ACCT 201 Project 1 Instructions: You have just landed at temporary assignment at

Question

ACCT 201 Project 1 Instructions: You have just landed at temporary assignment at a small retail company in your area. The accountant, who had completed the books through the end of November, went out on maternity leave during the first week of December The task you have been given is to take the ending Trial Belance for November, prepare December transastions and adjustments, prepare the December financals, and dlose the books. The manager of the company has indicated that salaries, rent and depreciation for December are the same as the 11 months preceding (employees are paid at the end of the month), Additional transaction information follows December Advertising $900 December Communications s500 December Utilities $700 The manager is pretty sure that they use LIFO for inventory, but it could be FIFO. Given the November transaction determine which of the two methods is used. Then, use that same method to value ending inventory for December Compute December Sales and Cost of Goods Sold, as well, and prepare the journal entries. Assume all inventory purchases are on credit. Also assume 80% of sales are credit sales and the rest are for cash. November December 12-01 begin with 1,350 units$36,000 12-04 sold 350 units$38.00 each 12-10 purch 500 units$29.00 each 12 13 sold 600 units$40.00 each 12-18 purch 600 units@$31.00 each 12-20 sold 600 units$41.00 each 12-21 purch 400 unvits$30.00 each 12-24 sold 550 units$42.00 each begin with 500 units @$22.00 each 11-01 11-03 sold 250 units$35.00 each 11-05 purch 500 units$23.00 each 11-10 sold 250 units $36.00 each 11-15 purch 450 units@$26.00 each 11 -19 purch 300 units$28.00 each $37.00 each 11-23 sold 200 units 11-29 purch 300 units$30.00 each During December, supplies purchased totaled $1,100. A physical count showed that there were $1,850 remaining at the end of the year. Prepare the necessary adjusting entry It was discovered that the insurance policy was renewed on December 1st; coverage will cost $6,720 for the next 12 months. Prepare the necessary entries. Collected $18,500 in cash from previous sales on credit. Those customers received $350.00 in discounts. pag 201 Project 1 v8.0-student (1

Explanation / Answer

1.The inventory policy used was FIFO as can be seen fromthe table below. Beginning inventory Purchases Sales Ending inventory Date Units Cost/unit Value Units Cost/unit Value Units Cost/unit Value Units Cost/unit Value 11-Jan 500 22 11000 500 11000 11-Mar 500 22 11000 250 22 5500 250 5500 11-May 250 5500 500 23 11500 750 22.67 17000 11-Oct 750 22.67 17000 0 250 22 5500 500 23 11500 Nov-15 500 23 11500 450 26 11700 0 950 23200 Nov-19 950 23200 300 28 8400 0 1250 25.28 31600 Nov-23 1250 31600 0 200 23 4600 1050 25.71 27000 Nov-29 1050 27000 300 30 9000 0 1350 26.67 36000 2. December inventory transaction are tabulated below. December inventory transcations Beginning inventory Purchases Sales Ending inventory Date Units Cost/unit Value Units Cost/unit Value Units Cost/unit Value Units Cost/unit Value 12-Jan 1350         26.67 36000 1350 36000 12-Apr 1350 36000 350 26.67 9335 1000 26666 12-Oct 1000 26666 500 29 14500 0 1500 27.44 41166 Dec-13 1500 41166 0 600 26.67 16002 900 27.96 25164 Dec-18 900 25164 600 31 18600 0 1500 43764 Dec-20 1500 43764 0 600 16468 900 30.33 27296 Dec-21 900 27296 400 30 12000 0 1300 30.23 39296 Dec-24 1300 39296 0 550 16450 750 30.46 22846 Sales Units Price Value 350 38 13300 600 40 24000 600 41 24600 550 42 23100 Total 85000 3. Journal entries Journal entries for the month of December Account title Debit Credit Inventory 45100 Accounts payable 45100 (Purchase of merchandise inventory during the month) Accounts recevable 68000 Cash 17000 Sales 85000 (Sales during the month recorded) Cost of goods sold 58255 Inventory 58255 (Cost of goods sold during the month) Advertising expense 900 Utilities expense 700 Communications expense 500 Cash 2100 (Expenses for the month of December paid) Salaries expense 2930 Rent expense 2200 Cash 5130 (Salaries and rent expenses paid during the month) Suppies 1100 Cash 1100 (Supplies purchased during December) Supplies expense 1450 Supplies 1450 (Supplies consumed during the month of Decemer) Accounts payable 22500 Cash 22000 Cost of goods sold 500 (Payment to suppliers and discounts received recorded) Dividend 15000 Dividend payable 15000 (Dividend payment recorded) Prepaid insurance 6720 Cash 6720 (Insurance policy for one year recorded) Insurance expense 560 Prepaid insurance 560 (Insurance expense for December recorded) Depreciation expense 1000 Accumulated depreciation - equipment 1000 (Depreciation expense recorded) 4. Trial balance Trial balance as at December 31. Opening Adjustments Adjusted Income statement Balance sheet Account Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash 27200 17000 37050 7150 7150 Accounts receivable 8720 68000 76720 76720 Inventory 36000 45100 58255 22845 22845 Supplies 2200 1100 1450 1850 1850 Prepaid Insurance 0 6720 560 6160 6160 Land 50000 50000 50000 Equipment 75000 75000 75000 Accumulated Depreciation - equipment 71000 1000 72000 72000 Accounts payable 30200 22500 45100 52800 52800 Dividend payable 15000 15000 15000 Paid in capital 70000 70000 70000 Retained earnings 27920 27920 29925 Distributions 0 15000 15000 Sales 85000 85000 85000 Sales discounts 0 Sales returns 0 Cost of goods sold 58255 500 57755 57755 Salaries expense 2930 2930 2930 Rent expense 2200 2200 2200 Insurance expense 560 560 560 Advertising expense 900 900 900 Depreciation expense 1000 1000 1000 Utilities expense 700 700 700 Communication expense 500 500 500 Supplies expense 1450 1450 1450 Net Income 17005 199120 199120 243915 243915 322720 322720 85000 85000 239725 239725 5.Income statement Income statement Sales 85000 Cost of goods sold 57755 Gross margin 27245 operating expenses Salaries expense 2930 Rent expense 2200 Supplies expense 1450 Depreciation expense 1000 Advertising expense 900 Utilities expense 700 Insurance expense 560 Communication expense 500 Total operatint expenses 10240 Net income 17005 6. Statement of retained earnings Statementof retained earnings Beginning balance December 1 27920 Net income for December 17005 44925 Dividends -15000 Ending balance December 31 29925 7.Balance sheet Balance sheet Assets Cash 7150 Accounts receivable 76720 Inventory 22845 Supplies 1850 Prepaid Insurance 6160 Land 50000 Equipment 75000 Accumulated Depreciation - equipment -72000 3000 Total Assets 167725 Liabilities and owners' equity Accounts payable 52800 Dividend payable 15000 Total Liabilities 67800 Paid in capital 70000 Retained earnings 29925 Total owners' equity 99925 Total liabilities and owners' equity 167725

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