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ACC - 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#38641 | Written in 18-Jul-2015

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