Required to prepare the Journal Entries for November, November Posting of Entries (including closing entries), November Trial Balance,November Income statement, November Retained Earnings statement, November Balance sheet, December Journal entries, December Posting of Entries (including adjusting and closing entries), December trail balance, December Income statement, December Retained earnings, December Balance sheet.

BEACON LUMBER, MONTH OF NOVEMBER TRANSACTIONS

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 monthly.

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.

Think about this from the corporation's perspective.

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 Beacon's 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. Nocturnal's 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 Beacon's 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 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. Hint...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 #2's Beacon stock

for $3,000 (see General Journal, Nov 15). Hint...remember we are thinking about ALOE from the perspective of the corporation.

Dec 7 Beacon pays the lawyer's 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 four months' rent.

The lease will start on Dec 15.

Dec 15 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 3 At the end of the month Beacon had collected cash payments from its account

holders of $37,600.

REQUIRED ADJUSTING ENTRIES FOR DECEMBER

A1 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. Note, a correcting entry works similarly to an adjusting entry. We want to make sure we get it right.

Beacon Lumber - Chart of accounts

101 CASH

112 ACCOUNTS RECEIVABLE

113 ALLOWANCE FOR DOUBTFUL ACCOUNTS

115 NOTES RECEIVABLE

118 INTEREST RECEIVABLE

120 MERCHANDISE INVENTORY

123 PREPAID ADVERTISING

125 OFFICE SUPPLIES

130 PREPAID INSURANCE

140 LAND

145 BUILDINGS

146 ACCUMULATED DEPRECIATION - BUILDINGS

157 EQUIPMENT

158 ACCUMULATED DEPRECIATION - EQUIPMENT

201 ACCOUNTS PAYABLE

208 UNEARNED RENT REVENUE

213 SALARIES AND WAGES PAYABLE

227 SALES TAXES PAYABLE

230 INTEREST PAYABLE

252 DIVIDENDS PAYABLE - COMMON STOCK

268 NOTES PAYABLE

311 COMMON STOCK

320 RETAINED EARNINGS

332 DIVIDENDS

350 INCOME SUMMARY

401 SALES

412 SALES RETURNS & ALLOWANCES

414 SALES DISCOUNTS

429 RENT REVENUE

505 COST OF GOODS SOLD

610 ADVERTISING EXPENSES

644 FREIGHT OUT

628 STORE WAGES EXPENSE

711 DEPRECIATION EXPENSE

718 INTEREST EXPENSE

722 INSURANCE EXPENSE

728 OFFICE SUPPLIES EXPENSE

729 RENT EXPENSE

732 UTILITIES EXPENSE

745 LEGAL SERVICES EXPENSE

813 GAIN ON SALE OF LAND

820 INTEREST REVENUE

916 LOSSES