Not a member of Pastebin yet?
Sign Up,
it unlocks many cool features!
- Download: http://solutionzip.com/downloads/chocolate-nirvana/
- 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. In addition, she will also sell direct to
- two local businesses, on account, with terms 1/10,n/30. 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, whether on account or for cash, you
- must also figure out the cost of the goods while recording the sale in the
- inventory subsidiary.
- 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. Record the transactions for Chocolate
- Nirvana found on the enclosed forms in one of the journals provided
- Cash Payments – any time you spend
- money
- Cash Receipts – any time you receive
- money
- Purchase – any time you purchase
- something on account
- Sales – any time you sell something on
- account
- General – only transactions that do
- NOT fit into one of the previous journals
- Chocolate
- Nirvana uses Accounts Receivable, Accounts Payable, and Merchandise Inventory
- Subsidiary Ledgers as well as a check book
- Remember to post to the
- subsidiary ledgers any time those accounts are used
- The
- first work you will be doing will be do determine which journal each form
- belongs in. Each form will only go
- into one journal. If we can post it
- into one of the special journals, we will.
- If it does not belong in a special journal – that is the only time we
- will use the general journal for our transactions. This will be fairly rare. Pay attention to the words used on the
- forms. If it indicates that we have
- received money – FOR ANY REASON – we will record that in the Cash Receipts
- Journal. If it indicates that we need
- to write out a check – FOR ANY REASON – it must go into the Cash Payments
- Journal. If we sell something on
- account then it would go into the Sales Journal. And if we buy something on account or we
- receive a service on account, then it would go into the Purchases
- Journal. If it is a sales return, a
- purchase return, or the payroll entries it must go into the General
- Journal.
- As we
- record the information from the forms into the journals we need to watch the
- columns where we record the information.
- If we record something in the Cash Receipts or the Cash Payments
- Journals, then we will have to affect cash.
- Any number we put in the Cash debit column from Cash Receipts we will
- also put into the check book as a deposit.
- Any number we put in the Cash credit column from Cash Payments we will
- also put into the check book as a check we write out. If we affect Accounts Receivable, Accounts
- Payable, or Merchandise Inventory in any of the special journals OR in the
- general journal, we must ALSO take that amount into that subsidiary
- ledger. If we debited it in the
- journal we will debit it in the subsidiary, if we credited it in the journal
- we will credit it in the subsidiary.
- If we purchased the merchandise inventory we will show it as a
- purchase in the inventory sheets, if we sold it we will show it under the
- cost of goods sold section – we will determine our cost for the sale by applying
- the FIFO rules and determining our cost in the goods we sold.
- Payroll – record the payroll
- as instructed first into their employee earnings records, then transfer the
- information into the payroll register and after totaling the payroll register
- use that information to prepare a general journal entry. Specific data for each individual
- regarding their pay rate, status and number of allowances can be found on
- their earnings record sheets. Specific
- rates to be used for social security, medicare, and the unemployment amounts
- can be found down in the next section.
- Prepare the journal entries based off what we were taught in the
- textbook. You will need to debit the
- salary expense account for total gross wages and credit each of the things we
- withheld (as summarized on the payroll register). However you must credit Payroll
- Checking Account for the net pay because this business uses a separate
- checking account for normal checks and payroll checks.
- When you are asked to
- transfer enough funds to cover payroll, you will debit the Payroll Checking
- account for the same amount you credited in the first payroll entry in the
- general journal (net pay) but now it will be in the Cash Payments Journal. This will give you a debit and a credit and
- will result in a zero balance (and nothing recorded in the Wages Payable
- account yet).
- Keep in mind that after
- recording the general journal entry to record the actual payroll you must
- also prepare a journal entry to record the payroll tax expense for the
- business. Chocolate Nirvana is
- responsible for matching the Social Security and Medicare amounts withheld
- from its employees and also must pay in for Federal and State
- Unemployment. This means that when it
- comes time to post into the ledger you will have two identical amounts in the
- Social Security account and two identical amounts in the Medicare
- account. This entry was shown in the
- textbook so please follow the format we saw there. The following rates apply
- Social Security 6.2%, on the first $110,000 earned each
- year by each employee
- Medicare 1.45%
- FUTA.8%, on the first $7,000 earned each year by each employee
- SUTA 9%, on the first $12,000
- earned each year by each employee
- We will NOT actually write
- out the individual payroll checks
- Hint: If you are asked to write out a check to
- cover more than one thing you must take more than one line so that you
- properly record the affect to each account.
- To this point you should NOT
- have anything recorded in the General Ledger.
- Wait until you have your journals completed, TOTALED, and corrected
- before putting anything into the general ledger.
- 2.
- After completing all journals, TOTAL THEM and write the totals below the last number
- in the column, compare to the check figures
- and post to the general ledger.
- For any journal column with the name of a specific account in the
- column heading you will post only the total from that column into that account
- in the general ledger. Journal columns
- shown as “”Other”" in the heading need to be posted individually into
- the general ledger. As you post
- remember that you have to use the post reference numbers. In the ledger you fill in the journal
- abbreviation and page number where you get your data and in the journal you
- put the ledger account number where you posted it. Cash Receipts is CR, Cash Payments is CP
- Purchases is P, Sales is S, and General Journal is J. In the journal to show that you posted it
- into a subsidiary ledger you put a check mark.
- 3. Prepare an unadjusted trial balance. After getting your numbers to match the
- check figure transfer the information into the first columns of the
- worksheet.
- 4. Prepare month end adjusting entries based
- on the following data
- a) Record accrued interest on the long term
- note for 3 days – $16.77
- b) Depreciation – calculate depreciation for
- JUST the month of October based on the following information
- Store Equipment – 5 year life, $2000
- salvage value, purchased October 10, use straight line depreciation
- Office Equipment – 5 year life, $200
- salvage value, purchased October 10, use straight line depreciation
- c) Record entry for expired insurance
- d) Currently there are $75 worth of office
- supplies on hand
- e) Currently there are $125 worth of store
- supplies on hand
- f) Record entry amount of advertising expired for the
- period just ended
- g) Record wages earned, but unpaid, on Oct 31
- of $275
- Adjusting
- entries need to be recorded in the general journal, posted into the general
- ledger (remember to indicate Adjusting Entry in the Item column), and added
- to the worksheet.
- 5. Complete the worksheet, schedule of
- accounts receivable/payable, Income Statement, Statement of Owners’ Equity
- and Balance Sheet. Add any accounts
- not already found on the worksheet as needed to complete your adjusting
- entries.
- The
- schedule of accounts receivable and schedule of accounts payable are prepared
- by listing every business owing us money at the end of the month and totaling
- them and listing every business we owe money to at the end of the month and
- totalling them. We use the two
- subsidiary ledgers to get this information.
- Prepare
- the Income Statement using the Multiple step format and the Balance Sheet
- using the classified format. The Notes
- Payable – current balance on the Balance Sheet should be $15,000 and the
- Notest Payable – noncurrent balance on the Balance Sheet should be $13,750.
- 6. Prepare closing entries, post to the
- ledger, and prepare a post-closing trial balance
- The
- easiest way to prepare your closing entries would be to use your completed
- worksheet. Close the credit amounts in
- the Income Statement column into income summary for the first entry. Close the debit amounts from the Income
- Statement columns into Income Summary for the second entry. Close the difference between the two income
- summary amounts (should equal net income) in to the Capital account in the
- third entry. Finally, close the
- drawing account into the capital account in the fourth entry. These entries are done in the General Journal
- and then posted into the General Ledger.
- Be sure to indicate Closing entry in the Item column. You will then prepare the post-closing
- trial balance by going through the ledger and listing every account that
- still has a balance and listing the balance (as either a debit or a credit -
- based on what it is in the ledger).
- (Have
- you made sure that your balances in your subsidiary ledgers match their
- controlling accounts in the general ledger?
- Does the net income from your work sheet match the net income you
- reported on your Income Statement?)
- In the Exhibit section you
- will find
- Chart of Account
- Tax Withholding Chart
- Check Figures
- In the Forms section you will
- find
- The transactions forms you need to
- record in the various journals
- In the Journals section you
- will find
- Sales Journal – begin with invoice
- 1001
- Purchases Journal
- Cash Receipts Journal – begin with
- invoice 101
- Cash Payments Journal – begin with
- check 1001
- General Journal (ONLY transactions
- that CANNOT go into one of the special journals)
- In the Ledgers section you
- will find
- Accounts Receivable Subsidiary Ledger
- Accounts Payable Subsidiary Ledger
- Merchandise Inventory Subsidiary
- Ledger
- General Ledger
- In the Checkbook section you
- will find
- Checkbook – begin with check 1001
- In the Payroll section you
- will find
- Individual Earnings Records
- Payroll Register – Begin with check
- 101 (assign to employees in order – do not actually write out checks to the
- employees)
- In the Financial Statement
- section you will find
- Unadjusted Trial Balance
- Work Sheet
- Schedule of Accounts Receivable
- Schedule of Accounts Payable
- Income Statement (Multiple Step
- format)
- Statement of Owners’ Equity
- Balance Sheet (Classified format)
- Post Closing Trial Balance”
- Download: http://solutionzip.com/downloads/chocolate-nirvana/
Add Comment
Please, Sign In to add comment