Foundations of Accounting I
Accounting Project
David’s Entertainment is a merchandising business. Their
account balances as of
November 30, 2012 (unless otherwise indicated), are as
follows:
110
112
113
115
116
117
123
124
210
211
218
220
310
311
312
410
411
412
510
520
521
522
523
529
530
531
532
533
539
550
Cash
Accounts Receivable
Allowance for Doubtful Accounts
Merchandise Inventory
Prepaid Insurance
Store Supplies
Store Equipment
Accumulated Depreciation-Store Equipment
Accounts Payable
Salaries Payable
Interest Payable
Note Payable (Due 2017)
D. Williams, Capital (January 1, 2012)
D. Williams, Drawing
Income Summary
Sales
Sales Returns and Allowances
Sales Discounts
Cost of Merchandise Sold
Sales Salaries Expense
Advertising Expense
Depreciation Expense
Store Supplies Expense
Miscellaneous Selling Expense
Office Salaries Expense
Rent Expense
Insurance Expense
Bad Debt Expense
Miscellaneous Administrative Expense
Interest Expense
$ 73,920
34,250
11,000
123,900
3,750
2,850
100,800
20,160
21,450
0
0
15,000
73,260
50,000
0
853,445
20,020
13,200
414,575
74,400
18,000
0
0
2,800
40,500
18,600
0
0
1,650
1,100
David’s Entertainment uses the perpetual inventory system and
the First-in, First-out
costing method. Transportation-in and purchase discounts
should be added to the
Inventory Control Sheet, but since this will complicate the
computation of the First-in,
First-out costing method, please ignore this step in the
process. They also use the
Allowance Method for bad debt.
The Accounts Receivable and Accounts Payable Subsidiary
Ledgers along with the
Inventory Control Sheet should be updated as each transaction
affects them (daily).
David’s Entertainment sells four types of television
entertainment units.
The sale prices of each are:
TV A:
TV B:
TV C:
PS D:
$3,500
$5,250
$6,125
$9,000
During December, the last month of the accounting year, the
following transactions
were completed:
Dec.
1. Issued check number 2632 for the December rent, $2,600.
3. Purchased three TV C units on account from Prince Co.,
terms 2/10, n/30,
FOB shipping point, $11,100.
4. Issued check number 2633 to pay the transportation changes
on purchase of
December 3, $400. (NOTE: Do not include shipping and purchase
discounts
to the Inventory Control sheet for this project.)
6. Sold four TV A and four TV B on account to Albert Co.,
invoice 891, terms
2/10, n/30, FOB shipping point.
10. Sold two projector systems for cash.
11. Purchased store supplies on account from Matt Co., terms
n/30, $580.
13. Issued check to Prince Co. number 2634 for the full
amount due, less
discount allowed.
14. Issued credit memo for one TV A unit returned on sale of
December 6.
15. Issued check number 2635 for advertising expense for last
half of December,
$1,500.
16. Received cash from Albert Co. for the full amount due
(less return of
December 14 and discount).
19. Issued check number 2636 to buy two TV C units, $7,600.
19. Issued check number 2637 for $6,100 to Joseph Co. on
account.
20. Sold five TV C units on account to Cameron Co., invoice
number
892, terms 1/10, n/30, FOB shipping point.
20. For the convenience of the customer, issued check number
2638 for shipping
charges on sale of December 20, $700.
21. Received $12,250 cash from McKenzie Co. on account, no
discount.
21. Purchased three projector systems on account from Elisha
Co., terms 1/10,
n/30, FOB destination, $15,600.
24. Received notification that Marie Co. has been granted
bankruptcy with no
amount of recovery. We are to write-off her amount due.
(Note: See page
402 for entry required.)
25. Issued a debit memo for return of $5,200 because of a
damaged projection
system purchased on December 21, receiving credit from the
seller.
26. Issued check number 2639 for refund of cash on sales made
for cash, $600.
(Customer was going to return goods until an allowance was
arranged.)
27. Issued check number 2640 for sales salaries of $1,750 and
office
salaries of $950.
28. Purchased store equipment on account from Matt Co., terms
n/30, FOB
destination, $1,200.
29. Issued check number 2641 for store supplies, $470.
30. Sold four TV C units on account to Randall Co., invoice
number 893,
terms 2/10, n/30, FOB shipping point.
30. Received cash from sale of December 20, less discount,
plus transportation
paid on December 20. (Round calculations to the nearest
dollar.)
30. Issued check number 2642 for purchase of December 21,
less return
of December 25 and discount.
30. Issued a debit memo for $300 of the purchase returned
from
December 28.
Instructions:
1. Enter the balances of each of the accounts in the
appropriate balance column of a
four-column account (General Ledger). Write Balance in the
item section, and place
a check mark (x) in the Post Reference column.
2. Journalize the transactions in a sales journal, purchases
journal, cash receipts
journal, cash payments journal, or general journal as
illustrated in chapter 7. Also
post to the Accounts Receivable and Accounts Payable
Subsidiary ledgers and
Inventory Control Sheet as needed.
3. Total each column on the special journals and prove the
journal.
4. Post the totals of the account named columns and
individually post the “other”
columns as well to the General Ledger.
5. Prepare the Schedule of Accounts Receivable and the
Schedule of Accounts
Payable (their total amount must equal the amount in their
controlling general ledger
account).
6. Prepare the unadjusted trial balance on the worksheet.
7. Complete the worksheet for the year ended December 31,
2012, using the following
adjustment data:
a. Merchandise inventory on December 31
$90,800
b. Insurance expired during the year
1,250
c. Store supplies on hand on December 31
975
d. Depreciation for the current year needs to be calculated.
The business uses
the Straight-line method, the store equipment has a useful
life of 10 years
with no salvage value. (NOTE: the purchase and return will
not be included
as the dates of the transactions were after the 15 th of the
month).
e. Accrued salaries on December 31:
Sales salaries
$1,400
Office salaries
760
2,160
f. The note payable terms are at 8%, payment is not being
made until Jan. 3,
2013. Interest must be recognized for one month.
g. Net realizable value of Accounts Receivable is determined
to be $27,950.
8. Prepare a multiple-step income statement, a statement of
owner’s equity, and a
classified balance sheet in good form. (Recommend review of
“Current Liabilities” on
pages 166 & 167 and “Current Maturities of Long-term
Debt” on page 480.)
9. Journalize and post the adjusting entries.
10. Journalize and post the closing entries. Indicate closed
accounts by inserting a line
in both balance columns opposite the closing entry.
11. Prepare a post-closing trial balance.
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