Accounting_Cycle_Assignment

A C G 6 0 2 6 - A c c o u n t i n g f o r M a n a g e r s

ACCOUNTING CYCLE ASSIGNMENT

Spring 2016

Names

Points:

Problem 1 – 30 points Problem 2 – 70 points Total (100 points)

Problem 1. ABC Company began business on January 1, 2015. During January, the following

transactions occurred:

January:

1 st Issued common stock in exchange for $150,000 cash.

2 nd

Purchased inventory on account for $30,000.

4 th

Paid an insurance company $2,450 for one-year insurance policy.

10 th

Sold merchandise on account for $13,000. The cost of the merchandise was $6,000.

15 th

Borrowed $35,000 from a local bank and signed a note. Principal and interest at 10%

will be repaid in six months.

20 th

Paid employees $6,000 in wages for the first half of the month.

22 nd

Sold merchandise for $11,000 cash. The cost of the merchandise was $7,000.

24 th

Paid $15,000 to suppliers for the merchandise purchased on January 2.

26 th

Collected $5,500 on account from customers.

28 th

Paid $2,000 to the local utility company for January water.

30 th

Paid $5,000 rent for the building. $2,500 was for January rent, and $2,500 for

February rent.

Required:

1. Prepare general journal entries (i.e., no adjusting journal entries) to record each transaction. (10p.)

2. Post the entries to T-accounts. (10p.) 3. Prepare an unadjusted trial balance as of January 30, 2015. (10p.)

Problem 2.

Florida Company manufactures and sells various types of pasta to grocery chains as private label

brands. The company's fiscal year-end is December 31. The unadjusted trial balance as of

December 31, 2015, appears below.

Information necessary to prepare the year-end adjusting entries appears below.

1. Depreciation on the equipment for the year is $20,000. 2. Employee wages are paid twice a month, on the 22

nd for wages earned from the 1

st

through the 15 th

, and on the 7 th

of the following month for wages earned from the 16 th

through the end of the month. Wages earned from December 16 through December 31,

2015, were $2,000.

3. On October 1, 2015, Florida borrowed $50,000 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in

10 years.

4. On March 1, 2015, the company lent a supplier $20,000 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2016.

Account Title Debit Credit

Cash 29,000

Accounts Receivable 40,000

Supplies 1,500

Inventory 60,000

Notes Receivable 20,000

Interest Receivable -

Prepaid Rent 2,000

Prepaid Insurance 7,000

Equipment 80,000

Accumulated Depreciation-Equipment 30,000

Accounts Payable 31,000

Wages Payable -

Notes Payable 50,000

Interest Payable -

Unearned Revenue -

Common Stock 60,000

Retained Earnings 24,500

Sales Revenue 148,000

Interest Revenue -

Cost of Goods Sold 70,000

Wages Expense 18,900

Rent Expense 11,000

Depreciation Expense -

Interest Expense -

Supplies Expense 1,100

Insurance Expense -

Advertising Expense 3,000

Totals 343,500 343,500

5. On April 1, 2015, the company paid an insurance company $7,000 for a two-year fire insurance policy.

6. $800 of supplies remained on hand at December 31, 2015. 7. A customer paid Florida $2,000 in December for 1,500 pounds of spaghetti to be

manufactured and delivered in January 2016.

8. On December 1, 2015, $2,000 rent was paid to the owner of the building. The payment represented rent for December and January 2016, at $1,000 per month.

Required:

1. Prepare the necessary December 31, 2015 adjusting journal entries. (25p.) 2. Enter the unadjusted balances from the trial balance into T-accounts. (5p.) 3. Post the adjusting entries prepared in (1) to the accounts. (10p.) 4. Prepare an adjusted trial balance. (5p.) 5. Prepare closing entries and post to the accounts. (15p.) 6. Prepare a post-closing trial balance. (10p.)