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.
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.
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:
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.
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
>Chart of s
Acct # Acct # 1
1
Acct # Accounts edit
13-Oct 31-Oct 31-Oct – 0 General Journal Entries Date Accounts Debit Total – 0 – 0 <== Do the debits equal the credits? (they should)
A Company Date Accounts Debit Credit Be sure to review the 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 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
68.00 2 $ 6.00 $ 12.00 15-Dec 48.00 $ 6.10 4 $ 6.10 48.00 25 4 $ 6.10 $ 24.40 20-Dec 122.00 122.00 29 $ 175.65 24-Dec 109.60 151.25 Common Stock 3-Oct 10-Oct $ – 0 $ 1-Oct $ – 0 13-Oct $ – 0 $ – 0 – 0 8-Nov $ – 0 – 0 18-Nov 30-Nov – 0 – 0 $ – 0 $ – 0 $ – 0 20-Dec $ – 0 $ – 0 $ – 0 15-Dec $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 Bakery Sales $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 Dividends $ – 0 $ – 0 Date Accounts Debit Credit <== Interest adjustment goes here
<== Insurance adjustment goes here
<== Baking supplies adjustment goes here
<== Office supplies adjustment goes here
Merchandise Inventory Baking Equipment Accounts Receivable Accounts Payable Rent Expense Misc. Expense Business License Expense – 0 – 0 – 0 – 0 – 0 – 0 Debits should equal credits – 0 – 0 – 0 – 0 0 0 0 – 0 – 0 – 0 – 0 – 0 – 0 – 0 – 0 – 0 – 0 – 0 <== Do the debits equal the credits? (they should)
31-Dec Retained Earnings Baking Supplies Prepaid Rent Office Supplies Notes Payable Total – 0 – 0 <== Do the debits equal the credits? (they should)
2
Account
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
Acct #
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
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
Bakery Sales
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
October Journal Entries
A Company
General Journal Entries
October,
20xx
Date
Debit
Cr
1-Oct
$
$
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
November, 20xx
Credit
December Journal Entries
General Journal Entries
December, 20xx
Inventory Valuation
FIFO
Purchases
Ending Inventory
Date
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
20 $ 6.10 $
122.00
Merchandise Sales Revenue
22
$ 134.00
Record sale of inventory
24-Dec
Cost of Goods Sold (8 X $6)
16
$ 97.60
$ 24.40
Merchandise Inventory
18
$
109.60
Recorded the cost of goods sold
30-Dec
$ 6.05
$
151.25
Merchandise Inventory (20 x $6.10 )
25 $ 6.05 $ 151.25
Cash
29
$ 175.65
Net Inventory
55
$ 333.25
26
$ 157.60
Cash (18 x 8.50)
153.00
Merchandise Sales Revenue 153.00
Record sale of inventory
24-Dec
Cost of Goods Sold (2 x $6)+(16 x $6.10)
Merchandise Inventory 109.60
Recorded the cost of goods sold
30-Dec
Merchandise Inventory (25 x $6.05)
Cash 151.25
T-Accounts – autofill
date Cash date date Notes Payable date
Business License exp
1-Oct $
$ – 0
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 14-Oct
$ – 0 31-Oct
31-Oct $ – 0
$ – 0
5-Nov
8-Nov
$ – 0
10-Nov
18-Nov
$ – 0
15-Nov
$ – 0
20-Nov
Accounts Rec.
$ – 0 20-Nov 31-Oct – 0
$ – 0
22-Nov
30-Nov
$ – 0
1-Dec
$ – 0 5-Dec – 0
8-Dec
$ – 0 7-Dec
31-Dec
8-Dec $ – 0
$ – 0
10-Dec
$ – 0
13-Dec
$ – 0
$ – 0 15-Dec
15-Dec $ – 0
$ – 0 20-Dec
24-Dec $ – 0
$ – 0 30-Dec
31-Dec $ – 0
$ – 0
Misc. expense
Baking equipment
Advertising expense
11-Oct $ – 0 13-Oct $ – 0 13-Oct $ – 0
$ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0
$ – 0 $ – 0 $ – 0
Baking supplies
Office supplies
Rent expense
1-Oct $ – 0 14-Oct $ – 0 7-Oct $ – 0
15-Nov $ – 0 22-Nov $ – 0 15-Nov $ – 0
11-Dec
$ – 0 $ – 0 $ – 0
Prepaid rent
Prepaid insurance
7-Oct $ – 0 31-Oct $ – 0 $ – 0 31-Oct
$ – 0 30-Nov
$ – 0 31-Dec
$ – 0 $ – 0 $ – 0
Accounts payable
Salary and wages expense
Salaries and wages payable
$ – 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
Telephone expense
COGS
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
Merch. Inv. FIFO
$ – 0 15-Dec 7-Dec $ – 0
$ – 0 24-Dec $ – 0 15-Dec
20-Dec $ – 0
$ – 0 $ – 0 $ – 0 24-Dec
$ – 0 30-Dec $ – 0
$ – 0Adjusting Entries
A Company
Adjusting Journal Entries
20XX
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)
Trial Balance
A Company
Trial Balance
20xx
Unadjusted trial balance
Adjusting entries
Adjusted trial balance
Account Debit Credit Debit Credit Debit Credit
Cash – 0
Baking Supplies – 0
Prepaid Rent Prepaid Insurance – 0
Accumulated Depreciation – 0
Office Supplies – 0
Notes Payable Interest Payable – 0
Wages Payable
Common Stock
Dividends
Bakery Sales
Merchandise Sales Baking Supplies Expense – 0
Interest Expense – 0
Insurance Expense – 0
Depreciation Expense – 0
Office Supplies Expense – 0
Advertising Expense
Wages Expense
Telephone Expense COGS
Retained Earnings
Total:
Do these two columns tie to the debits and credits on the adjusting entries tab?
Debits should equal credits
Debits should equal credits
`
Income Statement
A Company
Income Statement
For Qtr. Ending 12/31/20XX
Revenues
Total Revenues
<== Don't forget the COGS!
Gross Profit
Operating Expenses:
Baking Supplies Expense – 0
Total Operating Expenses:
Net Income
Statement of Stockholder Equity
A Company
Statement of Stockholder’s Equity
For
Qtr. Ending 12/31/20xx
Common Stock Retained Earnings Total
Beginning Balances, September 30
Issued Common Stock
Net Income
Dividends
Make sure your dividends are negative so the formula subtracts them
Ending Balances, December 31:
Balance Sheet
A Company
Balance Sheet
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
Closing Entries
Qtr ending 12/31/20xx
Date Accounts Debit Credit
Note** We are closing out the same accounts that are listed on the income statement
31-Dec Bakery Sales
Merchandise Sales
Retained Earnings
31-Dec 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
Unadjusted Trial Balance
Account Debit Credit
Cash
Note** These are the same accounts that are listed on the balance sheet
Merchandise Inventory
Prepaid Insurance
Baking Equipment Accumulated Depreciation
<== 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.
Accounts Receivable
Accounts Payable
Wages Payable Interest Payable
Common Stock
Retained Earnings
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