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Assignment 2 (100 marks) ? Session 1 Note:...

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Assignment 2 (100 marks) ? Session 1 Note: This assignment integrates concepts covered in Modules 1 through 6 inclusive. It is worth 100 marks and 10% of your final course grade. Refer to the general instructions in Assignment 1. Part I ? Journal Entries (35 marks) It is July 1, 2013, and you are the accountant for Turnbull Corp. The company operates with monthly accounting periods and has a June year-end. Turnbull Corp. sells only one product. All of the accounting work has been completed through the end of June 2013. The post-closing trial balance as at June 30, 2013, follows: TURNBULL INC. Post-Closing Trial Balance June 30, 2013 Debit Credit Cash 95,000 Accounts receivable1 198,000 Allowance for doubtful accounts 10,923 Merchandise inventory2 240,000 Office supplies 11,600 Store supplies 14,800 Prepaid insurance 2,500 Interest receivable3 29 Office equipment 67,000 Accumulated depreciation ? Office equiptment 16,080 Store equipment 82,000 Accumulated depreciation ? Store equipment 19,680 Note receivable4 14,000 Accounts payable5 176,800 Property tax payable Chris Turnbull, capital 502,046 725,529 725,529 Notes: 1 Accounts receivable balance is made up of ? Purchase by Lakeview Ltd. on June 27 for $195,500 ? Purchase by Rico Inc. on March 26 for $3,100. 2 There are currently 25,000 units in inventory. The company uses a moving weighted-average system (rounding the average cost per unit to the nearest $0.01). 3 Interest receivable represents half month of interest earned on the note receivable but not yet paid at the end of June; refer to the Note receivable amortization schedule for details. 4 This is a 5.0% note due June 15, 2015 with interest and principal payable on the 15th of each month; refer to the Note receivable amortization schedule for details. 5 Accounts payable balance is made up of ? Purchase from Astros Co. on June 11 for $176,800 terms 2/10, n/30. The terms of all credit sales are 2/10, n/30. Merchandise sells for $25.00 per unit. During the month of July, the following events occur: July 1 Collected the amount owing from Lakeview Ltd. 2 Issued cheque to Astros Co. regarding the June purchase. 3 Purchased on credit from Acer Inc. ? 980 units of merchandise at $9.75 per unit; store supplies, $480; and office supplies, $530. Invoice dated July 3, terms 1/10, n/30. 4 Sold 465 units of merchandise on credit to Sharp Ltd. 5 Acer Inc. issued a memorandum regarding the return of 25 defective units of merchandise purchased on July 3. 7 Issued cheque to Boardwalk Corp. in payment of the July rent for $5,000. Charge 60% of the rent to Rent expense, selling space and the balance to Rent expense, office space. 8 Sold 175 units to Houston Inc. for cash. 9 Received the July property tax bill today; $2,500, it will be paid September 15. 9 Purchased store supplies on credit from Acer Inc., invoice dated July 9, terms 1/10, n/15, $3,300. 11 Received payment from Sharp Ltd. for the July 4 sale. 12 Received a $800 credit memorandum from Acer Inc. for defective store supplies received on July 9 and returned for credit. 13 Received 1,260 units of merchandise from Anthro Corp. and an invoice dated July 13 totalling $10,710, terms 1/15, n/60. 14 Issued cheque to Acer Inc. to pay for the July 3 purchase less the July 5 return. 15 Issued cheque, payable to Payroll, in payment of sales salaries, $4,580 and office salaries, $3,380. The cheque was cashed immediately to pay the employees. 15 Collected the interest and principal regarding the Note Receivable (Hint: Refer to the Note receivable amortization schedule. Debit Cash for the amount of the payment, credit Notes receivable for the amount of principal paid, credit Interest receivable for the amount of interest that was accrued at the end of last month, and also credit Interest revenue for the amount of interest earned this month). 17 Sold 675 units of merchandise on credit to Sharp Ltd. 20 Issued cheque to Acer Inc. to pay for the July 9 purchase less the July 12 return. 20 Received 360 units of merchandise and an invoice dated July 20 terms 1/5, n/30, from Acer Ltd., $11.25 per unit. 21 Issued cheque to Anthro Corp. in payment of its July 13 invoice. 24 Determined that the customer account belonging to Rico Inc. was uncollectible and wrote it off. 25 Sold 375 units of merchandise on credit to ABC Events. 26 Received payment from Sharp Ltd. regarding the July 17 sale. 28 Issued cheque to Hydro Corp. in payment of the July utility bill, $794. 29 Received 745 units of merchandise and an invoice dated July 29, terms 1/15, n/60, from Scotch Corp., $7,850 total cost. 31 Issued cheque, payable to Payroll, in payment of sales salaries, $4,580, and office salaries, $3,380. The cheque was cashed immediately to pay the employees. 31 The owner, Chris Turnbull, withdrew $25,000 from the business for personal use, using a cheque. Required Note: Ignore GST, PST, and HST. You can use these working papers. Record the journal entries for the month of July (omit explanations). Note: Sub-ledgers for accounts receivables and accounts payables are not required for this assignment. Therefore when journalizing entries for accounts receivables/payables the name of the customer or supplier is not required on the journal entry. As you record the journal entries, use the inventory sub-ledger to keep track of the moving weighted average cost of inventory. Round to the nearest $0.01 on the inventory sub-ledger. (Posting to accounts receivable and accounts payable sub-ledger accounts or the general ledger accounts is not required for this assignment.) Part II ? Work sheet, adjustments, bank reconciliation and financial statements (65 Marks) It is now August 31, and all journal entries to date have been posted to the appropriate general ledger accounts. The balances have been used to prepare the unadjusted trial balance. Now complete the adjusting entries, bank reconciliation, and the financial statements for the month of August. TURNBULL INC. Unadjusted Trial Balance August 31, 2013 Debits Credits Cash 126,783 Short-term investments 2,050 Accounts receivable 264,800 Allowance for doubtful accounts 10,580 Merchandise inventory 317,997 Office supplies 15,565 Store supplies 19,725 Prepaid insurance 15,000 Interest receivable Office furniture 37,800 Accumulated depreciation ? Office furniture 1,512 Office equipment 87,000 Accumulated depreciation ? Office equipment 19,560 Store equipment 117,870 Accumulated depreciation ? Store equipment 24,395 Note receivable 12,886 Accounts payable 67,425 Property taxes payable 2,500 Chris Turnbull, capital 513,990 Chris Turnbull, withdrawals 28,500 Sales 842,570 Sales returns and allowances 8,426 Sales discounts 4,213 Cost of goods sold 379,157 Bad debts expense Sales salaries expense 17,500 Rent expense, selling space 8,900 Store supplies expense Depreciation expense, store equipment Office salaries expense 7,700 Utilities expense 3,800 Rent expense, office space 4,500 Insurance expense Depreciation expense ? Office furniture Depreciation expense ? Office equipment Office supplies expense Bank service charge expense Delivery expense 2,360 Interest earned Totals 1,482,532 1,482,532 Required Transfer the amounts on the unadjusted trial balance to the appropriate columns on the provided work sheet. Additional information about Turnbull Corp. has been provided below; no adjustments have been made for these items: Office supplies used during August totaled $1,890 The balance in Prepaid insurance represents one year of insurance for coverage. The insurance policy started on August 1, 2013. A count of the store supplies was completed on August 30 and the value on hand was $8,900. Turnbull Corp.?s policy is to depreciate the capital assets by 2% of the book value every month. Round depreciation calculations to the nearest dollar. Due to a safety recall in August a number of items in merchandise inventory were affected. As a result the net realizable value of the merchandise inventory on August 31 was determined to be $301,497. Calculate accrued interest on the note receivable for the last half of August (Hint: Refer to the Note receivable amortization schedule provided). Using historical rates management estimates the percentage of accounts receivable that will be uncollectable. This rate is applied to outstanding accounts. The historical rates and accounts receivable aging schedule are as follows (round the result to the nearest dollar): Percentage uncollective (%) Not yet due 1-30 days past due 31-60 days past due 61-90 days as past due Greater than 91 days past due 0% 5% 15% 35% 60% Turnbull Inc. Accounts receivable aging schedule Not yet due 1-30 days past due 31-60 days past due 61-90 days as past due Greater than 91 days past due Total Accounts receivable $135,048 $68,848 $47,664 $9,268 $3,972 $264,800 Journal the adjusting entries using the general journal from part I (omit explanations) and complete the worksheet. While you are not required to do this here, remember that the adjusting journal entries are then posted to the general ledger before the financial statements and closing entries are prepared. Prepare a bank reconciliation given the following information. Record any entries arising from the bank reconciliation in the general journal from Part I (omit explanations) and complete the worksheet. There were no items outstanding from the July 31 bank reconciliation. The bank statement showed the August 31 balance to be $124,806.00. Chris (the owner) made a deposit on August 31 for $4,258 but the bank was closed by the time he got there so he dropped the deposit off in the night deposit slot. As at August 31, there are 5 cheques totaling $1,689 that have not yet been presented to the bank. Interest received from the bank totaled $1,260. The A/P clerk incorrectly recorded cheque #123 for utilities expense as $435. It should have been recorded as $485. The bank incorrectly recorded cheque #156 for delivery expense as $652; it should have been recorded as $625. There was an NSF cheque for $513 from a customer paying their account. Only the issuer?s bank charges NSF fees. Chris has not yet recorded the $78 bank service charges for the month of August. Complete and total the adjusted trial balance, income statement and balance sheet columns on the work sheet. Prepare a classified multiple-step income statement for the month of August, an August statement of changes in equity, and an August 31 classified balance sheet (round all figures to the nearest dollar). Prepare the closing entries (omit explanations). Submission Submit the following reports to your marker for assessment: Part I: (35 marks) General journal entries (30 marks) Merchandise inventory sub-ledger (5 marks) Part II: (65 marks) Work sheet (6 marks) Adjusting entries (8 marks) August 31 bank reconciliation (8 marks) Entries resulting from the bank reconciliation (4 marks) Documents: Classified multiple-step income statement for the month ending August 31 (15 marks) Statement of changes in equity for the month ending August 31 (5 marks) Classified balance sheet as at August 31 (15 marks). Closing entries (4 marks) 100

 

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