Assignment:
Pre-requisite Accounting Mechanics Quiz
Purpose of Quiz: This take home quiz has been designed as a review of the pre-requisite accounting knowledge necessary to be successful in ACTG 381. This quiz focuses on recording basic accounting transactions/journal entries, understanding T-accounts, and creating a set of financial statements. It is also intended as an opportunity to practice using basic Excel functions. The accounting issues included in this quiz are assumed to have been covered in your prerequisite financial accounting course. If you need a reference, you could refer to the textbook from your pre-requisite accounting course or Chapter 3 in the textbook for this class. Students who are unable to successfully complete this quiz should consider taking ACTG 281 prior to ACTG 381.
Due Date: A printed copy of your completed Balance Sheet and Income Statement must be turned in at the beginning of class on Thursday, January 11th. Your Excel file should be posted to D2L Assignments by 10pm on Friday, January 12th. Late assignments will receive a score of zero as the solution will be posted on D2L the next day. If you are unfamiliar with D2L, please refer to https://www.pdx.edu/oit/d2l
Background: Summer Corporation (Summer) was founded in 2008 by Erica and Phil Summer. The company designs, sells, installs, and services security systems for high-tech companies. The founders, who describe themselves as "entrepreneurial geeks," met in a computer lab when they were teenagers and found they had common interests in working on security systems for critical industries. Summer also has one employee, Suzanne Johnson, who has an MBA. To date Suzanne has been doing all the accounting for the company. In June 2017, Summer hires you as an accounting intern.
Required:
Suzanne Johnson has just provided you with the attached preliminary unadjusted trial balance for 5/31/17. Assume this trial balance has been correctly prepared. Summer's year end is June 30th.
(A) Using the Excel General Journal spreadsheet in this file, record the June transactions listed below AND the necessary month end adjusting journal entries. Label the transactions in numeric sequence corresponding to the numbers below. Each of the transactions below requires a journal entry. Note that there is a debit and credit control total at the top of the general journal so that you can check after each entry to see if you are in balance.
1. $750,000 of product was sold on account. This product had a cost of goods sold of $360,000.
2. $62,000 received from customer for sales made on account in previous months.
3. The following invoices totaling $69,000 were received and recorded on account:
Legal and Accounting Expense of $27,000
Office Supplies Expense of $5,500
Utilities Expense of $17,200
Repair & Maintenance of $19,300
4. $116,000 of inventory was purchased on account and received into the warehouse during June. The company uses a perpetual inventory system.
5. $83,750 of vendor invoices were paid during June. These invoices had already been accrued into accounts payable in May.
6. On June 1 a customer made a $72,600 deposit for product sales to be made in July 2017.
7. Total June wages were $97,000, of which $84,750 were paid in June and $12,250 were to be paid in July. Payroll taxes should be ignored when you record this entry.
8. On July 1, 2016, Summer sold equipment with an original cost of $12,000 and accumulated depreciation of $8,000 for $6,000. In June 2017, Summer realized this entry had not yet been recorded. Hint: Since this equipment was sold on 7/1/16, make sure not to include it in the calculation of year-end depreciation.
Suzanne also provided you the following information that she thought may be helpful in preparing the year-end financial statements.
9. On January 1, 2017, ABC Corp. had paid Summer $155,000 in advance for 8 months of consulting services starting on January 1, 2017. Suzanne has been properly recording consulting revenue each month.
10. Bad debt expense has been estimated at $23,500. Bad debt expense is recorded annually at the end of the year, and has not yet been recorded.
11. Monthly interest expense on long-term liabilities is $6,845. Interest should be accrued every month but has not yet been accrued for June.
12. The Prepaid Expense account includes a one-year insurance policy purchased and recorded on January 1, 2017 for $14,400. Suzanne has been properly recognizing insurance expense each month through the end of May.
13. Depreciation is recorded annually on the straight line basis at the end of the fiscal year (i.e., no depreciation expense has been recorded yet for 2017). The company owns one building which has a useful life of 30 years and is assumed to have a $250,000 salvage value. Furniture and equpment are assumed to have a useful life of 10 years with no salvage value. Hint: Don't forget the impact of entry #8
14. On June 1, 2017, Summer declared a dividend of $132,000, to be paid on October 20, 2017. Do not use a separate Dividends account. Debit the amount directly to Retained Earnings.
(B) "Post" the journal entries from the General Journal to the Excel spreadsheet of T-accounts in this file. All necessary T-accounts have been provided. This should be completed through the use of Excel formulas rather than retyping the numbers in your T-accounts. Please also place the number of each transaction next to each journal entry (see transaction ‘1' in the Excel T-Account sheet for an example). TIP: Set up your spreadsheet to have debit and credit control totals so that you can check after each entry to see if you are in balance.
(C) In Excel, prepare a balance sheet as of 06/30/17 and a SINGLE-STEP income statement for the year ended 6/30/17. This should be completed through the use of Excel formulas rather than retyping the ending balances from your T-accounts in the financial statements. Note that you do not need to record closing entries to the General Journal, just use the T-account balances to create your balance sheet and income statement. You do NOT need to prepare a Statement of Shareholders' Equity or Statement of Cash Flows. Income taxes should be ignored.