Page 1 PRACTICE SET ACCOUNTING 3341 (5133) SPRING 2020 This practice set is intended to refresh your basic accounting skills by requiring you to record, summarize, and report the results of a basic set of accounting transactions for a sample company, HOW TO PROCEED Enter the current period transactions in the General Journal. Use the journal entry number for each transaction as a reference. It is not necessary to include an explanation for the entries in this problem. Enter the beginning balances for each account in the General Ledger and post the current period journal entries to the accounts in the General Ledger. Balance each account in the General Ledger. List each account balance on the Unadjusted Trial Balance. Record the adjusting entries in the General Journal. Post the adjusting entries to the General Ledger and re- balance each account. List each account balance on the Adjusted Trial Balance, Prepare a multiple-step Income Statement, a Statement of Retained Earnings, and a classified Balance Sheet. Record the year-end closing entries in the General Journal, post them to the General Ledger, and re-balance each account. Prepare a Post-Closing Trial Balance. REQUIREMENTS nimi tvoros COMPLETE THE FOLLOWING FOR THE PERIOD CURRENTLY ENDED: General Journal - should include current period entries, adjusting entries and closing entries. General Ledger - with all journal entries appropriately posted. Unadjusted Trial Balance - which you will complete prior to making adjusting entries, Adjusted Trial Balance - which you will use to prepare the financial statements. Income Statement (Multiple Step) - including Earnings-Per-Share, Statement of Retained Earnings. Balance Sheet (Classified). Post-Closing Trial Balance. NOTE: All of the above must be submitted inside this bound workbook and in page number sequence in order to insure uniformity in the grading process. If your practice set is submitted in any other form, credit will be deducted for failure to follow instructions. Page 2 SUMMARY INFORMATION 4. BACKGROUND: Tony's Tools was incorporated on January 1, 2010 with 40,000 shares of $1 par value common stock authorized. All 40,000 shares have been issued. The company's accounting period ends on December 31 of each year. ACCOUNTING POLICIES: The company uses the following generally accepted accounting principles in presenting financial information: a. INVENTORY VALUATION - First-in, first-out method on a perpetual basis. Physical counts are conducted at the end of the year to determine the quantity and value of merchandise inventory on hand. b. DEPRECIATION - Straight-line. As of the close of business on November 30, 2019, the company had the following trial balance: Acct # Account Title Debit Credit 1110 Cash $ 691,200 1120 Accounts Receivable $ 423,360 1130 Merchandise Inventory $ 1,151,280 1230 Equipment $ 1,468,800 1231 Accumulated Depreciation - Equipment $ 594,864 2110 Accounts Payable $ 380,160 2210 Income Tax Payable 3010 Common Stock ($1 Par) $ 40,000 3020 Paid-In Capital in Excess of Par $ 260,616 3030 Income Summary 3040 Retained Earnings $ 718,004 4010 Sales Revenue $ 11,593,800 5020 Cost of Goods Sold $ 5,267,160 Salaries & Wages Expense $ 4,044,600 6010 Telephone & Utility Expense $ 6060 267,840 $ 273,204 6070 Rent Expense 6120 Depreciation Expense - Equipment 6410 Income Tax Expense Total $ 13,587,444 $ 13,587,444 Page 3 INFORMATION FOR CURRENT PERIOD TRANSACTIONS When applicable, round amounts to the nearest dollar. The following transactions occurred during December 2019: JE. #. DESCRIPTION AMOUNT Merchandise Inventory purchased from vendors on account, terms net 45. $ 201,960 $ 1,130,220 Sales to credit customers on account, terms net 45. The cost of the merchandise inventory sold was $508,599. Cash collections from credit customers 980,352 414,000 Payments of Accounts Payable 27,490 Payments in cash for Telephone and Utility Expense Payroll checks written and distributed for salaries and wages 438,840 Payment in cash for Rent Expense 22,767 Information for Adjusting Journal Entries After creating the journal entries to record the current year transactions, posting those entries to the ledger accounts, balancing each account, and preparing the unadjusted trial balance, an inspection of the balances indicates that the following adjusting entries are required: AJE # As the result of a physical count, year-end Merchandise Inventory was determined to be $838,141. Adjust the Merchandise Inventory account to reflect the amount of inventory overage or shortage. 2. Record the depreciation expense on Equipment for the year. All depreciable assets were purchased on the date of incorporation and have an estimated useful life of 20 years, with a residual (salvage) value equal of 10% of original costs. 3. Income Tax Expense for the year is estimated to be $184,920. Page 5 GENERAL JOURNAL ACCOUNT TITLE DEBIT ACCT CODE CREDIT GENERAL JOURNAL Page 6 Account 1110 CASH JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 1120 ACCOUNTS RECEIVABLE JE# ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 1130 MERCHANDISE INVENTORY JE ITEM DEBIT CREDIT Balance BEGINNING BALANCE GENERAL LEDGER Page 7 Account 1230 EQUIPMENT ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 1231 ACCUMULATED DEPRECIATION - EQUIPMENT ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 2110 ACCOUNTS PAYABLE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 2210 INCOME TAX PAYABLE ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 3010 COMMON STOCK ($1 PAR) ITEM DEBIT CREDIT Balance BEGINNING BALANCE GENERAL LEDGER Page 8 Account 3020 PAID-IN CAPITAL IN EXCESS OF PAR JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 3030 INCOME SUMMARY JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 3040 RETAINED EARNINGS JE# ITEM DEBIT CREDIT Balance BEGINNING BALANCE GENERAL LEDGER Page 9 Account 4010 SALES REVENUE JEW ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 5020 COST OF GOODS SOLD JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 6010 SALARIES & WAGES EXPENSE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 6060 TELEPHONE & UTILITY EXPENSE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE GENERAL LEDGER Page 10 Account 6070 RENT EXPENSE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 6120 DEPRECIATION EXPENSE - EQUIPMENT JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 6410 INCOME TAX EXPENSE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Page 11 TONY'S TOOLS UNADJUSTED TRIAL BALANCE AS OF DECEMBER 31, Acct # Account Title Debit Credit 1110 Cash 1120 Accounts Receivable 1130 1230 1231 2110 2210 3010 3020 3030 3040 4010 5020 6010 Merchandise Inventory Equipment Accumulated Depreciation - Equipment Accounts Payable Income Tax Payable Common Stock ($1 Par) Paid-In Capital in Excess of Par Income Summary Retained Earnings Sales Revenue Cost of Goods Sold Salaries & Wages Expense Telephone & Utility Expense Rent Expense Depreciation Expense - Equipment Income Tax Expense Total 6070 6120 6410 Page 12 TONY'S TOOLS ADJUSTED TRIAL BALANCE AS OF DECEMBER 31, Debit Credit Acct # Account Title 1110 Cash 1120 Accounts Receivable 1130 Merchandise Inventory 1230 Equipment 1231 Accumulated Depreciation - Equipment 2110 Accounts Payable 2210 Income Tax Payable 3010 Common Stock ($1 Par) 3020 Paid-In Capital in Excess of Par 3030 Income Summary 3040 Retained Earnings 4010 Sales Revenue 5020 Cost of Goods Sold 6010 Salaries & Wages Expense 6060 Telephone & Utility Expense 6070 Rent Expense 6120 Depreciation Expense - Equipment 6410 Income Tax Expense Total Page 13 TONY'S TOOLS INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31. Page 14 TONY'S TOOLS STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, Page 15 TONY'S TOOLS BALANCE SHEET AS OF DECEMBER 31, Page 16 TONY'S TOOLS POST-CLOSING TRIAL BALANCE AS OF DECEMBER 31. Debit Credit Acct # Account Title 1110 Cash 1120 Accounts Receivable 1130 Merchandise Inventory 1230 Equipment 1231 Accumulated Depreciation - Equipment 2110 Accounts Payable 2210 Income Tax Payable 3010 Common Stock ($1 Par) 3020 Paid-In Capital in Excess of Par 3030 Income Summary 3040 Retained Earnings 4010 Sales Revenue 5020 Cost of Goods Sold 6010 Salaries & Wages Expense 6060 Telephone & Utility Expense 6070 Rent Expense 6120 Depreciation Expense - Equipment 6410 Income Tax Expense Total