The Business This practice set is designed in five parts. In the first part, the student will complete the journal entries for the month in a manual accounting system for Mavericks Boards. In the second part, the student will record the adjusting journal entries. Here, the necessary adjusting month-end entries are entered. Part three consists of preparing the balances in a T-Account for each account. Part four consists of preparing a bank reconciliation. Additionally, journal entries related to the reconciliation are entered into the system. Lastly the trial balance, Income Statement, Statement of Stockholders Equity and Balance Sheet are prepared. Background Mavericks Boards is a surf shop started in January of 2020 by Blaise Maverick. He has saved over $70,000 to invest in the business. He has had a meeting with his lawyer and his Certified Public Accountant (CPA) and they have determined that the business should be organized as a corporation. The CPA has agreed to help Mr. Maverick set up his accounting system. He provided to Mr. Maverick a chart of accounts. He will be using a Perpetual Inventory System. Chart of Accounts Numbering System 1xxxx Current Asset 15xxx Property, Plant & Equipment 17xxx Accumulated Depreciation 2xxxx Current Liabilities 27xxx Long-term Liabilities 39xxx Stockholders Equity 4xxxx Revenues 5xxxx Cost of Goods Sold 6xxxx Operating Expenses 3 | Page Below is the Chart of Accounts that will be used in the journal entries. Use the account numbers listed below. Chart of Accounts Current Assets 10000 Cash 11000 Accounts Receivable 12000 Inventory Surfboards 12100 Inventory Wakeboards 13100 Office Supplies 13200 Shipping Supplies 14000 Prepaid Rent 14100 Prepaid Insurance Long-Term Assets 15000 Furniture and Fixtures 17000 Accumulated Depreciation Furniture and Fixtures 15100 Computer Equipment 17100 Accumulated Depreciation Computer Equipment Current Liabilities 20000 Accounts Payable 21100 Note Payable Wells Fargo 21200 Note Payable Computer Equip. 23100 Wages Payable 23200 Interest Payable 23300 Sales Tax Payable 23400 Utility Payable Stockholders Equity 39003 Common Stock 39005 Retained Earnings 39007 Dividends Revenue 40000 Sales Expenses 50000 Cost of Goods Sold 60850 Registration & Dues Fee 60100 Legal Expense 60150 Office Supplies Expense 60200 Shipping Supply Expense 60300 Insurance Expense 60350 Wage Expense 60400 Credit Card Expense 60450 Delivery Expense 60500 Advertising and Promotion Expense 60550 Utility Expense 60600 Rent Expense 60650 Depreciation Expense 60700 Interest Expense 60750 Bank Service Fee 60800 Gasoline Expense 4 | Page Part One Instructions Record the January 2020 transactions in the general journal (last section of this practice set) using the following events. No explanation is required for the journal entries. Instead of recording the names of the accounts use the account number. Prepare the journal entries as shown in the practice set. Transactions Date Deposit No. / Check No. Description 1. 1/02/2020 Blaise met with his lawyer and CPA for advice on starting the business. The lawyer told Mr. Maverick to register the company name Mavericks Boards with the County of El Paso. In addition, Mr. Maverick will get an employer identification number (EIN) from the Internal Revenue Service and get a sales tax permit from the state of Texas. 2. 1/02/2020 Deposit #1 Mr. Maverick opened a business checking account at Wells Fargo Bank by depositing $70,000. The corporation issued him a stock certificate for 7,000 shares of common stock with no par value. 3. 1/03/2020 Ck #1001 Mr. Maverick signed a one-year rental. He was required to pay $9,000 for rent for the months of January 1, 2020 June 30, 2020. 4. 1/03/2020 Ck #1002 Arranged for a general business liability insurance policy and paid $4,000 to State Penn Insurance. This premium is for twelve months coverage. 5. 1/03/2020 Purchased a new computer system that cost $5,200 from Computer Inc. for use in the business. Mr. Maverick signed a 6 month, 10% note payable for the cost of the system. The computer system has an estimated useful life of five years the residual (salvage) value is $400. This will be recorded as Computer Equipment. Depreciation will be an adjusting entry using straightline depreciation. 6. 1/05/2020 Deposit #2 Signed a note payable to borrow $10,000 from Wells Fargo bank. Interest is 12% annually and the note is to be repaid with interest in twelve months. Interest will be an adjusting entry. 7. 1/05/2020 Ck #1003 Paid $1,100 for shipping supplies. 8. 1/06/2020 Ck #1004 Paid $14,600 for furniture and fixtures. The estimated service life of these assets is 8 years. The residual (salvage) value is $200. These items will be recorded as Furniture and Fixtures and depreciated accordingly. Depreciation will be done in the adjusting journal entries using straight-line depreciation. 9. 1/06/2020 Ck #1005 Arranged for Sun City Movers to make the delivery of the computer system and paid the delivery charge of $750. This charge should be added to the cost of the computer equipment purchased and depreciated on the same 5 | Page basis as the computer equipment. The depreciation will be calculated in the adjusting journal entries. 10. 1/08/2020 Ck #1006 Purchased $450 of office supplies for cash from Office Supplies Co. 11. 1/08/2020 Purchased $8,000 of merchandise inventory (surfboards) on account. The vendor did not extend credit terms. 12. 1/09/2020 Purchased $6,000 of merchandise inventory (wakeboards) on account. There were no credit terms for prompt payment. 13. 1/13/2020 Ck #1007 Mr. Maverick received and paid the $940 charge from lawyer. 14. 1/14/2020 Mavericks Boards is now open for business. 15. 1/14/2020 Deposit #3 Sold merchandise for $7,200 cash. Sales Tax was $594. The cost of the Surfboards is $3,000; the cost of the Wakeboards is $1,100. Part of this sale must be delivered to the customer. The merchandise will be shipped FOB destination. 16. 1/16/2020 Ck #1008 Paid $250 to ship the merchandise. 17. 1/16/2020 Purchased additional surfboards on account for $4,500. Credit terms were 2/15, n/30. 18. 1/20/2020 Deposit #4 Recorded cash sales that totaled $8,300. Sales tax is $685. The cost of merchandise sold was $4,500 (surfboards were $2,500; wakeboards were $2,000). 19. 1/22/2020 Ck #1009 Mr. Maverick joined the El Paso Chamber of Commerce. He paid the registration fee of $200. 20. 1/23/2020 Mr. Maverick participated in a surfboard exhibition held at the convention center. He felt this was a good way to publicize his new business. 21. 1/23/2020 Convention Center charged Mr. Maverick $800. He will pay the bill later. He considers this an advertising and promotion expense. 22. 1/26/2020 Ck #1010 Mr. Maverick paid the Convention Center rental. 23. 1/26/2020 Ck #1011 Paid for the wakeboards purchased on 1/09/2020. 24. 1/27/2020 Deposit #5 Mr. Maverick recorded cash sales totaling $9,000. Sales tax is $743. The cost of the merchandise sold was $4,500 (surfboards $3,000; wakeboards $1,500). 25. 1/27/2020 Ck #1012 Paid the balance due for the surfboards. There are two invoices. 26. 1/30/2020 American Express sent bill for $235 for gasoline. This was automatically deducted from Blaises checking account as a debit memo. 27. 1/30/2020 Received but did not pay the utility bill for the month, $445. 28. 1/30/2020 Ck #1013 Paid the first monthly installment on the computer equipment. The payment amount is $910. Of this amount, $43.33 is for interest and $866.67 is for principal. 6 | Page 29. 1/30/2020 Deposit #6 Recorded sales made for the last week of the month. Sales tax is $248. Total cash sales were $3,000. The cost of the merchandise sold was $1,800 (surfboards $1,100; wakeboards $700). 30. 1/31/2020 Ck #1014 Paid the sales tax to the proper taxing authority. 31. 1/31/2020 Ck #1015 Declared and paid a cash dividend of $650 to Mr. Maverick. Part Two Instructions Once all journal entries are recorded in the practice set, record the eight adjusting journal entries below and round to the nearest cent if necessary. The following are the adjusting journal entries for the month of January. Record all adjusting entries on January 31, 2020. Record Adjusting Entries: Record the following month end adjusting entries for the month of January. Write the journal entries in the practice set after the original journal entries. Round all answers to the nearest cent. a. $70 of office supplies remained on hand. b. $200 of shipping supplies remained on hand. c. $1,300 of wages for the part-time help from Irenes Temp Services for January should be accrued. Do not worry about payroll taxes; Temp Services Inc. will handle these. d. Make the necessary adjusting entries for one months depreciation for the Computer Equipment using Straight Line Depreciation. e. Make the necessary adjusting entry for one months depreciation for the furniture and fixtures using Straight Line Depreciation. f. One month of the prepaid insurance has expired. g. One month of the prepaid rent has expired. h. Record the interest for the loan from Wells Fargo for one month. Make sure you prepare the journal entries and the adjusting entries and write them in the practice set. Part Three Instructions All T-accounts with the correct balances should be prepared. (There is an example of how to set up the T-Accounts in Excel at the end of the practice set. Make sure all accounts that were used in the Chart of Accounts are included and if they have a zero balance that you place the zero on the normal balance side.) Part Four Instructions In this part of the practice set, the student will prepare a Bank Reconciliation for the month of January. Prepare it in Word or Excel and use the ending balance in your cash account for the cash for your books. Be prepared to turn in the Bank Reconciliation after answering the questions in Blackboard. Requirements 1. Make sure you have corrected any errors on your journal and adjusting journal entries and have the correct balance for the cash account before starting the Bank Reconciliation. 2. Bank Reconciliation: Using the cash balance per books and the bank statement, prepare a bank reconciliation. A template you can use to create a Bank reconciliation is located at the back of this practice set. 3. Record Bank Reconciliation Adjustments: After you have prepared the bank reconciliation you must make any adjusting journal entries to your cash account by entering them in the general journal of the practice set so that the general ledger cash account agrees with the bank reconciliation. Part Five Instructions Prepare Financial Statements listed below. Once you complete the Financial Statements and answer the questions on Blackboard, you should print the financial statements and turn them in for grading: a. Trial Balance b. Income Statement c. Statement of Retained Earnings d. Balance sheet

Can you help with part 5?