supply and issued check #22108

for $176.56 as payment in full.

June

15

Issued check #22109 in payment to Kawasaki, USA for the June 5 purchases.

June

15

Issued check #22110 John Douglas, the part-time repair and sales person for the

business. John is paid $9.65 per hour and worked 44.75 hours during the past

two-week period ended June 14.

June

15

Issued debit memorandum #DM005 to Albright Supply for $35.50 as the returned of

store supplies which was purchased on account on June 14.

June

15

Issued check #22111 to AT&T Phone Company for $53.74. The check is paid in

full for Aaron Larson's personal home phone bill. No business calls were made this

month on his home phone.

June

15

Received a check for $223.50 from Alice Berry as payment in full on her past due

account.

June

15

Borrowed $18,500 cash from the First National Bank by issuing a short term,

60-day note payable.

June

17

Purchased Jet Ski parts and accessories for $4,566.75 cash (check #22112) from

Fong Brother Company.

June

17

Issued the following checks as payment in full for monthly billings:

Check #22113 to Michigan Power & Light for $312.45

Check #22114 to Michigan Lake Service for truck gas and truck repairs, $355.43.

Check #22115 to Michigan AT&T Telephone for $104.65.

June

17

Issued check #22116 to Albright Supply for the June 7 purchased.

June

17

Sold a Kawasaki Jet Ski and accessories to Joel Letterman for $8,340, plus sales

tax. Mr. Letterman paid in full using a Western National Credit Card. (Don't forget to

include the sales tax.)

June

17

Issued check #22117 for $2,189.88 to Tumbleweed Sports as payment in full of the

June 7 purchased.Tumbleweed offers cash terms of 1/10, n30 and the invoice

balance of $2,212 is being paid in time to qualify for the purchase discount.

June

18

Upon analysis of the Tumbleweed Sports account, discovered that a second

Invoice (T1011) dated May 18, had been misfiled and must be paid today.The

amount due was $309 and the cash terms extended by Tumbleweed Sports was 1/10, n30. Check #22118 was issued to Tumbleweed for the payment.

June

18

Purchased a special order, custom built, racing version of the T-model from

Kawasaki, USA. The amount from Kawasaki totals $8,753, ($8,673 being the cost

of the T-model, and $80 the charge for freight in cost. Credit terms: 2/10, n30 and

FOB Shipping point.

June

18

Received a check for $119.84 from Robert Altman as payment in full for 2 hours of

service work ($56 per hour) performed today on his Jet Ski and trailer.

June

19

Issued check #22119 for $313.50 to Robert Logan, Chartered Accountant, for

accounting services received.

June

19

Performed service work totaling $179.76, including tax, for customer Alice Murray.

Alice paid in full using a Western National Credit Card.[Hint: divide $179.76 by 1.07 (100% of selling price plus 7% sales tax) to calculate the amount billed for the

service fees.]

June

20

Issued check #22120 for $22.50 to the Sierra Freight Company as payment in full

for delivery of a customer Jet Ski that had been serviced.

June

20

Issued check #22121 to Jet Ski Cruising magazine for an advertising feature in the

June issue. The advertisement costs $870.

June

20

Issued a credit memorandum CM301 to the Browns Ravine Jet Skiers for $422.65.

Accessories valued at $395.00 (plus sales tax) were returned for credit.

June

20

Sold on account the special order, custom built T-model from Kawasaki, USA to

customer Charles Grubonski.The sales amount including tax is $12,267.55.

[To obtain the sales tax, divide the sales amount by 1.07]

June

21

Issued check #22122 in payment to Yancy Sprintcraft for the June 11 purchased.

Terms offered by Yancy Sprintcraft was 1/10, n30.[Hint: don't forget the debit

memo of June 13 and the qualification for the purchase discount.]

June

21

Issued check #22123 in payment to Less Inc. for the June 11 purchased.

June

22

Received a check fro $850 from Wesmouth, Inc as payment for six (6) months

rent (June 24 to December 24) on their storage space.

June

22

Sold a Sprintcraft Superjet at a special sale price of $6,611 OTD (out the door).

This special price includes sales tax. The customer paid in full using a Bank Credit

Card (3% bank fee).

June

22

Discovered that check #22107, issued for $54.24 on June 14, and debited to the

Tools Expense account, had been recorded in error for $52.44.

June

22

Received a check for $321 from Kelly Ingalls as payment in full on her purchase of

May 22.

June

24

Sold parts and accessories to customer Roger Elliott for $175.00 and charged

Mr. Elliott for 2.75 hours of labor ($56.00 per hour) for work on his Jet Ski.

Mr. Elliott paid cash for this merchandise and services.

June

24

Issued check #22124 for $187.17 to the Newscastle TV Repair for service work

on the television satellite system in Aaron Larson's home. [Hint: Is this a business

operating expense?]

June

24

Sold a Kawasaki Jet Ski and a deluxe trailer to customer Jennie McKinsey. Total

sales including sales tax was $8,725.85. The selling price of the Jet Ski was $7,360

and the trailer price was $795. Jennie paid $2,725.85 cash as down payment and

gave Holiday Jet Ski a short-term promissory note (IOU) for the balance.Holiday

Jet Ski accepted the note.

June

24

Received a check for $8,830.45 from the Western National Credit Card Company

as payment in full on credit card invoices that had been received through June 20.

The invoices totaled $9,103.56 and the credit card company charged a 3% fee for

the use of their system.

June

24

Issue check #22125 to Albright Supply for the balance due on June 14

purchase, less the debit memo of June 15.

June

25

Received a check for $500.00 from Emma Larson as partial payment on her

account.

June

25

Aaron Larson withdrew $1,650 (check #22126) from the business for personal use.

June

25

Repaired hull damage and replaced an impeller for customer David Parkson.

Mr. Parkson was charged 4.25 hours of labor ($56 per hour), parts totaling $362,

plus sales tax. The bill was paid with a Western National Credit Card.

June

26

Purchased additional store fixtures for better display of the new Kawasaki Jet Skis

and issued check #22127 for $2,150 as payment in full to Attwater Business

Equipment.

June

26

Issued check #22128 for $995 to AIA Insurance for additional liability insurance

for the business.

June

27

Received a check for $4,342.50 from Waterrippers, Inc, as payment in full for the

May 28 purchases.

June

27

Through telephone order, sold to the Round Hill Ski Club, a Kawasaki X-2 model

Jet Ski and accessories for $5,575 plus sales tax. The purchase was charged to

the club account (accounts payable)

June

28

The Placerville Ski Club used a bank credit card (3% fee) to pay storage fees of

$855 for the six-month period beginning July 1.

June

28

Paid the shipping costs to transport the Kawasaki X-2 model Jet Ski to the

telephone customer, Round Hill Ski Club by issuing check #22129 for $45.50

to the DHL Logistic and Transport Company.

June

28

Issued check #22130 to the State Board of Business Tax for the balance of Sales

Tax collected through the close of the work day on June 22.Check the ledger card

for the balance in the account to this date. [Hint: sum all the sales tax amount until

June 22.]

June

28

Billed customer Cindy Dunne for 3.6 hours of labor for repairing racing damage

to her Jet Ski.

June

28

Issued check #22131 to Kawasaki, USA as payment in full on the June 18

purchase. [Hint: Remember that discounts are not taken on freight charges.]

June

29

Received a check for $102 from customer Alice Berry as payment in full of June 1

purchase.

June

29

Issued check #22132 for $30.76 (which includes sales tax) to Roger Elliott as a

cash refund for parts and accessories he returned. The check is for a $28.75

merchandise return plus sales tax.

June

29

Issued check #22133 098 for 50.60 to replenish the Petty Cash Fund. A total of

$24.40 remains in the petty cash box at this time. A summary of the receipts shows

the following expenditures have been made to date from Petty Cash.:

Store & Shop Supplies Expense$36.50

Tools Expense8.35

Miscellaneous Expense4.75

June

29

Purchased five (5) Clear Water Sprint watercraft and watercraft accessories from

Clear Water, Incorporated of Alameda. The purchase totaled $23,899, lists of cash

terms of 2/10, n30 and FOB destination shipping terms.

June

29

Sold two (2) Trail-Swift trailers plus accessories to the Browns Ravine Jet Skiers

for $1,923.86, which includes sales tax. Received a cash payment of $1,000 and

the balance was charged to the club account.

June

29

Issued check #22134 John Douglas, the part-time repair and sales person for the

business. John is paid $9.65 per hour and worked 31.5 hours during the past

two-week period ended June 28.

Holiday Jek Ski

Unadjusted Trial Balance

June 1, 2019

Account Title

Dr

Cr

Cash

$11,875.65

Petty Cash

75.00

Accounts Receivable

29,595.35

Accounts Receivable - Credit Card Companies

4,343.00

Merchandise Inventory

125,130.00

Prepaid Insurance

4,375.00

Prepaid Rent

12,000.00

Store Equipment and Fixtures

49,700.00

Acc. Depreciation - Store Equipment and Fixtures

$14,520.00

Shop Equipment

14,250.00

Acc. Depreciation - Shop Equipment

3,750.00

Trucks

22,500.00

Acc. Depreciation - Trucks

4,000.00

Accounts Payable

12,042.00

Sales Tax Payable

317.40

Unearned Storage Fees

8,700.00

Aaron Larson, Capital

188,202.45

Aaron Larson, Withdrawals

12,000.00

Watercraft, Accessories & Parts Sales

122,400.00

Sales Returns and Allowances

1,398.00

Service Fees Earned

3,215.00

Purchases of Merchandise

64,300.00

Purchases Returns and Allowances

2,450.00

Purchases Discounts

510.00

Transportation-In

585.00

Store & Shop Supplies Expense

2,039.00

Salaries & Wages Expense

1,416.50

Truck Operating Expense

911.95

Advertising Expense

1,692.00

Delivery Expense

388.00

Credit Card Expense

515.00

Tools Expense

42.00

Professional Services Expense

472.00

Electric and Gas Expense

416.00

Telephone Expense

318.00

Bank Service Charges

32.00

Cash Short & Over

12.00

Miscellaneous Expense

37.40

Interest Earned

312.00

$360,418.85

$360,418.85