Nov 4 On this day an entrepreneur (Investor #1) created the Beacon Lumber corporation and purchased 20,000 shares of its common stock for $20,000. The corporation will operate a lumberyard and building materials business in a medium sized city not far from your school. The business will prepare financial statements on a monthly basis. Nov 4 Later in the day two other investors purchase shares. Investor #2 purchases 2,000 shares for $2,000 and investor #3 purchases 3,000 shares for $3,000. Nov 4 Later that afternoon the lawyer who performed the incorporation submits a bill for $500 fee and $37 in expenses. Nov 6 The investors (and, at present, the sole owners) of the Beacon Lumber Corporation elect three prominent businesspersons to the company's Board of Directors. The board will meet once every quarter to review operations and set overall policy for the company, but it will not be involved in the day to day operations. The company's founder is appointed CEO of the corporation. The board appoints a clerk-secretary. Nov 15 An investor supplies 20 acres of land in exchange for stock and a mortgage note. The land has been appraised at $70,000 and the investor receives 15,000 shares of stock and a note with a face value of $55,000. The note requires Beacon to pay interest at the rate of 10% per year and the principal (face amount) is due in 5 years. Nov 15 Investor #2 sells 500 shares of Beacon stock to a younger sister for $500. Nov 17 Beacon agrees to rent a trailer which it will use as a temporary office. The rental cost, as determined by AZCO, the lessor, will be $200 per month. AZCO will pro-rate this month's rent, using a Nov18th start date. Beacon pays the rent. In the future, rent will be due the first of the month. Beacon cannot receive a discount if the trailer is returned. Therefore, the lessor has determined that a performance obligation has been met on the first day of the month not at the end of the month. Hint if lessor is recording revenue then the lessee, Beacon should be recording the expense not a prepaid asset. Round your entry to the nearest dollar. Nov 17 Beacon applies for credit to the Big Wholesale Lumber Company (BWLC). Since Beacon is a brand-new business and has no history of operations the credit manager for the BWLC is at first reluctant to approve the request. Eventually, after heated discussions, she agrees to a $10,000 limit, provided that the company's ratio of Debt to Total Assets does not rise above .70, and that its Current Ratio does not fall below 2.45. Nov 17 Beacon purchases 20,000 board feet (bd. ft.) of framing lumber from BWLC at a cost of $.90/bd. ft., (ninety cents per board foot). After reaching its credit limit, it paid cash for the balance of the purchase. Nov 17 Beacon hires an Office Manager and two-yard personnel. The yard personnel will each earn $12.00 per hour and the manager will earn $17.00 per hour. All employees will work an eight-hour day. Nov 18 The Solid Construction Company purchases 3,000 bd. ft. of lumber from Beacon on account for $4,800.00. (Beacon uses the perpetual method of inventory is used.) Nov 18 The Strong Construction Company purchases 6,000 bd. ft. of lumber on account for $9,600.00. Nov 18 The Reliable Construction Company purchases 4,000 bd. ft. of lumber on account for $6,400.00. Nov 20 The Nocturnal Departures Home Improvement Co. applies for a trade credit Account with Beacon. Nocturnal provides the following financial information to Beacon in its credit application: Cash 12,000 Short-term Liabilities 2,000 Total Assets 15,500 Total Liabilities 5,000 For the following questions, please enter your responses in the Nov Questions tab. Based upon the preceding, 1. What is the ratio of cash to short-term liabilities for Nocturnal? 2. What is the ratio of Assets to Total Liabilities? 3. Using the same credit standards that BWLC applied to Beacon, does it appear that Nocturnal meets Beacons standards for trade credit? Before approving credit, the office manager calls the bank reference provided by Nocturnal, and learns that the company currently has a cash balance of $200. When she asks Nocturnal about the $11,800 discrepancy Nocturnal explains that the financial information includes the anticipated (but yet, unrealized) profit of $11,800 on a job under bid. Nocturnals accountant explains that the company keeps its books according to Contingent Reality Accounting Principles (CRAP). The office manager reviews financial statements for the company and adjusts them to GAAP: Cash 200 Short-term Liabilities 2,000 Total Assets 3,700 Total Liabilities 5,000 4. What is the ratio of cash to short-term liabilities? 5. What is the ratio of Debt to Assets? 6. Does it still appear that Nocturnal meets Beacons standards for trade credit? 7. What would stockholders equity be? 8. Do lenders or owners appear to have greater interest in the assets of Nocturnal? Nov 20 The Nocturnal Departures Home Improvement Co. purchases 1,000 bd. ft. of lumber for $1,600, paying cash. Nov 22 John Q. Homeowner purchases 2,000 bd. ft. of lumber for $3,500, paying cash. He does not have a sales tax exemption certificate. By law, Beacon must collect 8.25% sales tax and remit this to the state at the end of each quarter. (Hint: your entry should include a credit to Sales Taxes Payable of 289 *rounded up ($288.75* ($3,500 x .0825).) Nov 26 The Solid, Strong & Reliable Construction Companies all send checks totaling $18,000 for payment on account. Nov 26 Beacon writes a check for $10,000 to the Big Wholesale Lumber Company for payment on account. Nov 30 Beacon pays a total wage expense of $3,608 to its workers for the month of November. (Debit the store wages expense account when you make this entry.) ? BEACON LUMBER, MONTH OF DECEMBER TRANSACTIONS Dec 1 Beacon purchases a general liability insurance policy for $1,200, paying cash. The term of the policy is one year, from Dec 1, 20X1 through Nov 30, 20X2. Dec 1 Beacon purchases a forklift for $10,000, paying half in cash and half with a 5 year, 12% note. The forklift is a well-made American Machine & Foundry product, and it is expected to last for 10 years. Dec 1 Beacon purchases office equipment for $2,000, paying cash. The equipment has an expected life of 5 years. Dec 3 Beacon purchases 30,000 bd. ft. of lumber from BWLC for $27,000. Again, after reaching its credit limit it paid cash for the remaining amount. Dec 3 On this day Beacon sent a check to pay for December's rent ($200) for the office trailer. Dec 6 Beacon signs a contract with SCORE Construction to have a warehouse built on its property. The warehouse will cost $20,000. Beacon will pay SCORE by issuing $10,000 worth of stock, paying $5,000 in cash and issuing a note for the balance. (Has A.L.O.E. been impacted?) Dec 6 Beacon pays $300 for three months of advertising on a web site. The ad will run from Dec 15, 20X1 through March 15, 20X2. Dec 6 The sister of investor #2 purchases the balance of investor #2s Beacon stock for $3,000 (see General Journal, Nov 15). Dec 7 Beacon pays the lawyers bill received on Nov 4. Dec 15 Mark Peltz, a local sculptor, agrees to rent 1 acre of land at the rear of Beacon's lot to use as an outdoor studio. He pays $600 for 4 months rent. The lease will start on Dec 15. Dec 15 On this day Beacon sells 3 acres of land for $15,000. It receives $5,000 in cash and a mortgage note for the rest. The note carries interest at 10% and the principal amount is due in 8 years. Assume that all the land had a uniform cost per acre when it was purchased by Beacon. Dec 18 The office manager purchases $250 worth of office supplies. Beacon pays cash. Dec 29 Girl Scouts sneak into the lot Friday night and start a campfire. The fire gets out of control and destroys $1,800 worth of inventory. (To avoid embarrassment to the Girl Scouts, the company does not file charges with the police or make an insurance claim. Instead it asks the Girl Scouts to perform 200 hours of community service.) For accounting purposes, this would be considered a loss. Dec 29 The Board of Directors declares a cash dividend of $.05 per share, payable in January. (Hint: Use the dividends and dividends payable - common stock accounts.) Verify that the amount of the dividends (the product of the number of shares issued and the amount per share) equals $2,000. Dec 30 This is the last payday for the month of December. The next payday will occur in January. Payroll checks for the month of December total $5,248. (For the time being you can ignore taxes. We will examine this topic later in the course.) Dec 31 Total sales on account for the month of December were $45,600. Beacon sold all merchandise at a uniform selling price of $1.60 per board foot. (Hint: you should be able to use this information to calculate the COGS entry by determining how many unites were sold.) Dec 31 By the end of the month Beacon had collected cash payments from its account holders of $37,600. REQUIRED ADJUSTING ENTRIES FOR DECEMBER A1 The two yard personnel and the office manager worked on Dec. 29, 30 and 31. On December 30th they were paid for work through the 28th. The yard personnel are paid $12.00 per hour and the office manager receives $17.00 per hour. All employees work an eight-hour day. A2 A review of the office supplies locker shows that $180 worth of supplies are on hand. A3 Compute and record the insurance expense for the month of December. Assume that the insurance coverage expires at an even rate throughout the year. Refer to the general journal for Dec 1 and verify that the expense should equal $100. A4 Compute and record depreciation on the forklift acquired on Dec 1. Assume that usage will occur at an even rate over the life of the machine, so that 1/120th of its original cost will be depreciated each month. A5 Compute and record depreciation on the office equipment acquired on Dec 1. Use the same method for this equipment as you did for the forklift. Think about how the shorter life (five years for the office equipment as opposed to ten for the forklift) affects your calculation? A6 Compute and record the advertising expense for the month of December. As always, pay careful attention to all dates. A7 Compute and record the rental revenue from sculptor Mark Peltz. (1/2 of a month has lapsed) A8 Compute and record the accrued interest revenue on the note received as partial payment for the 3 acres of land sold earlier in the month. A9 Compute and record all the accrued interest expense on (a) the note given to the investor who supplied 20 acres of land on Nov. 15 and (b) the forklift. Use a 360-day year and verify a total of $737.50 for both notes. Round your answer up to the nearest dollar Correcting entry CX The office manager realizes that the check written for office supplies was made for $200, and not $250 as initially recorded. The cash account and supplies expense account should be corrected to show their proper amounts. ? Instructions: For the month of November, please complete the following: 1) Make all required journal entries for the transactions during the month of November. (See BEACON LUMBER, MONTH OF NOVEMBER TRANSACTIONS found later in this document.) Use the Excel tab Nov General Journal for your entries. Cells highlighted in orange contain drop down boxes so that you can choose your answer from the list. Cells highlighted in blue are manual entries. There are some questions within these transactions, so please make sure you do not miss any transactions after the questions. For Journal entries, please note the following: Credits do not need to be indented If one transaction requires multiple debits and/or credits, then enter all the debits first. Enter the larger number first. Then enter the credits (largest amount first) Round all numbers to the nearest dollar Enter numbers directly, there is no need to add dollar signs or commas. If information would not require a journal entry, i.e. does not affect the accounting equation, then do not enter no entry. just go to the next transaction. There may be notes provided within the workbook that provide further hints or entry detail. 2) Answer the questions within the BEACON LUMBER, MONTH OF NOVEMBER TRANSACTIONS. Please enter your responses in the tab titled Nov Questions within the Excel workbook. Cells highlighted in orange contain drop down boxes so that you can choose your answer from the list. Cells highlighted in blue are required manual entries. In this tab you will see additional input guidance as well. 3) Post all November journal entries to the ledger accounts. Use the Excel tab Nov General Ledger to record your postings. Post the debit or credit from the journal in the appropriate column and then keep a running total in the appropriate balance debit or balance credit column. For example, the cash account may have debits and credits posted but the balance should always be a debit. Note you should have the exact number of rows needed after the closing entries are made later, using this same tab. 4) Prepare a trial balance. Use the Excel tab Nov Trial Balance. The accounts have already been filled in as a check. Remember total debits must equal total credits or something is wrong. 5) Prepare an Income Statement, Retained Earnings Statement, and a Balance Sheet. Use the tab Nov Financial Statements to record your entries. Note the financials include the appropriate accounts; you will need to enter the correct amounts and total properly. As a reminder, you are using Excel so utilize formulas when you can. 6) Journalize and post the closing entries for the month of November. Pay special attention to the difference between permanent (balance sheet) accounts and temporary (income statement) accounts. Use the Excel tab Nov General Journal to record the closing entries and use the Nov General Ledger tab to post them. The accounts have already been included in the closing journal entries; therefore, you need to focus on the amounts. FOR DECEMBER - DO THE FOLLOWING: 1) Make all required journal entries for the transactions during the month of December. (See BEACON LUMBER, MONTH OF DECEMBER TRANSACTIONS found later in this document.) Use the Excel tab Dec General Journal for your entries. Cells highlighted in orange contain drop down boxes so that you can choose your answer from the list. Cells highlighted in blue are manual entries. 2) Journalize adjusting entries. (See REQUIRED ADJUSTING ENTRIES FOR DECEMBER.) Use the Excel tab Dec General Journal for your entries. 3) Post all journal entries, including adjusting entries, for the month of December. Use the Dec General Ledger tab to record your entries. Before posting any journal entries for December make sure that the General Ledger includes all beginning balances from November. Please note: later, this same tab will be used for closing entries. 4) Prepare an adjusted trial balance. Use the Dec Trial Balance tab. Note the column Acct. No. & Title have already been prepopulated. 5) Prepare an Income Statement, Retained Earnings Statement, and a Balance Sheet. Use the tab Dec Financial Statements to record your entries. Note the financials include the appropriate accounts, you will need to enter the correct amounts. As a reminder, you are using Excel so utilize formulas when you can. 6) Journalize and post the closing entries for the month of December. Pay special attention to the difference between permanent (balance sheet) accounts and temporary (income statement) accounts. Use the Excel tabs Dec General Ledger to record the closing entries and use the Dec General Ledger tab to post them. The accounts have already been included in the closing journal entries; therefore, you need to focus on the amounts. ?