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Queta Johnson is about to open a new business ? Chocolate Nirvana




Question;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. 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


Paper#38433 | Written in 18-Jul-2015

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