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8/3/2019 OddFalls Practice Set
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Odd Falls Trading Company
A Practice Problemfor
ACC 2301
University of Houston - Downtown
Profits on the sale of this practice set will be deposited in theAccounting Excellence Fund to benefit accounting and business students
INTRODUCTIONThis short practice problem gives you, the student, an opportunity to practice the accountingconcepts and skills acquired in an introductory financial accounting course. The objective of thepractice problem is to have you complete a comprehensive example of the accounting cycle.You will evaluate transactions, use the general journal to record events, adjust the accounts,close the temporary accounts, maintain an ongoing general ledger, prepare a worksheet andprepare financial statements.
In following the instructions for the Practice Problem, keep in mind that an accountant prepares accounting
records in a neat fashion and in proper format. If you prepare this practice set by hand, using a pencil for the
accounting work gives you a better opportunity to maintain neat records.
COMPANY OPERATIONSThe Odd Falls Trading Company, a sole proprietorship owned by Max Gator, began operations atthe beginning of the month in SmallTown, Texas. Odd Falls sells items such as small officemachines, office supplies, magazines, make-up, hair products, etc. and is located in a newshopping mall. Odd Falls sells on account to some customers and on a cash basis to other
customers.
Odd Falls has retained you to install the companys manual accounting system, to implement
the system, to maintain the companys accounting records, and to produce monthly financial
statements. The accounting system for accounting records and financial statements includesthe general journal, general ledger accounts, the worksheet, the Multiple-Step IncomeStatement, the Statement of Owners Equity, and the classified Balance Sheet.
Additionally, Odd Falls has asked you to prepare the unadjusted trial balance, theadjusted trial balance, and the post-closing trial balance.
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Odd Falls Trading Company, continued
Odd Falls Trading Company specifies these accounting method choices:1 -- use the gross method to record all purchases and all sales;2 -- special journals or subsidiary ledger accounts are not yet needed;3 -- do not make any provision for income taxes since this is the first month of operations;
4 -- use the perpetual inventory method;Hint: Determine the cost per unit foreach inventory purchase.
5 -- record inventory cost valuation on a FIFO basis;6 -- use the accounts receivable method for computing bad debt expense;7 -- take a full month of depreciation for assets purchased in the first half of the month;8 -- take a half-month of depreciation for assets purchased in the second half of the month.
REQUIREMENTS
As the accountant for Odd Falls Trading Company, you must1 -- Record the transactions for the month in the general journal.
2 -- Post the general journal entries to the general ledger accounts andalso provide the proper referencing and running totals.
3 -- Prepare the trial balance, based on the ledger balances, before adjusting entries are made.4 -- Prepare the worksheet.5 -- Prepare any necessary adjusting journal entries to the general ledger accounts.6 -- Post the adjusting journal entries to the general ledger accounts.7 -- Prepare the adjusted trial balance, based on the ledger balances.8 -- Prepare the closing journal entries as of the month end.9 -- Post the closing journal entries to the general ledger accounts.10 -- Prepare the post-closing trail balance, based on the ledger balances.11 -- Prepare the financial statements, including the
Multiple-step Income StatementStatement of Owner's Equityclassified Balance Sheet
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Odd Falls Trading Company, continued
CHART OF ACCOUNTS
Accountum er ccount
101 Cash105 Accounts Receivable
106 Allowance for Doubtful Accounts
108 Inventory
110 Office Supplies
120 Prepaid Rent
123 Prepaid Insurance
125 Store Fixtures
126 Accum. Depr.-Store Fixtures
130 Office Equipment
131 Accum. Depr.-Office Equipment200 Accounts Payable
205 Salaries Payable
210 Interest Payable
215 Notes Payable
300 Capital
305 Withdrawals
400 Sales Revenue
402 Sales Returns and Allowances
404 Sales Discounts
501 Cost of Merchandise Sold
510 Salaries Expense
512 Freight-Out
514 Depreciation Expense
516 Rent Expense
518 Bad Debts Expense
520 Utilities Expense
525 Supplies Expense
530 Insurance Expense
535 Interest Expense
540 Bank Charges Expense
NOTE: All accounts are specified. Do not create any new accounts.
List each account, in numerical order, in the general ledger.
Each account listed on any trial balance or the worksheet should be listed in numerical order.
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Day The Odd Falls Trading Company
1 Max Gator contributes the following as start-up capital for The Odd Falls Trading CompanyCash 40,000.00$Equipment (to be depreciated on the straight-line basis) 30,000.00$The equipment is estimated to last the following number of years 9The estimated salvage value at the end of the estimated life will be 3,000.00$
1 Max hires a store clerk to help with stocking of inventory and sales. Max will pay the clerk a monthly salary of 2,200.00$Max has instituted a payroll process of paying employees on the first and fifteenth of each month.
1 Odd Falls borrows cash from the Small Town Bank in the amount of. 50,000.00$The loan is for one year at the following interest rate of 4%
3 Odd Falls finds rental space in the newest mall in town.Odd Falls pays M & M Realty the following rent for this month and the next four as well) 10,000.00$Total months of initial lease 5
5 Odd Falls pays cash to Office Depot for office supplies in the amount of 700.00$
7 Odd Falls orders inventory on credit from Texas Novelties with payment terms of 2/10, n/30.The order was for the following number of items 400The order cost for each item was 30.00$The total order on account from Texas Novelties was 12,000.00$
9 After inspecting the inventory, Odd Falls returns the following number of items due to defects in quality 50Therefore, the total amount of inventory returned to Texas Novelties was 1,500.00$Odd Falls will not expect a refund for any freight charges paid by Odd Falls related to this return of inventory
14 After proper consideration of the discount terms, Odd Falls pays for the inventory purchased on account
15 Odd Falls makes a sale on account to Valley High School (terms 2/10, n/30, FOB destination)The sale was for the following number of items 300The sale price for each item was 40.00$The total sale on account to Valley High School was for 12,000.00$
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15 Odd Falls paid Cajun Shipping to ship the goods to Valley High. Odd Falls will not collect this from Valley.The amount paid to Cajun for the shipping cost was 90.00$
15 Odd Falls paid the clerk hired back on the first of the month. Nothing was withheld from the clerk's salary payment.
16 Odd Falls prepays American Republic Insurance Co. for an insurance policy lasting this number of months 3The amount paid to American for the liability and casualty coverage policy was 1,500.00$
16 Odd Falls buys store fixtures from Office Depot in the amount of 20,000.00$
Odd Falls made a cash down payment of 5,000.00$The remaining balance placed on account with Office Depot was 15,000.00$The equipment is estimated to last the following number of years 5The estimated salvage value at the end of the estimated life will be 2,000.00$Odd Falls' fixtures will be depreciated on the double-declining-balance basis
16 Max Gator withdraws the following amount of cash from the company account 2,500.00$
18 Odd Falls receives payment (after discount as appropriate) on the A/R with Valley High
20 Odd Falls orders inventory on credit from Small Town Supply Company with payment terms of n/30.The order was for the following number of items 600The order cost for each item was 20.00$The total order on account from Small Town Supply Company was 12,000.00$
21 When the inventory arrives, Odd Falls pays Small Town Shipping Company directly for the freight bill of 200.00$
22 Odd Falls makes a sale to the Nearby Shrine.The sale was for the following number of items 300The sale price for each item was 40.00$Therefore, the total sale to the Nearby Shrine was for 12,000.00$Cash received from Nearby Shrine at the time of the sale was 8,000.00$The remaining balance placed on account (terms 2/10, n/30) with Nearby Shrine was 4,000.00$
23 Nearby Shrine returned this number of items for full refund; it did not have enough room to store the items. 20
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26 Odd Falls receives a utility bill from Small Town Lighting and Power (due 7th of next month) in the amount of 250.00$
31 Odd Falls received its current month's bank statement, which it was able to reconcile after identifying the following:Service charge by the bank in the amount of 40.00$Fee for new accounts in the amount of 5.00$
31 Additional information as of the end of month includes:Office supplies on hand 200.00$Physical count of inventory on hand of 370Max Gator estimates the following percentage of accounts receivable will be uncollectible 2%
*** Remember that there may be other necessary adjustments in addition to those indicated above.Hint: The chart of accounts might indicate accounts requiring adjustments.
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The Odd Falls Trading Company
General Journal
Day Account Titles and Explanations Ref. Debit Credit
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The Odd Falls Trading Company
General Journal
Day Account Titles and Explanations Ref. Debit Credit
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The Odd Falls Trading Company
General Journal
Date Account Titles and Explanations Ref. Debit Credit
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The Odd Falls Trading Company
General Journal
Date Account Titles and Explanations Ref. Debit Credit
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The Odd Falls Trading Company
General Ledger
Account: CASH Acct. No: 101
Day Explanation Ref. Debit Credit Balance
Account: A/R Acct. No: 105
Day Explanation Ref. Debit Credit Balance
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The Odd FallsVariety Store
General Ledger
Account: ADA Acct. No: 106
Day Explanation Ref. Debit Credit Balance
Account: Inventory Acct. No: 108
Day Explanation Ref. Debit Credit Balance
Account: Office Supplies Acct. No: 110
Day Explanation Ref. Debit Credit Balance
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The Odd FallsVariety Store
General Ledger
Account: Prepaid Rent Acct. No: 120
Day Explanation Ref. Debit Credit Balance
Account: Prepaid Insurance Acct. No: 123
Day Explanation Ref. Debit Credit Balance
Account: Store Fixtures Acct. No: 125
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
General Ledger
Account: A/D - Store Fixtures Acct. No: 126
Day Explanation Ref. Debit Credit Balance
Account: Office Equipment Acct. No: 130
Day Explanation Ref. Debit Credit Balance
Account: A/D - Office Equipment Acct. No: 131
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
General Ledger
Account: A/P Acct. No: 200
Day Explanation Ref. Debit Credit Balance
Account: Salaries/P Acct. No: 205
Day Explanation Ref. Debit Credit Balance
Account: Interest/P Acct. No: 210
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
General Ledger
Account: N/P Acct. No: 215
Day Explanation Ref. Debit Credit Balance
Account: Capital Acct. No: 300
Day Explanation Ref. Debit Credit Balance
Account Withdrawals Acct. No: 305
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
General Ledger
Account:Sales Revenue Acct. No:400
Day Explanation Ref. Debit Credit Balance
Account: Sales Returns & Allowances Acct. No: 402
Day Explanation Ref. Debit Credit Balance
Account: Sales Discounts Acct. No: 404
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
General Ledger
Account: Cost of Merchandise Sold Acct. No: 501
Day Explanation Ref. Debit Credit Balance
Account: Salaries Expense Acct. No: 510
Day Explanation Ref. Debit Credit Balance
Account: Freight-Out Acct. No: 512
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
General Ledger
Account: Depreciation Expense Acct. No: 514
Day Explanation Ref. Debit Credit Balance
Account: Rent Expense Acct. No: 516
Day Explanation Ref. Debit Credit Balance
Account: Bad Debts Expense Acct. No: 518
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
General Ledger
Account: Utilities Expense Acct. No: 520
Day Explanation Ref. Debit Credit Balance
Account: Supplies Expense Acct. No: 525
Day Explanation Ref. Debit Credit Balance
Account: Insurance Expense Acct. No: 530
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
General Ledger
Account: Interest Expense Acct. No: 535
Day Explanation Ref. Debit Credit Balance
Account: Bank Charges Expense Acct. No: 540
Day Explanation Ref. Debit Credit Balance
Account: Income Summary Acct. No: 999
Day Explanation Ref. Debit Credit Balance
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The Odd Falls Trading Company
Trial BalanceEnd of Month One
Acct. No. Account Titles Debits Credits
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The Odd Falls Trading Company
Adjusted Trial BalanceEnd of Month One
Acct. No. Account Titles Debits Credits
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The Odd Falls Trading Company
Post-Closing Trial BalanceEnd of Month One
Acct. No. Account Titles Debits Credits
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The Odd Falls Trading Company
Worksheet
End of Month One
Trial Balance Adjustments Adjusted Trial Balance Income Statement Balanc
Acc. # Account Titles Debits Credits Debits Credits Debits Credits Debits Credits Debits
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The Odd Falls Trading CompanyINCOME STATEMENT
For the ending of the first month
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The Odd Falls Trading CompanySTATEMENT of CAPITAL [or OWNER'S EQUITY]
For the ending of the first month
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The Odd Falls Trading CompanyBALANCE SHEETFor the first month