Fluent Essays

Overview In previous modules, you examined the initial stages of the accounting cycle and practiced journalizing financial transactions. In Milestone One, you will complete the first part of your course project to demonstrate your ability to accurately record financial data, which will continue to be used to complete other parts of the project. Scenario You are a certified public accountant (CPA) who is working with a small bakery to prepare their financial statements for three months of the current fiscal year. Because the company is a startup and so small, the accounting is done manually in Microsoft Excel. You have been given the accounts and information you need to prepare their financial statements, but you will need to use the accounting cycle to report accurate information to the finance department. Prompt Record Financial Data: Use accepted accounting principles to accurately capture business transactions for October, November, and December in the Company Accounting Workbook Template Spreadsheet using the data provided in the Accounting Data Appendix Word Document. Specifically, you must address the following rubric criteria: Accuracy: Prepare entries that are accurate in that they fully reflect the appropriate information. Completeness: Prepare entries that are complete for each month, including transferring posted entries to T accounts. Inventory Valuation: Prepare entries for the month of December to reflect the new line of products offered by the company, which includes using the entries from the “Inventory Valuation” tab to complete your journal for the month of December. Guidelines for Submission Using the provided template, submit your company accounting workbook with the following portions completed: October, November, and December journal entries; the “T Accounts” tab; and the “Inventory Valuation” tab. This should be completed and submitted using Microsoft Excel. Please note that there are drop-down menus embedded in the “Accounts” columns as well as formulas throughout the spreadsheet to help you complete the workbook without accidentally introducing errors. Accounting Data Appendix 1. The following events occurred in October: October 1: The business owner used $25,000 from their personal savings account to buy common stock in their company. October 1: Purchased $8,500 worth of baking supplies from vendor, on account. October 3: The company borrowed $10,000 in cash, in exchange for a two-year, 6% note payable. Interest and the principal are repayable at maturity. October 7: Entered into a lease agreement for bakery space. The agreement is for one year. The rent is $1,500 per month; the last month’s rent payment of $1,500 is required at the time of the lease agreement. The payment was made in cash. Lease period is effective October 1 of this year through September 30 of the next. October 10: Paid $375 to the county for a business license. October 11: Purchased a cash register for $250 (deemed to be not material enough to qualify as depreciable equipment). October 13: The owner has baking equipment, including an oven and mixer, which they have been using for their home-based business and will now start using in the bakery. You estimate that the equipment is currently worth $5,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a five-year useful life. October 13: Paid $200 for business cards and flyers to use for advertising. October 14: Paid $300 for office supplies. October 15: Hired a part-time helper to be paid $12 per hour. One pay period is the first of the month through the fifteenth, and the other is the sixteenth through the end of the month. Paydays are the twentieth for the first pay period and the fifth of the following month for the second pay period. (No entry required on this date—for informational purposes only.) October 30: Received telephone bill for October in amount of $75. Payment is due on November 10. October 31: Paid $1,200 for a 12-month insurance policy. Policy effective dates are November 1 through October 31. October 31: Accrued wages earned for employee for period of October 16 through October 31. (See Wage Calculation Data table at the end of this document.) October 31: Total October bakery sales were $15,000 ($5,000 of these sales on accounts receivable). 2. The following events occurred in November: November 5: Paid employee for period ending October 31. November 8: Received payments from customers toward accounts receivable in amount of $3,800. November 10: Paid October telephone bill. November 15: Purchased additional baking supplies in amount of $5,000 from vendor, on account. November 15: Accrued wages earned for employee from period of November 1 through November 15. (See Wage Calculation Data table at the end of this document.) November 15: Paid rent on bakery space. November 18: Received payments from customers toward accounts receivable in amount of $1,000. November 20: Paid $8,500 toward baking supplies vendor payable. November 20: Paid employee for period ending November 15. November 22: Purchased $300 in office supplies. November 30: Received telephone bill for November in amount of $75. Payment is due on December 10. November 30: Accrued wages earned for employee for period of November 16 through November 30. (See Wage Calculation Data table at the end of this document.) November 30: November bakery sales total was $20,000 ($7,500 of this total on accounts receivable). 3. Many customers have been asking for more allergy-friendly products, so in December the bakery started carrying a line of gluten-free products on a trial basis. The information below relates to the purchase and sales of the new products. Use the perpetual inventory method with the FIFO valuation method. Please see the “Inventory Valuation” tab in your workbook for purchase and sales information. The following events occurred in December: December 1: Paid dividends to self in amount of $10,000. December 5: Paid employee for period ending November 30. December 7: Purchased merchandise for resale. See the “Inventory Valuation” tab for details. December 8: Received payments from customers toward accounts receivable in amount of $4,000. December 10: Paid November telephone bill. December 11: Purchased baking supplies in amount of $7,000 from vendor on account. December 13: Paid on supplies vendor account in amount of $5,000. December 15: Accrued employee wages for period of December 1 through December 15. December 15: Paid rent on bakery space $1,500. December 15: Recorded merchandise sales transaction. See the “Inventory Valuation” tab for details. December 15: Recorded impact of sales transaction on COGS and the inventory asset. See the “Inventory Valuation” tab for details. December 20: Paid employee for period ending December 15. December 20: Purchased merchandise inventory for resale to customers. See the “Inventory Valuation” tab for details. December 24: Recorded sales of merchandise to customers. See the “Inventory Valuation” tab for details. December 24: Recorded impact of sales transaction on COGS and the inventory asset. See the “Inventory Valuation” tab for details. December 30: Purchased merchandise inventory for resale to customers. See the “Inventory Valuation” tab for details. December 31: Accrued employee wages for period of December 16 through December 31. December 31: Total December bakery sales were $25,000 ($6,000 of these sales on accounts receivable). 4. On December 31, the following adjustments must be made: · Depreciation of baking equipment transferred to company on October 13. Assume half month of depreciation in October using the straight-line method. Assume no salvage value. · Accrue interest for note payable. Assume a full month of interest for October. (6% annual interest on $10,000 loan) · Record insurance used for the year. · Actual baking supplies on hand as of December 31 are $1,100. · Office supplies on hand as of December 31 are $50. Wage Calculation Data Month Hours Rate Pay 31-Oct 10 12 120 15-Nov 40 12 480 30-Nov 35 12 420 15-Dec 38 12 456 31-Dec 40 12 480 Chart of Accounts This chart of accounts should help you identify the appropriate accounts to record to as you are analyzing and journaling transactions for this workbook. There is nothing to complete on this page; this is simply a resource for you. Asset Accounts Liability Accounts Equity Accounts Acct # Acct # Acct # Cash 101 Notes Payable 201 Common Stock 301 Baking Supplies 102 Accounts Payable 202 Dividends 302 Prepaid Rent 103 Wages Payable 203 Cost of Goods Sold 303 Prepaid Insurance 104 Interest Payable 204 Baking Equipment 105 Office Supplies 106 Accounts Receivable 107 Accumulated Depreciation 108 Merchandise Inventory 109 Revenue Accounts Acct # Bakery Sales 401 Merchandise Sales 402 Expense Accounts Acct # Baking Supplies Expense 501 Rent Expense 502 Insurance Expense 503 Misc. Expense 504 Business License Expense 505 Advertising Expense 506 Wages Expense 507 Telephone Expense 508 Interest Expense 509 Depreciation Expense 510 Office Supplies Expense 511 Cash Baking Supplies Prepaid Rent Prepaid Insurance Baking Equipment Office Supplies Accounts Receivable Accumulated Depreciation Merchandise Inventory Notes Payable Accounts Payable Wages Payable Interest Payable Common Stock Dividends Bakery Sales Merchandise Sales Baking Supplies Expense Rent Expense Insurance Expense Misc. Expense Business License Expense Advertising Expense Wages Expense Telephone Expense Interest Expense Depreciation Expense Office Supplies Expense Cost of Goods Sold October Journal Entries A Company General Journal Entries October, 20xx Date Accounts Debit Credit 1-Oct $ $ 1-Oct 3-Oct 7-Oct 10-Oct 11-Oct 13-Oct 13-Oct 14-Oct 30-Oct 31-Oct 31-Oct 31-Oct Total - 0 - 0 <== Do the debits equal the credits? (they should) November Journal Entries A Company General Journal Entries November, 20xx Date Accounts Debit Credit Total - 0 - 0 <== Do the debits equal the credits? (they should) December Journal Entries A Company General Journal Entries December, 20xx Date Accounts Debit Credit Be sure to review the Inventory Valuation tab (Columns M-P) for all Inventory related journal entries as they are given to you! Total - 0 - 0 <== Do the debits equal the credits? (they should) Inventory Valuation FIFO Purchases Sales Ending Inventory Purchases Date No. of Items Unit Price Total Price No. of Items Unit Price Total Price No. of Items Unit Price Total Price Date Microsoft: Below are the journal entries for each inventory related transaction! All you need to do is copy and paste it into the correct dates on the December Journal tab! Dr Cr 12/7: 10 boxes purchased at $6 7-Dec 10 $ 6.00 $ 60.00 10 $ 6.00 $ 60.00 7-Dec Merchandise Inventory (10 x $6) 60.00 12/20: 20 boxes purchased at $6.10 Cash 60.00 12/30: 25 boxes purchased at $6.05 15-Dec 8 $ 6.00 $ 48.00 2 $ 6.00 $ 12.00 Purchased inventory Sales – selling price, $8.50 a box 12/15: 8 boxes 20-Dec 20 $ 6.10 $ 122.00 2 $ 6.00 $ 12.00 15-Dec Cash (8 x $8.50) 68.00 12/24: 18 boxes 20 $ 6.10 $ 122.00 Merchandise Sales Revenue 68.00 22 $ 134.00 Record sale of inventory 24-Dec 2 $ 6.00 $ 12.00 15-Dec Cost of Goods Sold (8 X $6) 48.00 16 $ 6.10 $ 97.60 4 $ 6.10 $ 24.40 Merchandise Inventory 48.00 18 $ 109.60 Recorded the cost of goods sold 30-Dec 25 $ 6.05 $ 151.25 4 $ 6.10 $ 24.40 20-Dec Merchandise Inventory (20 x $6.10 ) 122.00 25 $ 6.05 $ 151.25 Cash 122.00 29 $ 175.65 Net Inventory 55 $ 333.25 26 $ 157.60 29 $ 175.65 24-Dec Cash (18 x 8.50) 153.00 Merchandise Sales Revenue 153.00 Record sale of inventory 24-Dec Cost of Goods Sold (2 x $6)+(16 x $6.10) 109.60 Merchandise Inventory 109.60 Recorded the cost of goods sold 30-Dec Merchandise Inventory (25 x $6.05) 151.25 Cash 151.25 T-Accounts - autofill date Cash date date Notes Payable date Business License exp Common Stock 1-Oct $ $ - 0 3-Oct 10-Oct $ - 0 $ 1-Oct 3-Oct $ - 0 $ - 0 13-Oct $ - 0 7-Oct $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 10-Oct $ - 0 $ - 0 $ - 0 $ - 0 11-Oct $ - 0 13-Oct $ - 0 14-Oct $ - 0 31-Oct 31-Oct $ - 0 $ - 0 5-Nov 8-Nov $ - 0 $ - 0 10-Nov 18-Nov $ - 0 $ - 0 15-Nov $ - 0 20-Nov Accounts Rec. $ - 0 20-Nov 31-Oct - 0 $ - 0 22-Nov - 0 8-Nov 30-Nov $ - 0 - 0 18-Nov $ - 0 1-Dec 30-Nov - 0 $ - 0 5-Dec - 0 8-Dec $ - 0 7-Dec 31-Dec - 0 8-Dec $ - 0 $ - 0 10-Dec $ - 0 $ - 0 $ - 0 13-Dec $ - 0 $ - 0 15-Dec 15-Dec $ - 0 $ - 0 20-Dec $ - 0 20-Dec 24-Dec $ - 0 $ - 0 30-Dec 31-Dec $ - 0 $ - 0 $ - 0 $ - 0 Misc. expense Baking equipment Advertising expense 11-Oct $ - 0 13-Oct $ - 0 13-Oct $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 Baking supplies Office supplies Rent expense 1-Oct $ - 0 14-Oct $ - 0 7-Oct $ - 0 15-Nov $ - 0 22-Nov $ - 0 15-Nov $ - 0 11-Dec $ - 0 15-Dec $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 Prepaid rent Prepaid insurance Bakery Sales 7-Oct $ - 0 31-Oct $ - 0 $ - 0 31-Oct $ - 0 30-Nov $ - 0 31-Dec $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 Accounts payable Salary and wages expense Salaries and wages payable $ - 0 1-Oct 31-Oct $ - 0 $ - 0 31-Oct $ - 0 31-Oct 15-Nov $ - 0 5-Nov $ - 0 10-Nov $ - 0 30-Nov $ - 0 $ - 0 15-Nov $ - 0 15-Nov 15-Dec $ - 0 20-Nov $ - 0 20-Nov $ - 0 31-Dec $ - 0 $ - 0 30-Nov $ - 0 30-Nov 5-Dec $ - 0 10-Dec $ - 0 $ - 0 $ - 0 $ - 0 15-Dec $ - 0 11-Dec $ - 0 20-Dec $ - 0 13-Dec $ - 0 $ - 0 31-Dec $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 Telephone expense Dividends COGS 30-Oct $ - 0 1-Dec $ - 0 15-Dec $ - 0 30-Nov $ - 0 $ - 0 $ - 0 24-Dec $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 Merchandise Sales Revenue Merch. Inv. FIFO $ - 0 15-Dec 7-Dec $ - 0 $ - 0 24-Dec $ - 0 15-Dec 20-Dec $ - 0 $ - 0 $ - 0 $ - 0 24-Dec $ - 0 30-Dec $ - 0 $ - 0 $ - 0 $ - 0 Adjusting Entries A Company Adjusting Journal Entries 20XX Date Accounts Debit Credit 31-Dec Depreciation Expense Accumulated Depreciation <== Interest adjustment goes here <== Interest adjustment goes here <== Insurance adjustment goes here <== Insurance adjustment goes here <== Baking supplies adjustment goes here <== Baking supplies adjustment goes here <== Office supplies adjustment goes here <== Office supplies adjustment goes here - 0 - 0 <== Do the debits equal the credits? (they should) Trial Balance A Company Trial Balance 20xx Unadjusted trial balance Adjusting entries Adjusted trial balance Account Debit Credit Debit Credit Debit Credit Cash - 0 Baking Supplies - 0 Merchandise Inventory Prepaid Rent Prepaid Insurance - 0 Baking Equipment Accumulated Depreciation - 0 Office Supplies - 0 Accounts Receivable Notes Payable Interest Payable - 0 Accounts Payable Wages Payable Common Stock Dividends Bakery Sales Merchandise Sales Baking Supplies Expense - 0 Rent Expense Interest Expense - 0 Insurance Expense - 0 Depreciation Expense - 0 Misc. Expense Office Supplies Expense - 0 Business License Expense Advertising Expense Wages Expense Telephone Expense COGS Retained Earnings Total: - 0 - 0 - 0 - 0 - 0 - 0 Do these two columns tie to the debits and credits on the adjusting entries tab? Debits should equal credits Debits should equal credits Debits should equal credits ` Income Statement A Company Income Statement For Qtr. Ending 12/31/20XX Revenues Total Revenues - 0 <== Don't forget the COGS! Gross Profit - 0 Operating Expenses: Baking Supplies Expense - 0 Total Operating Expenses: - 0 Net Income - 0 Statement of Stockholder Equity A Company Statement of Stockholder's Equity For Qtr. Ending 12/31/20xx Common Stock Retained Earnings Total Beginning Balances, September 30 0 0 0 Issued Common Stock Net Income Dividends Make sure your dividends are negative so the formula subtracts them Ending Balances, December 31: - 0 - 0 - 0 Balance Sheet A Company Balance Sheet As of December 31, 20XX Assets Liabilities and Owners' Equity Current Assets: Current Liabilities: Total Current Liabilities - 0 Long Term Liabilities: Total Current Assets - 0 Total Long Term Liabilities: - 0 Total Liabilities: - 0 Shareholder's Equity: Non-Current Assets: Microsoft: show number as negative as the total formula will subtract it for you. Total Equity - 0 Baking Equipment (Net) - 0 Total Assets: - 0 Total Liabilities & Equity - 0 <== Do the debits equal the credits? (they should) Closing Entries A Company Closing Entries Qtr ending 12/31/20xx Date Accounts Debit Credit Note** We are closing out the same accounts that are listed on the income statement 31-Dec Bakery Sales Merchandise Sales Retained Earnings 31-Dec Retained Earnings Baking Supplies Expense Rent Expense Wages Expense Misc Expense Business License Expense Office Expense Depreciation Expense Insurance Expense Advertising Expense Interest Expense Telephone Expense COGS 31-Dec Retained Earnings Dividends Post-Closing Trial Balance A Company Post-Closing Trial Balance Qtr. Ending 12/31/20xx Unadjusted Trial Balance Account Debit Credit Cash Note** These are the same accounts that are listed on the balance sheet Baking Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Baking Equipment Accumulated Depreciation <== Accumulated depreciation goes in the debit column - as a reduction of the assets (so be sure it is a negative number!) just as you have on the balance sheet. Office Supplies Accounts Receivable Accounts Payable Wages Payable Interest Payable Notes Payable Common Stock Retained Earnings Total - 0 - 0 <== Do the debits equal the credits? (they should)