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Page 1 PRACTICE SET ACCOUNTING 3341 (5133) SPRING 2020 This practice set is intended to refresh...
Page 1 PRACTICE SET ACCOUNTING 3341 (5133) SPRING 2020 This practice set is intended to refresh your basic accounting skills by requiring you to record, summarize, and report the results of a basic set of accounting transactions for a sample company, HOW TO PROCEED Enter the current period transactions in the General Journal. Use the journal entry number for each transaction as a reference. It is not necessary to include an explanation for the entries in this problem. Enter the beginning balances for each account in the General Ledger and post the current period journal entries to the accounts in the General Ledger. Balance each account in the General Ledger. List each account balance on the Unadjusted Trial Balance. Record the adjusting entries in the General Journal. Post the adjusting entries to the General Ledger and re- balance each account. List each account balance on the Adjusted Trial Balance, Prepare a multiple-step Income Statement, a Statement of Retained Earnings, and a classified Balance Sheet. Record the year-end closing entries in the General Journal, post them to the General Ledger, and re-balance each account. Prepare a Post-Closing Trial Balance. REQUIREMENTS nimi tvoros COMPLETE THE FOLLOWING FOR THE PERIOD CURRENTLY ENDED: General Journal - should include current period entries, adjusting entries and closing entries. General Ledger - with all journal entries appropriately posted. Unadjusted Trial Balance - which you will complete prior to making adjusting entries, Adjusted Trial Balance - which you will use to prepare the financial statements. Income Statement (Multiple Step) - including Earnings-Per-Share, Statement of Retained Earnings. Balance Sheet (Classified). Post-Closing Trial Balance. NOTE: All of the above must be submitted inside this bound workbook and in page number sequence in order to insure uniformity in the grading process. If your practice set is submitted in any other form, credit will be deducted for failure to follow instructions.
Page 2 SUMMARY INFORMATION 4. BACKGROUND: Tony's Tools was incorporated on January 1, 2010 with 40,000 shares of $1 par value common stock authorized. All 40,000 shares have been issued. The company's accounting period ends on December 31 of each year. ACCOUNTING POLICIES: The company uses the following generally accepted accounting principles in presenting financial information: a. INVENTORY VALUATION - First-in, first-out method on a perpetual basis. Physical counts are conducted at the end of the year to determine the quantity and value of merchandise inventory on hand. b. DEPRECIATION - Straight-line. As of the close of business on November 30, 2019, the company had the following trial balance: Acct # Account Title Debit Credit 1110 Cash $ 691,200 1120 Accounts Receivable $ 423,360 1130 Merchandise Inventory $ 1,151,280 1230 Equipment $ 1,468,800 1231 Accumulated Depreciation - Equipment $ 594,864 2110 Accounts Payable $ 380,160 2210 Income Tax Payable 3010 Common Stock ($1 Par) $ 40,000 3020 Paid-In Capital in Excess of Par $ 260,616 3030 Income Summary 3040 Retained Earnings $ 718,004 4010 Sales Revenue $ 11,593,800 5020 Cost of Goods Sold $ 5,267,160 Salaries & Wages Expense $ 4,044,600 6010 Telephone & Utility Expense $ 6060 267,840 $ 273,204 6070 Rent Expense 6120 Depreciation Expense - Equipment 6410 Income Tax Expense Total $ 13,587,444 $ 13,587,444
Page 3 INFORMATION FOR CURRENT PERIOD TRANSACTIONS When applicable, round amounts to the nearest dollar. The following transactions occurred during December 2019: JE. #. DESCRIPTION AMOUNT Merchandise Inventory purchased from vendors on account, terms net 45. $ 201,960 $ 1,130,220 Sales to credit customers on account, terms net 45. The cost of the merchandise inventory sold was $508,599. Cash collections from credit customers 980,352 414,000 Payments of Accounts Payable 27,490 Payments in cash for Telephone and Utility Expense Payroll checks written and distributed for salaries and wages 438,840 Payment in cash for Rent Expense 22,767 Information for Adjusting Journal Entries After creating the journal entries to record the current year transactions, posting those entries to the ledger accounts, balancing each account, and preparing the unadjusted trial balance, an inspection of the balances indicates that the following adjusting entries are required: AJE # As the result of a physical count, year-end Merchandise Inventory was determined to be $838,141. Adjust the Merchandise Inventory account to reflect the amount of inventory overage or shortage. 2. Record the depreciation expense on Equipment for the year. All depreciable assets were purchased on the date of incorporation and have an estimated useful life of 20 years, with a residual (salvage) value equal of 10% of original costs. 3. Income Tax Expense for the year is estimated to be $184,920.
Page 5 GENERAL JOURNAL ACCOUNT TITLE DEBIT ACCT CODE CREDIT
GENERAL JOURNAL Page 6 Account 1110 CASH JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 1120 ACCOUNTS RECEIVABLE JE# ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 1130 MERCHANDISE INVENTORY JE ITEM DEBIT CREDIT Balance BEGINNING BALANCE
GENERAL LEDGER Page 7 Account 1230 EQUIPMENT ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 1231 ACCUMULATED DEPRECIATION - EQUIPMENT ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 2110 ACCOUNTS PAYABLE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 2210 INCOME TAX PAYABLE ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 3010 COMMON STOCK ($1 PAR) ITEM DEBIT CREDIT Balance BEGINNING BALANCE
GENERAL LEDGER Page 8 Account 3020 PAID-IN CAPITAL IN EXCESS OF PAR JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 3030 INCOME SUMMARY JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 3040 RETAINED EARNINGS JE# ITEM DEBIT CREDIT Balance BEGINNING BALANCE
GENERAL LEDGER Page 9 Account 4010 SALES REVENUE JEW ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 5020 COST OF GOODS SOLD JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 6010 SALARIES & WAGES EXPENSE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 6060 TELEPHONE & UTILITY EXPENSE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE
GENERAL LEDGER Page 10 Account 6070 RENT EXPENSE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 6120 DEPRECIATION EXPENSE - EQUIPMENT JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE Account 6410 INCOME TAX EXPENSE JE # ITEM DEBIT CREDIT Balance BEGINNING BALANCE
Page 11 TONY'S TOOLS UNADJUSTED TRIAL BALANCE AS OF DECEMBER 31, Acct # Account Title Debit Credit 1110 Cash 1120 Accounts Receivable 1130 1230 1231 2110 2210 3010 3020 3030 3040 4010 5020 6010 Merchandise Inventory Equipment Accumulated Depreciation - Equipment Accounts Payable Income Tax Payable Common Stock ($1 Par) Paid-In Capital in Excess of Par Income Summary Retained Earnings Sales Revenue Cost of Goods Sold Salaries & Wages Expense Telephone & Utility Expense Rent Expense Depreciation Expense - Equipment Income Tax Expense Total 6070 6120 6410
Page 12 TONY'S TOOLS ADJUSTED TRIAL BALANCE AS OF DECEMBER 31, Debit Credit Acct # Account Title 1110 Cash 1120 Accounts Receivable 1130 Merchandise Inventory 1230 Equipment 1231 Accumulated Depreciation - Equipment 2110 Accounts Payable 2210 Income Tax Payable 3010 Common Stock ($1 Par) 3020 Paid-In Capital in Excess of Par 3030 Income Summary 3040 Retained Earnings 4010 Sales Revenue 5020 Cost of Goods Sold 6010 Salaries & Wages Expense 6060 Telephone & Utility Expense 6070 Rent Expense 6120 Depreciation Expense - Equipment 6410 Income Tax Expense Total
Page 13 TONY'S TOOLS INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31.
Page 14 TONY'S TOOLS STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31,
Page 15 TONY'S TOOLS BALANCE SHEET AS OF DECEMBER 31,
Page 16 TONY'S TOOLS POST-CLOSING TRIAL BALANCE AS OF DECEMBER 31. Debit Credit Acct # Account Title 1110 Cash 1120 Accounts Receivable 1130 Merchandise Inventory 1230 Equipment 1231 Accumulated Depreciation - Equipment 2110 Accounts Payable 2210 Income Tax Payable 3010 Common Stock ($1 Par) 3020 Paid-In Capital in Excess of Par 3030 Income Summary 3040 Retained Earnings 4010 Sales Revenue 5020 Cost of Goods Sold 6010 Salaries & Wages Expense 6060 Telephone & Utility Expense 6070 Rent Expense 6120 Depreciation Expense - Equipment 6410 Income Tax Expense Total
Answers
Requirement 1: Prepare the journal entries as follows
Requirement 2: Post the entries as follows
Requirement 3 to 8
TT Inc Unadjusted Trial Balance As of December 31, 2019 Account Title Debit Credit Cash $768,455 Accounts Receivable $573,228 Merchandise Inventory $844,641 Equipment $1,468,800 Accumulated Depreciation $594,864 Accounts Payable $168,120 Income Tax Payable $0 Income Summary $0 Common Stock $40,000 Paid-in Capital in Excess of Par $260,616 Retained Earnings $718,004 Sales Revenue $12,724,020 Cost of Goods Sold $5,775,759 Salaries and Wages Expense $4,483,440 Telephone and Utility Expense $295,330 Rent Expense $295,971 Depreciation Expense $0 Income Tax Expense $0 Total $14,505,624 $14,505,624 TT Inc Adjusted Trial Balance As of December 31, 2019 Account Title Debit Credit Cash $768,455 Accounts Receivable $573,228 Merchandise Inventory $838,141 Equipment $1,468,800 Accumulated Depreciation $660,960 Accounts Payable $168,120 Income Tax Payable $184,920 Income Summary $0 Common Stock $40,000 Paid-in Capital in Excess of Par $260,616 Retained Earnings $718,004 Sales Revenue $12,724,020 Cost of Goods Sold $5,782,259 Salaries and Wages Expense $4,483,440 Telephone and Utility Expense $295,330 Rent Expense $295,971 Depreciation Expense $66,096 Income Tax Expense $184,920 Total $14,756,640 $14,756,640 TT Inc Income Statement For the Year Ended December 31, 2019 Sales Revenue $12,724,020 Deduct: Cost of Goods Sold $5,782,259 Gross Profit $6,941,761 Operating Expenses Salaries and Wages Expense $4,483,440 Telephone and Utility Expense $295,330 Rent Expense $295,971 Depreciation Expense $66,096 Total Operating Expenses $5,140,837 Income before income tax $1,800,924 Income Tax Expense $184,920 Net income $1,616,004 Earnings per share ($1,676,592 ÷ 40,000) $40.40 TT Inc Statement of Retained Earnings For the Year Ended December 31, 2019 Retained Earnings - Beginning Balance $718,004 Add: Net income $1,616,004 Retained Earnings - Ending Balance $2,334,008 TT Inc Balance Sheet December 31, 2019 Assets Current Assets Cash $768,455 Accounts Receivable $573,228 Merchandise Inventory $838,141 Total Current Assets $2,179,824 Property, Plant and Equipment: Equipment $1,468,800 Deduct: Accumulated Depreciation ($660,960) $807,840 Total Assets $2,987,664 Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $168,120 Income Tax Payable $184,920 Total liabilities $353,040 Stockholders' Equity Common Stock $40,000 Paid-in Capital in Excess of Par $260,616 Retained Earnings $2,334,008 $2,634,624 Total Liabilities and Stockholders' Equity $2,987,664 TT Inc Post-Closing Trial Balance As of December 31, 2019 Account Title Debit Credit Cash $768,455 Accounts Receivable $573,228 Merchandise Inventory $838,141 Equipment $1,468,800 Accumulated Depreciation $660,960 Accounts Payable $168,120 Income Tax Payable $184,920 Common Stock $40,000 Paid-in Capital in Excess of Par $260,616 Retained Earnings $2,334,008 Sales Revenue Cost of Goods Sold Salaries and Wages Expense Telephone and Utility Expense Rent Expense Depreciation Expense Income Tax Expense Total $3,648,624 $3,648,624 Notes: Computation of depreciation expense
Cost of equipment $1,468,800 Deduct: Salvage value ($1,468,800 × 10%) $146,880 Depreciable value $1,321,920 ÷ Useful life 20 Annual depreciation expense $66,096 Credit JE. #. 1 Debit $201.960 Account Title and Explanation Merchandise Inventory Accounts Payable To record merchandise inventory purchased $201.960 2 $1.130.220 Accounts Receivable Sales Revenue To record sales on account $1.130.220 $508,599 Cost of Goods sold Merchandise Inventory $508,599 $980,352 Cash Accounts Receivable To record cash collected on account $980,352 4 $414,000 Accounts Payable Cash To record cash paid on account $414.000 5 Telephone & Utility Expense $27.490 Cash To record cash paid for telephone and utility expenses $27.490 6 $438.840 Salaries and Wages Expense Cash To record salaries and wages paid $438.840 7 $22.767 Rent Expense Cash To record rent paid $22,767 AJE# Credit Debit $6,500 Account Title and Explanation Cost of goods sold ($844.641 - $838,141) Merchandise Inventory To record adjustment for inventory shortage $6,500 $66,096 Depreciation Expense Accumulated Depreciation To adjustment for record depreciation expense $66.096 $184,920 Income Tax Expense Income Tax Payable To adjustment for record income tax expense $184,920 Credit Clo# 1 Debit $12.724,020 Account Title and Explanation Sales Revenue Income Summary To close revenue accounts $11,108,016 Income Summary Cost of Goods Sold Salaries and Wages Expense Telephone and Utility Expense Rent Expense Depreciation Expense Income Tax Expense To close expense accounts $5.782.259 $4.483,440 $295,330 $295.971 $66.096 $184.920 $1,616,004 Income Summary Retained Earnings To close income summary account $1.616.004Cash Credit Debit $980,352 Acct # 1110 Item Item Dec. 1 Beginning balance JE #3 Cash collections JE #4 Cash payments JE # 5 Cash payments JE #6 Salaries JE #7 Rent $414,000 $27,490 $438,840 $22.767 Balance $691,200 $1,671,552 $1,257,552 $1,230,062 $791,222 $768,455 LEIL Debit Acct # 1120 Item Item Dec. 1 Beginning balance JE #2 Credit sales JE #3 Cash collections Accounts Receivable Credit Balance $423,360 $1,553,580 $980,352 $573,228 $1.130.220 Debit Acct # 1130 Item Item Dec. 1 Beginning balance JE #1 Purchases JE #2 Sales AJE #1 Shortage Merchandise Inventory Credit Balance $1,151,280 $1,353,240 $508.599 $844.641 $6,500 $838,141 $201.960 Acct # 1230 Item Beginning balance Item Dec. 1 Debit Equipment Credit Balance $1,468,800 Acct # 1231 Item Beginning balance Item Dec. 1 AJE # 2 Debit Accumulated Dep. Credit Balance $594,864 $66,096 $660,960 Accounts Payable Credit Acct #2110 Item Item Dec. 1 Beginning balance JE #1 Purchases JE #4 Cash payments Balance $380,160 $582,120 $168,120 $201.960 $414.000 Acct # 2210 Income Tax Payable Credit Balance Item Debit Item Dec. 1 AJE # 3 Beginning balance $0 $184,920 $184,920 Acct # 3010 Item Beginning balance Common Stock Credit Item Dec. 1 Debit Balance $40,000 Item Dec. 1 Acct # 3020 Item Beginning balance Paid-in Capital In Excess of Par Debit Credit Balance $260,616 Income Summary Debit Credit Balance Acct # 3030 Item Beginning balance Revenue Expenses Item Dec. 1 Clo #1 Clo #2 Clo # 3 $0 $11,108,016 $1,616,004 $12,724.020 $12,724,020 $1,616,004 SO Acct # 3040 Item Beginning balance Item Dec. 1 Clo #3 Debit Retained Earnings Credit Balance $718,004 $1.616.004 $2,334,008 Debit Item Dec. 1 JE #2 Clo #1 Acct # 4010 Item Beginning balance Credit sales Sales Revenue Credit Balance $11,593,800 $1.130.220 $12,724,020 SO $12,724.020 Debit Acct # 5020 Item Item Dec. 1 Beginning balance JE # 2 Sales AJE# 1 Inventory shortage | Clo #2 Cost of Goods Sold Credit Balance $5,267,160 $5,775,759 $5,782,259 $5,782,259 SO $508,599 $6,500 Acct # 6010 Item Item Dec. 1 Beginning balance JE #6 Salaries Clo #2 Salaries and Wages Expense Debit Credit Balance $4,044,600 $438.840 $4,483,440 $4,483,440 SO Acct # 6060 Item Item Dec. 1 Beginning balance JE #5 Cash payments | Clo #2 Telephone and Utility Expense Debit Credit Balance $267,840 $27.490 $295,330 $295,330 SO Rent Expense Credit Debit Acct #6070 Item Item Dec. 1 Beginning balance JE #7 Rent Clo #2 Balance $273,204 $295,971 $22,767 $295,971 Acct # 6120 Item Beginning balance Item Dec. 1 AJE # 2 Clo #2 Depreciation Expense Debit Credit Balance SO $66,096 $66,096 $66,096 $0 Acct # 6410 Income Tax Expense Credit Balance Item Debit Beginning balance Item Dec. 1 AJE # 3 Clo #2 $184.920 $184,920 $184,920 $0
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