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2

>Cover

page

Intro

Introduction Queta Johnson is about to open a new business –

Chocolate Nirvana

. It will be a small chocolate specialties store. She plans on selling a limited number of hand-made molded candies, some of which are holiday specific and others that are of a more generic nature, as well as carrying a line of top-end candy bars. The majority of her sales will come from walk-in customers which will all be on a cash only basis. She anticipates working full-time at the store and needing the help of four part-time employees. She uses a perpetual FIFO (First-in, First-Out) method to account for her inventory. So, every time you record a sale of merchandise you must also figure out the cost of the goods (determined from recording it in the merchandise inventory sheets and applying FIFO). The purpose of this practice set is to allow you the chance to see how each of the separate components we have worked on this semester fit together. As you complete the set, you may find it necessary to look back at what we learned in various chapters to help remember exactly what to do. Instructions 1

. Be sure to complete each form before moving on to the next form. 2. Read the form and decide which journal to put it in. 3

. First – journalize the form into ONE of the journals. If it can go into one of the special journals, that is where you first put it. Only if you cannot (the transaction does not work for any of them) would you record it in the general journal. It would never go in two journals but it does have to go in one – you cannot record it anywhere else until you have journalized it. CASH PAYMENTS JOURNAL

– Use this if you are told to write a check. It must go in the

Cash

credit column, which means that it must also go to the check book and write out a check. Why did we pay it? On account would go in the

Account

s Payable

debit column, you would need the name of the business off to the left, and it would need to be recorded in the

Accounts Payable

subidiary. Some other reason? Would need to go in the Other column and you would need the name of an account from the chart of accounts. If we have an asset relating to what we are paying for we should use that. If not then we can use the expense or other appropriate account. If we pay for more

than

one thing with the single check we will need 2 lines to record it so that we can properly show the details. CASH RECEIPTS JOURNAL

– Use this one if you receive money FOR ANY REASON. The total amount of cash received must go in the Cash debit column and into the check book as a deposit. Why did you get the money? If you received it for a summary of cash sales, you must credit

Sales – Store Sales

and

Sales Tax Payable

. These numbers come from the bottom of the cash sales form. Then we must also take the things we sold into the merchandsie inventory sheets and record them as sales and determine what our COST in the goods sold would be. This is based on what we learned in chapter

7

. If we received it for any other reason it needs to go in the Other column and we need the name of an account on the left. PURCHASES JOURNAL

– Used if you buy something on account (or receive a service that you will be paying for a bit later). Because everything in this journal will include a credit to Accounts Payable you will need the name of the business off to the left and have to take it to the Accounts Payable Subsidiary. Then, what did you buy? Merchandise? Then also put it in the

Merchandise

Inventory

column and have to take it to the Inventory sheets and show the purchase. Something else? Then over on the right, put the amount in and then find an account from the chart of account that matches what you have gotten. SALES JOURNAL – This business does not use a sales journal GENERAL JOURNAL

– Only if you cannot record it in one of these four journals would you record it in the general journal. Which means you should not record anything here that affects Cash. We study payroll in chapter

11

. We will also use the general journal for our adjusting and closing entries. Payroll – record the payroll as instructed – 1) into their employee earnings records, 2) then transfer the information into the payroll register and 3) after totaling the payroll register use that information to prepare a general journal entry and then from what we learned in chapter 11 also prepare the entry to record payroll tax expense. Specific data for each individual regarding their pay rate, status and number of allowances can be found on their earnings record sheets. Actual hours worked are given on the form.

Federal Income Tax

withholding amounts are found on the chart near the front of the booklet. First detemine their gross wages, then based on their claimed marital status go to the appropriate chart (married or single – in the front of the book) and find the intersection of their gross wages and how many allowances they are claiming. This is the dollar amount to take for their income tax withholding. Prepare the journal entries based off what we were taught in the textbook. 4

. After journalizing all forms, total up every column from all four special journals and write down your total on the journal page. Compare your totals with the check figures. Do they match? If they do not, determine how far off they are. Try to determine where the error would come from. 5

. Once you have your totals correct, begin posting into the general ledger. You must post all 5 journals (includes the general journal!!!) From the special journals, if you have the name of an account in the column heading, you will post ONLY the total from that column into the general ledger as either a debit (DR) or a credit (CR) based on what is shown in the column heading.

For

the “Other” columns you must post each amount individually. This comes from chapter 5. Notice in chapter 5 how your post reference numbers should look. From the general journal you need to post every account you have used. 6

. As you post in the general ledger, keep running balances. Remember if you have a debit balance and a debit transaction they are added and stay a debit. If you have a credit balance and a credit transaction they are added and stay a credit. If you have one as a debit and the other as a credit they are subtracted and the balance goes to the higher side. Remember the rules for normal balances! Do not worry about an account’s balance too much until you have posted all transactions – at that time all accounts should have their “normal” balance.

7 After posting all numbers from the journals into the general ledger, go to the

Unadjusted Trial
Balance

in the back of the booklet. Write down each account, in order, from the general ledger that has a balance (you will have many accounts that do not yet have balances) and write in the balance amount – debit or credit – and add up your balances. Check your totals (this is a Trial BALANCE so your two balances should be the same) and compare to the check figures.

8

. Use your chart of accounts page to begin work on your worksheet. List all accounts, in order, except you do not need to list Notes Payable – current,

Income Summary

, or

Miscellaneous Expense

. 9

. For the accounts on your unadjusted trial balance, fill in their balances on to the worksheet in the

Unadjusted Trial Balance

columns. Leave all other accounts blank for these columns. 1

0

. Journalize your adjusting entries in the general journal. You are given the information here, but you will need to also use the chart of accounts, sometimes you will need to look back at the form where we originally got the information we recorded for this charge, or you may need to look up on the forms, the ledger, or the trial balance a cost amount. Prepare month end adjusting entries based on the following data for OCTOBER: a) Record accrued interest on the long term note for 3 days –

$ 13

.56 b) Depreciation – calculate depreciation for JUST the month of October based on the following information: Store Equipment

– 5 year life, $

30

00 salvage value, use straight line depreciation Office Equipment

– 5 year life, $

20

0

salvage value, use straight line depreciation c) Record entry for expired insurance d) Currently there are $45 worth of office supplies on hand e) Currently there are $

90

worth of store supplies on hand f) Record entry for amount of advertising expired for the period just ended g) Record wages earned, but unpaid, on Oct

31

of $1

10 11. Post your adjusting entries into the general ledger and get new running balances. Remember from chapter 3 what date we use and how we show this in the ledger. 12

. Also, add your adjusting entries on to the worksheet in the

Adjustments

column. You will total your adjusting entries here.

13. You can now complete the worksheet. Your

Adjusted Trial Balance

columns should match your general ledger balances. What accounts need to get extended into the

Income Statement

columns (based on the Adjusted Trial Balance numbers) and which ones need to go into the

Balance Sheet

columns? Look at chapter 4 if you can’t remember. Also, check chapter 4 to remind yourself how to show the totals on the bottom of the last page of the worksheet.

14

. You are now ready to prepare your financial statements. Be sure to use chapter 6 examples as references. 15

. Your Accounts Payable Vendor balance (Schedule of Accounts Payable) is from chapter 5. Simply list each vendor that you owe money to (Accounts Payable) and total them (example in chapter 5). You do not have to list any business that does not have a balance at the end of the month. 16

. Income Statement – use a multiple step format. What all do you show, and in what columns (chapter 6) to get to gross profit? Where do you show

Interest Expense

? The company decided not to separate their operating expenses into selling and administrative but rather to list them all under Operating Expenses unless they are considered to be Other Expenses. 17

. Statement of Owner’s Equity – were we in business last month? Does that affect how we show anything on this statement? 18

. Balance Sheet – be sure to use the classified format as described and illustrated in chapter 6. They show their Note Payable as a noncurrent liability rather than splitting it between current and noncurrent. 19

. You are now ready to prepare your closing entries. These need to be journalized in the general journal. Use chapter 4 as a reference. If you prepared your worksheet correctly this is a great help in preparing the closing entries. Remember, though, we may have some accounts now that we did not have back in chapter 4 that still need to be closed because of the type of account they are. We close revenues and expenses – where are they found on the balance sheet? What amount should we have for the third entry? What are we trying to close in the 4th entry? 20. After journalizing the closing entries, you then need to post them into the general ledger. Do we put something in the item column? 21

. After posting the closing entries, you will then prepare the post-closing trial balance. Which accounts should still be open? Be sure to use your textbook as a reference as you work through this set. All of this information comes from work in our textbook. Before turning in your completed practice set – Please be sure to put your name on it

chart of accts

Chocolate Nirvana

Cash

0

Sales – Store Sales

0

of Merchandise Sold

Office Equipment

Store Equipment

0

Accounts Payable

Tax Payable

Payable

Miscellaneous Expense

Interest Expense

Income Summary

Chart of Accounts
ASSETS	REVENUE
	100		41
	112		Office Supplies
	113		Store Supplies
	114		Prepaid Insurance	COST OF GOODS SOLD
	115		Prepaid Advertising		51							Cost
	120	Merchandise Inventory
	150
	151	Accumulated Depreciation – Office Equip	OPERATING EXPENSES
	160		61		Advertising Expense
	161	Accumulated Depreciation – Store Equip		615	Depreciation Exp – Store Eq
	620		Wages Expense
6								25		Store Supplies Expense
LIABILITIES		65		Rent Expense
	210		660	Depreciation Exp – Office Eq
	211		Interest Payable		665		Insurance Expense
	213	Sales Tax Payable		670		Payroll Tax Expense
	214		Employee’s Federal Income Tax Payable		675		Office Supplies Expense
	215			Social Security		6	80		Telephone Expense
	216							Medicare Tax		685	Utilities Expense
	217		FUTA Tax Payable		690
	218		SUTA Tax Payable
	219		Wages Payable
	250		Notes Payable – Non Current	OTHER EXPENSE
	810
OWNERS’ EQUITY
	310		Queta Johnson, Capital
	311		Queta Johnson, Drawing
	312

Fed Inc Tax Withholding Amts

Persons

than 0 1 2 3 4 5

0 200 0 0 0 0 0 0
200

0

15 12 8 4 0 0

30

17 11 5 2

700

31

17 13 9

1200

25 19 11

1800

31 24 16

2500

00

65 58 51 40 30 22

Persons

If the wages are And the number of withholding allowances claimed is
But less
At least than 0 1 2 3 4 5
The amount of income tax to be withheld is

0 400 0 0 0 0 0 0
400 700 9 5 2 0 0 0
700

17 12 7 5 3 0

1000

0

40

19 14 5

1400 1800

46

25 19 11

1800 2500 61 52 41 34 24 20

These are the Federal Income Tax Withholding DOLLAR amounts to
use for our practice set

		Single
	If the wages are		And the number of withholding allowances claimed is
	But less
	At least
	The amount of income tax to be withheld is
			40
	400				700				22
	1200	38					24
			1800		46	39		33
		2500		58	47	42
						32
	These are the Federal Income Tax Withholding DOLLAR amounts to
	use for our practice set
		Married
	1000
		140		34			27
	52	37
The numbers used in these charts do not reflect actual IRS numbers

Check Figures

Check Figures – Chocolate Nirvana Purchase Journal Accounts Payable

49,147.80 Merchandise Inventory

48,117.80 Other

1,030.00 Cash Receipts Journal Other

30,000.00 Merchandise Inventory / COGS 45,709.56 Sales – Store Sales 93,539.25 Sales Tax Payable 6,547.76 Cash 130,087.01 Cash Payments Journal Other

37,008.73 Accounts Payable

34,312.30 Cash 71,321.03 After posting your journals here are some selected balances: Cash

58,765.98 Merchandise Inventory

2,408.24 Accounts Payable

14,835.50 After computing payroll total net pay for all employees 4,910.75 End of month activities:

Work Sheet

:

Trial Balance 150,042.91 Adjustments 1,5

28

.56 Adjusted Trial Balance 150,466.47 Income Statement (very bottom)

93,539.25
Balance Sheet (very bottom ) 91,209.22 Income Statement: Sales

93,539.25
Gross Profit 47,8

29

.69

To

tal

Operating Expenses 13,370.40

Net Income

34,282.00 Statement of Owner’s Equity: Queta Johnson, October 31, 2016 36,782.00 Balance Sheet:

Total

Current

Assets

62,509.22 Total Property, Plant, & Equipment 20,900.00 Total Assets 62,360.24 Total Current Liabilities 28,002.22 Total Non-Current Liabilities 18,

625

.00 Total Liabilities 46,627.22 Total Liabilities plus Owner’s Equity 83,409.22 Post-Closing Trial Balance:

Debit

s and credit 83,709.22

purchase journal

PURCHASES JOURNAL

ED

POST REF

1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15

Page 1

DATE 2016

ACCOUNT

CREDIT

POST REF

Accounts Payable CR.

Merchandise Inventory DR.

ACCOUNT DR.

Amount

cash receipts journal

CASH RECEIPTS JOURNAL Page 1

ACCOUNT CREDITED POST REF

1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9

10 10
11 11
12 12
13 13
14 14
15 15

DATE 2016	INV NO	Other CR	Merch Inventory CR. COGS DR.	Sales – Store Sales CR.	Sales Tax Pay CR.	Cash DR
– 0

cash payments journal

CASH PAYMENTS JOURNAL Page 1

ED

POST REF

1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
11 11
12 12
13 13
14 14
16 16
17 17
18 18
19 19
20 20

DATE 2016

Check No.

ACCOUNT

DEBIT

Other Accounts DR.

Accounts Payable DR.

Cash CR.

General Journal

GENERAL JOURNAL Page 1

DEBIT CREDIT

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23

24 24
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GENERAL JOURNAL

DESCRIPTION

Debit

1

2 2
3 3
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GENERAL JOURNAL

DATE 2016 DESCRIPTION POST. REF. Debit Credit

1

2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9

10 10

11 11
12 12
13 13
14 14
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DATE 2016

DESCRIPTION

POST REF.

23

26

Page 2

DATE 2016

POST. REF.

Credit

Adjusting Entries

Page 3

Closing Entries

accts pay sub

2016

Debit Credit Balance

Name

Address

Item Post. Ref. Debit Credit Balance

Name

Address

Date 2016 Item Post. Ref. Debit Credit Balance

Name

Address

Date 2016 Item Post. Ref. Debit Credit Balance

Name

Address

Date 2016 Item Post. Ref. Debit Credit Balance

ACCOUNTS PAYABLE SUBSIDIARY LEDGER

Name

Antwerp Supreme

Address

337 Prumer Str., Antwerp, Belgium

Date

Item

Post. Ref.

Chocolate Delights

48956 257th Ave NE, Minneapolis, MN 55444

Date 2016

Fireplace Supplies

368 Express Place,

Westminster, SD 58307

TA & A Bell

251 381st St, Westminster, SD 58307

XY Energy

461 2nd St, Westminster, SD 58307

Merchandise Inventory sub

Inventory

Total Unit Total Unit Total

Date

Cost Cost Qty Cost Cost Qty Cost Cost

Item ID

Item Description

Purchases Cost of Merchandise Sold Inventory
Unit Total Unit Total Unit Total
Date Qty Cost Cost Qty Cost Cost Qty Cost Cost

Item ID

Item Description

Purchases Cost of Merchandise Sold Inventory
Unit Total Unit Total Unit Total
Date Qty Cost Cost Qty Cost Cost Qty Cost Cost

Item ID

Item Description

Purchases Cost of Merchandise Sold Inventory
Unit Total Unit Total Unit Total
Date Qty Cost Cost Qty Cost Cost Qty Cost Cost

Item ID

Item Description

Purchases Cost of Merchandise Sold Inventory
Unit Total Unit Total Unit Total
Date Qty Cost Cost Qty Cost Cost Qty Cost Cost

Item ID

C – 101

Item Description

Christmas

Purchases

Cost of Merchandise Sold

Unit

Qty

D – 101

Dark Chocolate

H – 101

Halloween

M – 101

Milk chocolate

T – 101

Thanksgiving

Check book

1001

Date
To 20 16
For

$

Deposit

Dollars

1002

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check

Balance For

1003

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

1004

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

1005

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

1006

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

1007

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

$ 1008

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

$ 1009

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

$ 1010

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

$ 1011

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

1012

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

1013

Date
To 20 16
For
Dollars Cents
Balance Forward Pay to the
Deposit Order of $
Deposit
Sub Total Dollars
Current Check
Balance For

No.

1001

Dollars

Cents

Balance Forward

Pay to the

Deposit

Order of

Sub Total

Current Check

Balance

For

No.

1002

No.

1003

No.

1004

No.

1005

No.

1006

No.

1007

No.

1008

No.

1009

No.

1010

No.

1011

No.

1012

No.

1013

General Ledger

Account Cash

100

Date 2016 Item Post. Ref. Debit Credit

Account Office Supplies Account No. 112