3-2 Milestone One

 

Overview

In previous modules, you examined the initial stages of the accounting cycle and practiced journalizing financial transactions. In Milestone One, you will complete the first part of your course project to demonstrate your ability to accurately record financial data, which will continue to be used to complete other parts of the project.

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Scenario

You are a certified public accountant (CPA) who is working with a small bakery to prepare their financial statements for three months of the current fiscal year. Because the company is a startup and so small, the accounting is done manually in Microsoft Excel. You have been given the accounts and information you need to prepare their financial statements, but you will need to use the accounting cycle to report accurate information to the finance department.

Prompt

Record Financial Data: Use accepted accounting principles to accurately capture business transactions for October, November, and December in the

Company Accounting Workbook Template Spreadsheet

 using the data provided in the

Accounting Data Appendix Word Document

.

Specifically, you must address the following rubric criteria:

  • Accuracy: Prepare entries that are accurate in that they fully reflect the appropriate information.
  • Completeness: Prepare entries that are complete for each month, including transferring posted entries to T accounts.
  • Inventory Valuation: Prepare entries for the month of December to reflect the new line of products offered by the company, which includes using the entries from the “Inventory Valuation” tab to complete your journal for the month of December.

Guidelines for Submission

Using the provided template, submit your company accounting workbook with the following portions completed: October, November, and December journal entries; the “T Accounts” tab; and the “Inventory Valuation” tab. This should be completed and submitted using Microsoft Excel. Please note that there are drop-down menus embedded in the “Accounts” columns as well as formulas throughout the spreadsheet to help you complete the workbook without accidentally introducing errors.

Accounting Data Appendix

1. The following events occurred in October:

October 1: The business owner used $25,000 from their personal savings account to buy common stock in their company.

October 1: Purchased $8,500 worth of baking supplies from vendor, on account.

October 3: The company borrowed $10,000 in cash, in exchange for a two-year, 6% note payable. Interest and the principal are repayable at maturity.

October 7: Entered into a lease agreement for bakery space. The agreement is for one year. The rent is $1,500 per month; the last month’s rent payment of $1,500 is required at the time of the lease agreement. The payment was made in cash. Lease period is effective October 1 of this year through September 30 of the next.

October 10: Paid $375 to the county for a business license.

October 11: Purchased a cash register for $250 (deemed to be not material enough to qualify as depreciable equipment).

October 13: The owner has baking equipment, including an oven and mixer, which they have been using for their home-based business and will now start using in the bakery. You estimate that the equipment is currently worth $5,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a five-year useful life.

October 13: Paid $200 for business cards and flyers to use for advertising.

October 14: Paid $300 for office supplies.

October 15: Hired a part-time helper to be paid $12 per hour. One pay period is the first of the month through the fifteenth, and the other is the sixteenth through the end of the month. Paydays are the twentieth for the first pay period and the fifth of the following month for the second pay period. (No entry required on this date—for informational purposes only.)

October 30: Received telephone bill for October in amount of $75. Payment is due on November 10.

October 31: Paid $1,200 for a 12-month insurance policy. Policy effective dates are November 1 through October 31.

October 31: Accrued wages earned for employee for period of October 16 through October 31. (See Wage Calculation Data table at the end of this document.)

October 31: Total October bakery sales were $15,000 ($5,000 of these sales on accounts receivable).

2. The following events occurred in November:

November 5: Paid employee for period ending October 31.

November 8: Received payments from customers toward accounts receivable in amount of $3,800.

November 10: Paid October telephone bill.

November 15: Purchased additional baking supplies in amount of $5,000 from vendor, on account.

November 15: Accrued wages earned for employee from period of November 1 through November 15. (See Wage Calculation Data table at the end of this document.)

November 15: Paid rent on bakery space.

November 18: Received payments from customers toward accounts receivable in amount of $1,000.

November 20: Paid $8,500 toward baking supplies vendor payable.

November 20: Paid employee for period ending November 15.

November 22: Purchased $300 in office supplies.

November 30: Received telephone bill for November in amount of $75. Payment is due on December 10.

November 30: Accrued wages earned for employee for period of November 16 through November 30. (See Wage Calculation Data table at the end of this document.)

November 30: November bakery sales total was $20,000 ($7,500 of this total on accounts receivable).

3. Many customers have been asking for more allergy-friendly products, so in December the bakery started carrying a line of gluten-free products on a trial basis. The information below relates to the purchase and sales of the new products.

Use the perpetual inventory method with the FIFO valuation method. Please see the “Inventory Valuation” tab in your workbook for purchase and sales information.

The following events occurred in December:

December 1: Paid dividends to self in amount of $10,000.

December 5: Paid employee for period ending November 30.

December 7: Purchased merchandise for resale. See the “Inventory Valuation” tab for details.

December 8: Received payments from customers toward accounts receivable in amount of $4,000.

December 10: Paid November telephone bill.

December 11: Purchased baking supplies in amount of $7,000 from vendor on account.

December 13: Paid on supplies vendor account in amount of $5,000.

December 15: Accrued employee wages for period of December 1 through December 15.

December 15: Paid rent on bakery space $1,500.

December 15: Recorded merchandise sales transaction. See the “Inventory Valuation” tab for details.

December 15: Recorded impact of sales transaction on COGS and the inventory asset. See the “Inventory Valuation” tab for details.

December 20: Paid employee for period ending December 15.

December 20: Purchased merchandise inventory for resale to customers. See the “Inventory Valuation” tab for details.

December 24: Recorded sales of merchandise to customers. See the “Inventory Valuation” tab for details.

December 24: Recorded impact of sales transaction on COGS and the inventory asset. See the “Inventory Valuation” tab for details.

December 30: Purchased merchandise inventory for resale to customers. See the “Inventory Valuation” tab for details.

December 31: Accrued employee wages for period of December 16 through December 31.

December 31: Total December bakery sales were $25,000 ($6,000 of these sales on accounts receivable).

4. On December 31, the following adjustments must be made:

· Depreciation of baking equipment transferred to company on October 13. Assume half month of depreciation in October using the straight-line method. Assume no salvage value.

· Accrue interest for note payable. Assume a full month of interest for October. (6% annual interest on $10,000 loan)

· Record insurance used for the year.

· Actual baking supplies on hand as of December 31 are $1,100.

· Office supplies on hand as of December 31 are $50.

Wage Calculation Data

Month

Hours

Rate

Pay

31-Oct

10

12

120

15-Nov

40

12

480

30-Nov

35

12

420

15-Dec

38

12

456

31-Dec

40

12

480

2

>Chart of

Account

s

Acct # Acct #

1

1

Acct #

Acct #

Cash
Baking Supplies
Prepaid Rent
Prepaid Insurance
Baking Equipment
Office Supplies
Accounts Receivable
Accumulated Depreciation
Merchandise Inventory
Notes Payable
Accounts Payable
Wages Payable
Interest Payable
Common Stock
Dividends
Merchandise Sales
Baking Supplies Expense
Rent Expense
Insurance Expense
Misc. Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Interest Expense
Depreciation Expense
Office Supplies Expense
Cost of Goods Sold
This chart of accounts should help you identify the appropriate accounts to record to as you are analyzing and journaling transactions for this workbook. There is nothing to complete on this page; this is simply a resource for you.
Asset

Accounts Liability Accounts Equity Accounts
Acct #
Cash 1

0 Notes Payable 20 Common Stock 301
Baking Supplies 102 Accounts Payable 202 Dividends 302
Prepaid Rent 103 Wages Payable 203 Cost of Goods Sold 303
Prepaid Insurance 10

4 Interest Payable 204
Baking Equipment 105
Office Supplies 106
Accounts Receivable 107
Accumulated Depreciation 10

8
Merchandise Inventory 109 Revenue Accounts
Bakery

Sales 401
Merchandise Sales 402
Expense Accounts
Baking Supplies Expense 501
Rent Expense 502
Insurance Expense 503
Misc. Expense 504
Business License Expense 505
Advertising Expense 506
Wages Expense 507
Telephone Expense 508
Interest Expense 509
Depreciation Expense 510
Office Supplies Expense 511
Bakery Sales

October Journal Entries

Accounts

edit

$
1-Oct

13-Oct

31-Oct

31-Oct

– 0

A Company
General Journal Entries
October,

20xx
Date Debit Cr
1-Oct $
3-Oct
7-Oct
10-Oct
11-Oct
13-Oct
14-Oct
30-Oct
31-Oct
Total – 0 <== Do the debits equal the credits? (they should)

November Journal Entries

A Company

General Journal Entries

Date Accounts Debit

Total – 0 – 0 <== Do the debits equal the credits? (they should)

November, 20xx
Credit

December Journal Entries

A Company
General Journal Entries

December, 20xx

Date Accounts Debit Credit

Be sure to review the

Inventory Valuation

tab (Columns M-P) for all Inventory related journal entries as they are given to you!

Total – 0 – 0 <== Do the debits equal the credits? (they should) Inventory Valuation

Sales

Purchases

Date

No. of Items Unit Price Total Price No. of Items Unit Price Total Price Date

s on the December Journal tab!

Cr

10

10 $ 6.00 $ 60.00 7-Dec

(10 x $6)

60.00

60.00

boxes purchased at $6.05

8 $ 6.00

2 $ 6.00

20

.00

2 $ 6.00 $ 12.00

boxes

20 $ 6.10 $

68.00

22

2 $ 6.00 $ 12.00 15-Dec

48.00

$ 6.10

4 $ 6.10

48.00

18

25

4 $ 6.10 $ 24.40 20-Dec

122.00

25 $ 6.05 $ 151.25

122.00

29 $ 175.65 24-Dec

Merchandise Sales Revenue 153.00
Record sale of inventory
24-Dec

109.60

Merchandise Inventory 109.60
Recorded the cost of goods sold
30-Dec

151.25

Cash 151.25
FIFO
Purchases Ending Inventory
No. of Items Unit Price Total Price Microsoft: Below are the journal entries for each inventory related transaction! All you need to do is copy and paste it into the correct

date Dr 12/7: 10 boxes purchased at $6
7-Dec $ 6.00 $

60.00 Merchandise Inventory 12/20: 20 boxes purchased at $6.10
Cash 12/30:

25
1

5-Dec $

48.00 $ 12.00 Purchased inventory Sales – selling price, $8.50 a box
12/15: 8 boxes
20-Dec $ 6.10 $ 1

22 15-Dec Cash (8 x $8.50) 68.00 12/24:

18
122.00 Merchandise Sales Revenue
$ 134.00 Record sale of inventory
24-Dec Cost of Goods Sold (8 X $6)
16 $ 97.60 $ 24.40 Merchandise Inventory
$

109.60 Recorded the cost of goods sold
30-Dec $ 6.05 $

151.25 Merchandise Inventory (20 x $6.10 )
Cash
29 $ 175.65
Net Inventory 55 $ 333.25 26 $ 157.60 Cash (18 x 8.50) 153.00
Cost of Goods Sold (2 x $6)+(16 x $6.10)
Merchandise Inventory (25 x $6.05)

T-Accounts – autofill

date Cash date date Notes Payable date

Common Stock

1-Oct $

3-Oct 10-Oct $ – 0 $ 1-Oct

3-Oct $ – 0

$ – 0 13-Oct
$ – 0 7-Oct $ – 0 $ – 0 $ – 0 $ – 0

$ – 0 $ – 0
$ – 0 10-Oct $ – 0 $ – 0

$ – 0
$ – 0 11-Oct

$ – 0 13-Oct

$ – 0 14-Oct
$ – 0 31-Oct
31-Oct $ – 0
$ – 0

$ – 0

$ – 0

$ – 0

$ – 0

$ – 0

$ – 0 20-Nov 31-Oct – 0
$ – 0

– 0 8-Nov

$ – 0 – 0 18-Nov

$ – 0

30-Nov – 0

$ – 0 5-Dec – 0

$ – 0 7-Dec

– 0

8-Dec $ – 0
$ – 0

$ – 0 $ – 0

$ – 0

$ – 0
$ – 0 15-Dec
15-Dec $ – 0
$ – 0 20-Dec

$ – 0 20-Dec

24-Dec $ – 0
$ – 0 30-Dec
31-Dec $ – 0

$ – 0 $ – 0
$ – 0

11-Oct $ – 0 13-Oct $ – 0 13-Oct $ – 0
$ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0
$ – 0 $ – 0 $ – 0
1-Oct $ – 0 14-Oct $ – 0 7-Oct $ – 0
15-Nov $ – 0 22-Nov $ – 0 15-Nov $ – 0

$ – 0 15-Dec $ – 0

$ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0
$ – 0 $ – 0 $ – 0

Bakery Sales

7-Oct $ – 0 31-Oct $ – 0 $ – 0 31-Oct
$ – 0 30-Nov
$ – 0 31-Dec

$ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0

$ – 0 $ – 0 $ – 0
$ – 0 1-Oct 31-Oct $ – 0 $ – 0 31-Oct
$ – 0 31-Oct 15-Nov $ – 0 5-Nov $ – 0
10-Nov $ – 0 30-Nov $ – 0 $ – 0 15-Nov
$ – 0 15-Nov 15-Dec $ – 0 20-Nov $ – 0
20-Nov $ – 0 31-Dec $ – 0 $ – 0 30-Nov
$ – 0 30-Nov 5-Dec $ – 0
10-Dec $ – 0 $ – 0 $ – 0 $ – 0 15-Dec
$ – 0 11-Dec $ – 0 20-Dec $ – 0
13-Dec $ – 0 $ – 0 31-Dec

$ – 0 $ – 0
$ – 0

$ – 0 $ – 0
$ – 0

Dividends

30-Oct $ – 0 1-Dec $ – 0 15-Dec $ – 0
30-Nov $ – 0 $ – 0 $ – 0 24-Dec $ – 0
$ – 0 $ – 0 $ – 0 $ – 0 $ – 0
$ – 0 $ – 0
Merchandise Sales Revenue

$ – 0 15-Dec 7-Dec $ – 0
$ – 0 24-Dec $ – 0 15-Dec
20-Dec $ – 0
$ – 0 $ – 0 $ – 0 24-Dec
$ – 0 30-Dec $ – 0

$ – 0 $ – 0
$ – 0

Business License exp
$ – 0
5-Nov
8-Nov
10-Nov
18-Nov
15-Nov
20-Nov Accounts Rec.
22-Nov
30-Nov
1-Dec
8-Dec
31-Dec
10-Dec
13-Dec
Misc. expense Baking equipment Advertising expense
Baking supplies Office supplies Rent expense
11-Dec
Prepaid rent Prepaid insurance
Accounts payable Salary and wages expense Salaries and wages payable
Telephone expense COGS
Merch. Inv. FIFO

Adjusting Entries

A Company

Date Accounts Debit Credit

31-Dec Depreciation Expense
Accumulated Depreciation

<== Interest adjustment goes here

<== Insurance adjustment goes here

<== Baking supplies adjustment goes here

<== Office supplies adjustment goes here

– 0 – 0 <== Do the debits equal the credits? (they should)
Adjusting Journal Entries
20XX
<== Interest adjustment goes here
<== Insurance adjustment goes here
<== Baking supplies adjustment goes here
<== Office supplies adjustment goes here

Trial Balance

A Company
Trial Balance
20xx
Account Debit Credit Debit Credit Debit Credit
Cash – 0
Baking Supplies – 0

Merchandise Inventory
Prepaid Rent

Prepaid Insurance – 0

Baking Equipment

Accumulated Depreciation – 0
Office Supplies – 0

Accounts Receivable
Notes Payable

Interest Payable – 0

Accounts Payable
Wages Payable
Common Stock
Dividends
Bakery Sales
Merchandise Sales

Baking Supplies Expense – 0

Rent Expense

Interest Expense – 0
Insurance Expense – 0
Depreciation Expense – 0

Misc. Expense

Office Supplies Expense – 0

Business License Expense
Advertising Expense
Wages Expense
Telephone Expense

COGS

– 0 – 0 – 0 – 0 – 0 – 0

Debits should equal credits

Debits should equal credits

Unadjusted trial balance Adjusting entries Adjusted trial balance
Retained Earnings
Total:
Do these two columns tie to the debits and credits on the adjusting entries tab?
Debits should equal credits
`

Income Statement

A Company

Income Statement

– 0

– 0

Baking Supplies Expense – 0

– 0

– 0

For Qtr. Ending 12/31/20XX
Revenues
Total Revenues
<== Don't forget the COGS!
Gross Profit
Operating Expenses:
Total Operating Expenses:
Net Income

Statement of Stockholder Equity

A Company

Common Stock Retained Earnings Total

0 0 0

Net Income
Dividends

– 0 – 0 – 0

Statement of Stockholder’s Equity
For

Qtr. Ending 12/31/20xx
Beginning Balances, September 30
Issued Common Stock
Make sure your dividends are negative so the formula subtracts them
Ending Balances, December 31:

Balance Sheet

A Company

Balance Sheet

– 0

– 0

– 0

– 0

– 0

– 0

– 0

– 0 <== Do the debits equal the credits? (they should)

As of December 31, 20XX
Assets Liabilities and Owners’ Equity
Current Assets: Current Liabilities:
Total Current Liabilities
Long Term Liabilities:
Total Current Assets Total Long Term Liabilities:
Total Liabilities:
Shareholder’s Equity:
Non-Current Assets:
Microsoft: show number as negative as the total formula will subtract it for you. Total Equity
Baking Equipment (Net)
Total Assets: Total Liabilities & Equity

Closing Entries

A Company

Date Accounts Debit Credit

31-Dec Bakery Sales
Merchandise Sales
31-Dec Retained Earnings

31-Dec Retained Earnings

Closing Entries
Qtr ending 12/31/20xx
Note** We are closing out the same accounts that are listed on the income statement
Retained Earnings
Baking Supplies Expense
Rent Expense
Wages Expense
Misc Expense
Business License Expense
Office Expense
Depreciation Expense
Insurance Expense
Advertising Expense
Interest Expense
Telephone Expense
COGS
Dividends

Post-Closing Trial Balance

A Company

Post-Closing Trial Balance
Qtr. Ending 12/31/20xx
Account Debit Credit
Cash

Baking Supplies

Merchandise Inventory

Prepaid Rent
Prepaid Insurance
Baking Equipment

Accumulated Depreciation

Office Supplies
Accounts Receivable
Accounts Payable
Wages Payable

Interest Payable

Notes Payable
Common Stock

Total – 0 – 0 <== Do the debits equal the credits? (they should)

Unadjusted Trial Balance
Note** These are the same accounts that are listed on the balance sheet
<== Accumulated depreciation goes in the debit column - as a reduction of the assets (so be sure it is a negative number!) just as you have on the balance sheet.
Retained Earnings

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