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Part I

Journal Entries

a. Within the "Transactions" worksheet you will find journal entry statements. Use those statements to write the corresponding journal entries. You are to write the journal entries in the proper special journal. The special journals included within this workbook include the Sales Journal, Purchases Journal, Cash Receipts Journal and Cash Payments Journal. Any transaction that does natually work within one of the special journals should be written into the General Journal.

b.Within the "Transactions" worksheet you will find journal entry statements. At the end of this list you will find "adjusting" information. Use this "adjusting" information to write the respective adjusting journal entries. Write all adjusting entries in the worksheet labled "General Journal ADJ".

c. Before starting work, review the entire project: all instructions, business transactions descriptions, workbook sections, check figures, due dates, and submission requirements.

Credit Terms & Inventory Accounting

a. When Auto Zone purchases merchandise from a supplier or vendor on account, they receive credit terms of 2/15, net 30.

b. When Auto Zone sells merchandise to a customer on account, they offer that customer credit terms of 2/30, net 45.

c. Auto Zone uses a perpetual inventory accounting system and a last-in, first-out (LIFO) inventory costing method. Within this workbook there is a worksheet labeled "Inventory Control". You will need to use the "Inventory Control" worksheet to keep a perptual record of your inventory. As part of that process you will be calculating the value of CGS each time you generate a sale. Use the "Inventory Control" worksheet to calcluate your Cost of Goods Sold values.

d. Auto Zone uses the "Gross" method of accounting for purchases and sales. The "Net" method assumes that discounts are taken at the point of sale or purchase.

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MAY JOURNAL TRANSACTIONS

May 1

Paid $2,100 to LG for utilities bill that was recorded in April as an Account Payable, Check #1000.

May 1

Purchased 3,000 GPS units on Credit from Yamaha for $35.00 per unit.

May 1

Purchases office supplies from Staples on credit for $1,800

May 1

Signed a one-year 15%, $150,000 note payable with Chase Bank.

May 2

Rented part of the warehouse to a new tenant and received $12,000 for three months rent (May, June, July).

May 2

Sold 2,000 Aux Cords on account to Tesla for $85 per units, Invoice #2000.

May 2

Sold 400 USB Ports for $70 per unit and 1,200 GPS units for $75 per unit on account to Dodge, Invoice #2001.

May 3

Received a bill from the law firm of Davenport Associates for $6,300, payable upon receipt, for bond consulting fees, Check #1001.

May 4

Sold 500 Aux Cords on credit to Buick for $77 per unit, Invoice #2002.

May 4

Purchased 2,100 USB Ports on credit from Shure for $45 per unit.

May 5

Paid for office supplies purchased at Staples on May 1st, Check #1002.

May 7

Sold 200 GPS units on account to Chevrolet for $49 per unit, Invoice #2003.

May 8

Issued 4,750 shares of common stock for $13 per share

May 11

Purchased 1,875 GPS units on credit from Sony for $25 per unit.

May 11

The Board of Directors declared a cash dividend of $7 per share for shareholders of record on May 13th, payable on May 17th.

May 12

Paid in full for the May 1 purchase from Yamaha, Check #1003.

May 13

Received and paid expense reports for travel and entertainment totaling $1,500, Check #1004.

May 13

Took advantage of a special deal to purchase 1,500 Aux Cords on account from Panasonic for $42 per unit.

May 15

Received payment in full from Tesla for the May 2nd sale.

May 15

Sold 1,050 USB Ports on credit to Chevrolet for $57 per unit, Invoice #2004.

May 16

Received payment from Buick for $125,000 of the $300,000 owed from April 5.

May 17

Paid the dividend that was declared on May 11th, Check #1005.

May 17

Check # 1006 was issued for payroll: $14,900 for salaries and $5,100 for wages.

May 20

Issued a credit to Chevrolet for the return of 150 defective units from the May 7th sale. These units has a cost basis of $35 per unit.

May 20

Returned the 150 defective units received from Chevrolet to Yamaha.

May 22

Purchased a $500 international phone card for one of the sales representative's upcoming European business trip, Check #1008.

May 23

Issued bonds payable at face value for $420,000

May 23

Purchased 2,080 USB Ports from Shure for $41 per unit paying in cash, Check #1009

May 24

Check #1010 was issued for payroll: $14,900 for salaries and $5,100 for wages.

May 25

Hired and paid a consultant $50,000 to devise a marketing plan. Auto Zone's management felt this was necessary to develop brand awareness. Check #1011.

May 26

While inspecting the May 11th purchase, it was discovered that the GPS units were programmed for Asia instead of North America. Auto Zone returned the entire order to Sony.

May 27

A bankruptcy judge disallowed Auto Zone's claim for $25,000 due from Jeep. Management Decided to write off this accounts receivable.

May 27

Sold 500 USB Ports on credit to GMC for $61 per unit, Invoice #2005.

May 29

Paid in full for the purchase from Panasonic on May 13, Check #1012.

May 29

Received payment in full from GMC for the May 27th transaction.

May 30

Auto Zone is behind in its mortgage payments to Fifth Third Bank. Paid a total of $20,000 ($5,000 principal and $15,000 interest), Check #1013.

May 31

Paid the first month's principal payment of $12,500 on the note payable. In addition, paid one month's interest, Check #1007

*All purchases on account terms of 2/15, n/30

**All credit sales have terms of 2/30, n/45

May Month-end Adjustments:

( A )

The Company took a physical count of Office Supplies on May 30 and found the following the value of inventory on hand to be $2,500. The beginning inventory was $3,200. Write the adjusting journal entry.

( B )

Auto Zone estimates bad debt expense on a monthly basis rather than waiting until year-end. The company uses the allowance method. Based on recent industry estimates, Auto Zone estimates that the allowance account should be 7.5% of accounts receivable. The ending AR balance is $850,000. At the end of the month (prior to this journal entry) there is a CREDIT balance of $19,000 in the Allowance for Doubtful Accounts account. Write the necessary adjusting entry.

( C )

The Balance of $23,000 in the prepaid insurance account at the beginning of May represents 5 months of coverage. Record the amount of insurance for May.

( D )

The Company took a physical inventory count on May 30 and found the following inventory on hand to be $100,641. The ending balance in the Inventory account (before this adjusting entry) was $128,947. Write the necessary adjusting entry.

( E )

Auto Zone has earned two months of the prepaid rent received from their tenant at the beginning of May.

( F )

Depreciation on the company's fixed assets for the month of May is as follows:

1. The furniture and equipment for the office was purchased last year for $7,350. these assets have a 5 year life, an expected salvage value of $500, and are depreicated using straight-line method.

2. The furniture and equipment for the warehouse was purchased a few years ago for $30,000. These assets have a 8-year life, an expected salvage value of $5,000, and are depreciated using the straight-line method.

how do i do the

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Auto Zone Company
General Journal -Adjusting
Date		Accounts	Post Ref	DEBIT	CREDIT