PART A - Recording Transactions

One Time Hits Electronic Company buys and sells DVD players, VHS players, and Phonographs. They use the periodic inventory method to record cost of goods sold. This means that all purchases of inventory will be recorded to purchases, not inventory, and that cost of goods sold will be recorded with the adjusting entries, not for each shipment.

Following are a list of events for 2003. You are responsible for completing the documents related to these events (from the revenue and expenditure cycles), recording the transactions, if required, in the special journals, posting these to the ledgers (general ledger and subsidiary ledger when applicable), and prepare some reports. As part of this assignment, you will take on the many roles of the individuals from the different departments that are responsible for the transactions.

Events: (See Events 1 and 2 video for help with the first two transactions)

Dec. 12: Received Customer order 2011 from Shawn Patrick. It was for a total of $1,950. They ordered 10 DVD40s ($80 each), 20 DVD30s ($50 each), and 5 VHS30 ($30 each). They would like these goods on December 19. Please Process Sales Order #1200. (but do not ship the goods). This is Revenue Cycle Step 1.

Dec. 13: Received approved requisition form from Operations requesting the purchase of 20 DVD Players-Basic and 25 DVD Players-Premium. These items will be purchased from 3DN Inc with an expected delivery date of Dec 30. Issue P.O. Number 358. Expenditure Cycle Step 1.

Dec 16: Paid amount due ($750) to Abbey Roads Inc. for Purchase Order Number 320. Issue check number 154. (Note: the supporting documents were included in the Documents in Process file, which you should have put in the cashier folder. You will need: a) invoice from Abbey Roads Inc, b) PO 320 (accounts payable copy) and c) receiving report. You will process the check. This is Expenditure Cycle Step 4.

Dec. 17: Received all of the product promotion pamphlets purchased for the marketing department. The purchase order (P.O.) was 356. The receiving department verified that all 1,000 pamphlets were there and in good condition. The pamphlets were sent to the marketing department. Use receiving number 121. (Note: from Documents in process, you will need: PO 356 receiving department copy which you should have put in the Receiving Department-temporary folder) This is Expenditure Cycle Step 2.

Dec 18: Accounts Payable received invoice from Beach Bum Inc. for the promotion pamphlets ordered on P.O. 356. Record these as Promotion and advertising expense (account # 50300).

(Note: from Documents in process, you will need: Invoice#488 from Beach Bum and PO 356 which are in accounts payable unmatched folder). (Note: this is not inventory. This is for GL account 50300-Promotion and Advertising Expense and will go in the other column on the purchase journal)

Dec. 20: Received approved requisition form from the Accounting Department requesting the purchase of 10 Pads of Columnar Paper (cost $5 each), 2 Printer Toners ($70 each), and 2 boxes of copy paper ($20 each). These items will be purchased from Highway Suppliers with an expected delivery date of January 3, 2004. Issue P.O. Number 359.

Dec 19: Shipped the goods for Sales Order number 1200. Please process the required documents and prepare packing slip/Shipping Notice # 1305, bill of lading#1305 and invoice # 1649. DO NOT include freight on the invoice.

Dec. 21: Received Customer order 15666 from Tiny Tims. It was for a total of $850. They ordered 5 DVD40s ($80 each) and 15 PHN10s ($30 each). They would like these goods shipped on December 31. Please Process Sales Order #1201. (but do not ship the goods).

Dec. 27. Pay amount due to Beach Bum Inc for PO number 356. Use check 155.

Dec 29: Received notification from the bank they received payment (check 899) from Shawn Patrick for invoice#1649. (Use the customer copy for the Remittance Advice sent by the bank).

Dec 30: Received inventory from 3DN Inc. for Purchase Order Number 358. All items ordered were received in good condition (20 DVD Players Basic and 25 DVD Players-Premium). These items were delivered to the warehouse. Use receiving number 122.

Dec 31: Received invoice from 3DN for PO number 358. (from Documents in process you will Customer Invoice from 3DN which you should find in the Accounts Payable -Unmatched folder.)

Dec 31: Shipped the goods for Sales Order number 1201. Please process the required documents and prepare packing slip/Shipping Notice # 1306, bill of lading#1306 and issue invoice # 1650. DO NOT include freight on the invoice.

Required:

1) For each of the above events, complete the documents, file them in the appropriate file and record the transactions, if required, in the correct special journals. You need to file the documents as you go through each event because some of them move around. (Hint: Do not use the general journal for these entries. For this project, the general journal will only be used for adjusting entries in Part B). Post the information to the subsidiary ledgers (where applicable-see note 4)) but not to the general ledger. The posting to the general ledger of the daily events will be done in the next requirement.

NOTE 1: Not all of the events require entries in the journals. For example, the processing of a sales order (Dec. 12) is not an economic event (it will lead to one in the future) and thus no accounting entry is required for this event. To determine what need to be done, for each event identify the event as one of the events on the Cycle Processes and follow the steps. You need to prepare the documents and process them as you do an event. You can not do them at the end. For the first 4, the Cycle Processes step has been identified for you.

NOTE 2: Do not use the general journal for the entries in this part. For this project, the general journal will only be used for adjusting entries in part B.

NOTE 3: Blank Forms needed for processing are included on the excel spread sheets (Revenue Cycle Forms and Expenditure Cycle Forms). The revenue forms include sales orders, bill of ladings, and invoices. They need to be single-sided (Please DO NOT PRINT THEM DOUBLE-SIDED.) The expenditure forms include purchase orders, receiving reports, and checks. Some of these forms are multi-copies. Some of the copies (marked N/A) will not be required. Please complete all required copies of the forms. (To help you, the copies have been linked to the first copy. If you input information on the first copy it will be duplicated on the other copies). You need to print these out and process them according. Please see the Cycles processes document for narratives on the process. For this project you will complete each type of form twice (that means you will have to print out 2 sets of each form).

Note 4: Posting to the subsidiary ledger: For every transaction recorded in the special journals that involves accounts receivables or accounts payables, when you record the transaction in the special journal dont forget to update the accounts payable or accounts receivable subsidiary ledger. Dont post to the general ledger until the end of the period which will be done in step 2. You should look at the transaction processing notes for information to help with posting to ledgers.

2) Post the information to the general ledger (where applicable). (Hint: Dont forget to include the transactions from Dec. 1 15 that are already included on the special journals. See our Transaction Processing Lecture Notes for more detail.

Note 5: Posting to the general ledger: At month end, for each special journal, draw a single line in each column (for totaling) at the bottom of the line for the last transaction. Then skip one row on the special journal and write December Totals in the description column. Total each column (including the Other column) and write the total for each column. Note that the transactions from December 1-15 need to be included in the totals. Cross-foot the special journal (add the totals for the debits and credits and make sure they equal) and then draw double lines under each column total. For each special column (except for the other column), post the total to the correct account in the general ledger. Write the total of the special journal column in proper account and complete the balance. Dont forget to put a checkmark under the column total of the special journal when you have finished posting. For the other column you can not post the total. Instead post each item in this column to the general ledger. When complete put a check in the column next to the amount.

3) Prepare a pre-adjusting entry trial balance.

4) Prepare an A/R aging report showing the customer balances and the ages of those balances (customers down the side, current=30, 30-60, 60-90, >90 days across).

Part B (Adjusting Entries and Reporting)

The end of the year (2003) has come, and all the routine transactions have been processed. As One Time Hits new accountant, it is your responsibility to complete the year-end process. You need to complete the adjusting entries, as well as the financial statements. You do not need to complete the closing entries.

Adjusting Entries: Prepare the correct adjusting entries using the following information.

The warehouse employees counted the ending inventory on hand at December 31, 2003. Their ending inventory balance is $40,000. (Remember we are using the periodic inventory method.)

The supplies department counted the supplies on hand. The balance of supplies at December 31 is $500.

The note payable is due in 5 years and was initiated on April 1, 2003. The note payable requires annual interest payments of 11% payable on March 31 of each year. Round to the nearest dollar. (Note: Since the loan is not for the full year, you need to prorate the interest expense. I used 275 days out of 365 to prorate the interest expense)

The company has estimated that bad debt expense is equal to one half of a percent (.005) of net sales (sales less sales discounts and returns).

December salaries and wages will be paid on January 5, 2004. December salaries and wages are $6,000.

Two of the fixed assets have not been completely depreciated. These two items are a mainframe computer purchased for $20,000 in 2002 and a personal computer purchased in the current year on October 1, 2003 for $3,000. Computers are depreciated using the straight-line method over 3 years. The salvage value is 0. (Note: the mainframe needs one full year of depreciation and the personal computer needs three months)

The companys income tax rate is 15%. Round to the nearest dollar. (For taxes most companies complete the other adjusting entries and then post them to the GL. Then prepare a preliminary income statement and calculate the taxes. Then they can make the adjusting entry for taxes and post to the general ledger).

Instructions:

1) Prepare the above adjusting entries for December 31, 2003. These entries should be recorded in the general journal. Provide any necessary calculations to support your entries. Note: Dont forget to put the income tax adjusting journal entry in the general journal and post it to the general ledger.

2) Post these adjusting entries to the General Ledger and prepare a trial balance.

3) Prepare the classified balance sheet and the multi-step format income statement, and statement of retained earnings (or the statement of retained earnings can be included at the end of the income statement). The statement of cash flows is not required.

You do not need to do Closing Entries