I need to prepare an Adjusted Trial Balance after doing the original journal transactions and T-Accounts. How do I go about setting up the Adjusted Trial Balance?

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Practice Problem

Beginning AIS, Last Revised 06/01/2013

This is a practice assignment that reviews general financial accounting principles and procedures. This assignment should help you understand the first assignment in the AIS course. While there are many aspects of this sample assignment that are similar to the assignment you will be completing, there are many aspects that are different. That means that you will have to review some of the material you covered in you financial accounting course and apply them to the first assignment. In both this sample assignment and your first assignment you will have to create general journal entries for a series of transactions and post them to the general ledger in the form of T-accounts. At the end of the financial reporting period, you will also make the adjusting journal entries. The solution to this sample assignment shows the details of this process. In addition, the sample solution is entered into an Excel spreadsheet. It is assumed that you have rudimentary knowledge of Excel.

The problem situation follows:

TUCKER BOATS

Tucker Boats began business on September 1, 2013, as a retail sales outlet for Swellcraft water-ski and fishing boats. Tucker Boats is located on the outskirts of Las Vegas, Nevada, and the area provides skiers and fishermen with ample opportunities for boating recreation at nearby Lake Mead. Joe Tucker was excited that he was able to get his business established before the spring, so that he would have his operations running smoothly by the peak sales period during spring and early summer. Tucker Boats has adopted a September 30 as fiscal year end, just in time to stock new merchandise.

On September 1, Joe and his attorney were involved with issuing the stock of this closely-held corporation. On this same date, he hired a recent graduate of a local trade school, Henry Webster, to be responsible for boat repairs. In the next few days of September, he rented a sales office, boat garage, and lot space. The store is open Monday through Saturday and Joe is there all six days. Henry works 8 hours per day, Monday through Friday. Both Henry and Joe are employees of the corporation.

The next page shows Tucker Boat's chart of accounts. Following are descriptions of events occurring during September. After October begins, you are to close the accounts.

Note: Since this is a new business, there are no beginning balances in your accounts.

Chart of Accounts: Tucker Boats

G/L Account No. Account name

101 Cash

111 Accounts Receivable

112 Allowance for doubtful accounts

121 Boat Inventory

122 Boat Accessory Inventory

131 Supplies

132 Prepaid Insurance

133 Prepaid Rent

141 Store, Office, & Boat Equipment

142 Accumulated depreciation

201 Accounts Payable

202 Accrued Salaries Payable

203 Accrued Interest Payable

204 Unearned Revenue

205 Dividends Payable

206 Current Maturities of long-term debt

207 Other Accrued expenses payable

210 Notes Payables

301 Common Stock - (no par)

311 Retained Earnings

401 Boat Sales

402 Accessory Sales

403 Boat Repair Revenue

501 Cost of Goods Sold - Boat Sales

502 Cost of Goods Sold - Accessory Sales

601 Salaries Expenses

602 Supplies Expenses

603 Insurance Expenses

604 Rent Expense

605 Depreciation expense

606 Utilities expense

607 Advertising expense

608 Interest expense

609 Doubtful Accounts expense

DESCRIPTIONS OF EVENTS OCCURRING Sept. 1 - 30

Date Description of Event

Feb.

1	Sept. 1, 2013	Joe, with the help and advice of his attorney, Jason Rutherford, issued to himself 5,000 shares of Tucker Boats, Incorporated common stock (no par) at a price of $20 per share. Joe transferred $100,000 cash from his personal bank account and deposited it in a checking account in the name of Tucker Boats, Incorporated.
2	Sept. 1, 2013	Tucker Boats hired Henry at $10 per hour. Henry's typical work week will be 8 hours a day, 5 days per week. Joe and Henry are paid on the first of each month for the month just ended.
3	Sept. 1, 2013	Tucker Boats paid Far West Insurance Agency a one-year general property and liability insurance premium of $2,196.
4	Sept. 1, 2013	Tucker Boats paid $2,400 to Ace Property Management Group for September's rent on the sales office and boat lot.
5	Sept. 4, 2013	Tucker Boats wrote a $900 check to Jason Rutherford to pay for his assistance in issuing the common stock.
6	Sept. 6, 2013	Tucker Boats purchased boat moving equipment, office furniture, and boat repair machinery. Tucker Boats paid $6,880 in cash and signed a four-year, 9.6%, $20,000 installment note payable to First National Bank. Equal monthly principal and interest payments of $503.42 are due the 5th of each month, beginning October 6. (The note assumes a 360-day year and 30 days of interest charged for each full month. Months with 31 days accrue only 30 days of interest, but so does September. The date the loan is signed bears interest. Interest is accrued to the nearest penny.)
7	Sept. 6, 2013	Tucker Boats purchased, at a cost of $11,500, a Fast Glass model Swell craft ski boat for resale. Transportation cost from the Swellcraft factory to Tucker Boats was $550, which Tucker paid in cash. Tucker uses a perpetual inventory system for both boats and accessories. Payment terms to Swellcraft are net 60 days or within two days of the sale of the boat.
8	Sept. 7, 2013	Tucker Boats purchased on account a variety of accessory merchandise at a cost of $1,330 from Miller Ski Supplies. Transportation was paid by Miller. Terms are net 30 days.
9	Sept. 8, 2013	Tucker Boats purchased supplies costing $760, paying cash.
10	Sept. 9, 2013	John Phillips, a local ski enthusiast, provided Tucker Boats with its first sale when he bought a $490 slalom ski for cash. The ski had been included in the September 6 purchase and had cost Tucker $350.
11	Sept. 11, 2013	Albert Snell, another skier, brought his Manvader ski boat in to be "winterized." Henry changed both the engine and outdrive oil, drained the water from the engine, replaced the spark plugs, and tuned the engine. Albert, a long time friend of Joe, agreed to pay the $220 invoice within Tucker Boats' customary 30-day trade terms.
12	Sept. 11, 2013	Sold Frank Featherstone a dry suit with a $410 price. After checking his credit, he was allowed the 30-day trade terms. The dry suit also was included in the September 6 purchase and had cost $225.
13	Sept. 13, 2013	Tucker Boats purchased additional accessory merchandise from Fisherman's Warehouse at a cost of $860. Tucker agreed to the 15-day payment terms from Fisherman's and paid $40 cash to a trucking firm for transportation.
14	Sept. 13, 2013	Tucker Boats paid Admirable Advertising Agency $180 for a newspaper advertisement to carried in the Saturday, September 18 edition of the Las Vegas Gazette.
15	Sept. 14, 2013	After inspecting the merchandise from Fisherman's Warehouse on September 13, Joe noticed that part of the merchandise was damaged. Tucker Boats returned the damaged merchandise, which had cost $130, and received a debit memorandum from Fisherman's Warehouse.
16	Sept. 15, 2013	Art Jensen, a new customer, purchased fishing gear at a price of $335, paying cash. The merchandise was included in the September 13 purchase at a cost of $222.
17	Sept. 15, 2013	Joe was hopeful that his upcoming newspaper advertisement would bring in boat customers, so he purchased a 15-foot, Swellcraft fishing boat with a 25-horsepower outboard motor. Tucker Boats received an invoice for $7,800 from Swellcraft and paid $310 cash for transportation.
18	Sept. 18, 2013	Tucker Boats' advertisement in the morning paper paid off when Lance Layitover signed a sales contract to buy the Fast Glass Swellcraft ski boat for an "out-the-door" price of $18,999. The sale was contingent on Lance's arranging bank financing.
19	Sept. 18, 2013	Tucker Boats had a booth in the Nevada State Boat Show to be held Sunday, September 26, paying the organizers of the event $300.
20	Sept. 20, 2013	Lance delivered the bank's check for $17,000 and his own for the balance of $1,999 to finalize the sale of the Swellcraft ski boat.
21	Sept. 21, 2013	Tucker Boats paid Swellcraft the $11,500 it owed on its purchase of the Swellcraft ski boat.
22	Sept. 21, 2013	Henry finished repairs and maintenance jobs on several boats. Cash receipts for this work amounted to $1,755.
23	Sept. 22, 2013	Tucker Boats' advertisement was so successful that he paid another $180 for an advertisement in the September 24 morning edition of the Gazette.
24	Sept. 23, 2013	Tucker Boats purchased another Fast Glass Swellcraft ski boat with some additional options that weren't included in the one he sold. The invoice cost was $12,100, which he agreed to pay on the same terms as his first purchase. Transportation cost, which Tucker Boats paid in cash, was $515.
25	Sept. 23, 2013	Ski accessory sales for cash totaled $704 for the day. The cost of these sales was $425.
26	Sept. 24, 2013	Frank Hammons, an avid skier, purchased a slalom ski from the manufacturer's catalogue. He paid the entire $580 price and the ski was ordered because it was not in stock.
27	Sept. 24, 2013	Tucker Boats wrote a $730 check to pay Fisherman's Warehouse for its September 13 purchase.
28	Sept. 25, 2013	Accessories costing $545 were sold to Vivian Ellis for a price of $770. Joe's check of her credit qualified her for 30-day credit terms.
29	Sept. 25, 2013	Additional accessory merchandise costing $827 was purchased from Tackle and Line Shop. Shipping costs were paid for in cash ($23). Payment terms are 30 days.
30	Sept. 27, 2013	James Murphy, a long-time associate of Joe Tucker, had major repairs to his boat performed during the last week of September. Henry finished the repairs on this date and Murphy was billed $2,329. Payment from James is due in 30 days.
31	Sept. 28, 2013	Joe and his wife, Martha, who is the Vice-president of Tucker Boats, constitute the Board of Directors. They met and declared a $.30 per share cash dividend, to be paid on March 15, 2014.

After you develop the journal entries for the above transactions, you should post the entries to T-accounts and calculate the account balances. These account balances can then be used in making adjusting entries. Using these account balances and additional adjustment information below, record adjusting journal entries. Note that some information needed for adjustments is obtained from the description of the original transaction. For example, Henry's wage rate is given in a Sept. 1 description.

Adjustment information as of September 30, 2013 not already given in original transactions:

Joe was very conscientious in checking his customers' credit history. However, while at the Nevada State Boat Show, he learned that it is customary within the pleasure boating industry for retail boat sales to suffer bad debt losses equal to 5% of credit sales. Joe decides that it is prudent to use the 5% industry-wide standard until he has more experience with his own business and customers. Round estimate to the nearest dollar.

As a control measure, Joe counts his inventory of skiing and fishing accessories at 9/30/2013. He determines that the cost of this merchandise on hand is $1,140.

Joe counts his Supplies after the close of business on the last day of the month and determines the cost of unused supplies to be $262.

Joe estimates that his office furniture and boat related equipment will last eight years with no salvage. Fixed assets purchased in the first half of the month are depreciated for the entire month, while fixed assets purchased in the last half of the month are not depreciated until the second month. Depreciation is rounded to the nearest dollar.

Henry worked 20 days during September and did not work any overtime. Joe gets a monthly salary of $3,000.

On October 4, Tucker Boats received a $357 invoice from Desert Gas and Electric Company for utilities consumed during September.

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I need to prepare an Adjusted Trial Balance after doing the original journal transactions and T-Accounts. How do I go about setting up the Adjusted Trial Balance?

DH 122,863 3,729 27.464 95.399 3,729 95.399 3.729 95.399 3.729 Cash Accounts Receivable Allowance for doubtful accounts Boat Inventory Boat Accessory Inventory 112 186 186 186 32,775 3,080 12,050 1,897 20,725 1,183 20.725 20.725 122 131 2,196 2,196 Prepaid Insurance Prepaid Rent Store, Office, & Boat Equipment Accumulated depreciation Accounts Payable Accrued Salaries Payable Accrued Interest Payable Unearned Revenue Dividends Payable Current Maturities of long-term debt Other Accrued expenses payable Notes Payables Common Stock-(no par) Retained Earnings Boat Sales Accessory Sales Boat Hepair Hevenue Cost of Goods Sold - Boat Sales Cost of Goods Sold Accessory Sales Salaries Expenses Supplies Expenses nsurance Expenses Rent Expense Depreciation expense Utilities expense Advertising expense Interest expense Doubtful Accounts expense 141 142 202 203 204 206 207 401 402 403 603 604 605 607 608 609 Enter an appropriate cell formula in the yellow marked cells for totaling numbers in each column. check figures with formula example of 223.920 223.920 169.249 169.249 11.280 11.280 174,805 174,805 26.012 26012 150,148 150,148