Transactions for January 2020

Manual Accounting Practice Set: Transactions to Financial Statements

The Global Unicycle company is engaged in wholesaling of unicycles to sports specialty retailers. This is a merchandising business with no manufacturing. The most recent Balance Sheet is presented below.

Global Unicycle Balance Sheet As of December 31, 2019
Cash	$110,000	Accounts Payable	$110,000
Accounts Receivable	100,000	Accrued Payroll	100,000
Allowance for Bad Debts	(5,000)	Total Current Liab.	$300,000
Office Supplies	5,000	Notes Payable	200,000
Inventory	300,000	Total Liabilities	$500,000
Total Current Assets	$600,000	Common Stock	50,000
Property, Plant & Equipment	600,000	Additional Paid in Capital	250,000
Accumulated Depreciation	(210,000)	Retained Earnings	190,000
		Total Stockholders Equity	$490,000
Total Assets	$900,000	Total Liabilities & Stockholders Equity	$900,000

Required (part 1):

• Use the Excel spreadsheet for all of your work. You should use formulas everywhere! Of course there are some data input items needed, but use formulas to calculate all subtotals/totals, to link G/L balances to the trial balances and to the financial statements.
  • Practice good spreadsheet grammar by appropriately formatting numbers and by using single and double underlines to show totals and grand totals.
• Record the beginning balances in the General Ledger (T accounts).
• Record all necessary journal entries for the business events (listed below and on page 2) in the General Journal. (think carefully about is a recordable business event has taken place.)

During the month of January, Global Unicycle had the following business events:

1. Jan 2 Employees are paid monthly on the first business day of the month for work done in the previous month. The total payroll for the previous month is $100,000. (Ignore payroll taxes for this assignment.) Accounting wrote and distributed the paychecks.
2. Jan 2 The first sale of the new year! A cash sale to a new customer for a total of $50,000. Global Bikes cost for the inventory sold was $20,000.
3. Jan 3 Purchased $150,000 of inventory from a vendor (Dallas Bike Mfg) on credit with terms n/10. Global Unicycle paid Yellow Freight with a manual check for $1,000 for the freight charges.
4. Jan 4 Made credit sales to NashGulch Bikes of $300,000 with terms n/15. Global Bikes cost for the inventory sold was $150,000.
5. Jan 5 Returned to the vendor, for credit, $10,000 of defective inventory purchased in transaction 3 on Jan 3rd.
6. Jan 6 Global Unicycle received payment of $25,000 from a customer in Seattle, WA (Northwest Bikes) for the balance due on their account.
7. Jan 7 Placed an order with a specialty unicycle vendor from Germany for delivery of $500,000 of trick unicycles. The purchase order requested delivery by May 1^st.
8. Jan 8 Paid an invoice from Lightbulb Accessory Kits for ordered goods that were received on December 20. The amount of the invoice from Lightbulb was $15,000 due net 20.
9. Jan 9 Paid current month rent of $9,000 for Global Bikes office and warehouse.
10. Jan 10 Received payment totaling $100,000 from one of the customers making a purchase on Jan 4 (NashGulch Bikes).
11. Jan 11 Made a $50,000 payment on the outstanding accounts payable to Dallas Bike Mfg.
12. Jan 12 Metro Nashville / Davidson County approved the companys building plans for a new warehouse. Estimated building costs are $1,500,000 which will be funded with a mortgage from Bank of America. Global Unicycle plans to break ground on the new building by June 1^st this year.
13. Jan 13 Global Unicycle received notice that Lances Bicycle Emporium had declared bankruptcy. The outstanding $1,000 A/R balance owed by Lances is uncollectible and must be written off.

Required (part 2):

• Post the journal entries recorded in the General Journal into the accounts in the General Ledger
  • For all G/L transactions in A/R or A/P accounts, also record the details for the customer or vendor in the subsidiary ledger.
    • The A/R (Accounts Receivable) and A/P (Accounts Payable) subsidiary ledgers are important parts of an accounting information system and include the transaction details for Sales and Cash Receipts transactions with customers (A/R) and Purchases and Cash Disbursements with vendors (A/P).
• Calculate account balances for each G/L account
• Prepare an unadjusted trial balance and make sure that Debits = Credits.
• Check the ending balances of the A/R and A/P G/L accounts to the corresponding subsidiary ledger total. This process is called a "reconciliation".

• See Required (part 3 and part 4) on page 3 for adjusting journal entries, financial statements, and closing entries.

Required (part 3):

• Record the adjusting journal entries for the End of the month adjustments in the General Journal

End of the month adjustments (record on Jan 31):

1. The property, plant & equipment recorded on the balance sheet was originally purchased for $600,000 with a 10 year estimated useful life. Calculate and record the depreciation expense (assume straight-line depreciation) for the month.
2. The company has $1,000 of office supplies on hand at the end of the month. Calculate and record the appropriate adjusting entry.
3. The companys notes payable has a 6% annual interest rate. Calculate and record the appropriate accrual entry for the monthly interest to be paid next month.
4. The company estimates bad debt expense to be $5,000 for the month.

Required (part 4):

• Post the adjusting journal entries into the accounts (General Ledger) and calculate the account balances.
• Use the account balances to prepare an adjusted trial balance.
• Use the amounts from the adjusted trial balance to prepare the financial statements in the proper format. (Financial Statements include: an Income Statement, a Statement of Changes in Owners Equity, a Balance Sheet and a Statement of Cash Flows.) You can prepare the Statement of Cash Flows using the simplified direct method that analyzes all cash transactions. This is the process used in Integrated Accounting for such a simple business setup.
• Record closing entries in the General Journal.
• Post the closing entries into the accounts (General Ledger) and calculate the new account balances.
• Prepare a post-closing trial balance.