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  1. Preface
  2. 1 Role of Accounting in Society
    1. Why It Matters
    2. 1.1 Explain the Importance of Accounting and Distinguish between Financial and Managerial Accounting
    3. 1.2 Identify Users of Accounting Information and How They Apply Information
    4. 1.3 Describe Typical Accounting Activities and the Role Accountants Play in Identifying, Recording, and Reporting Financial Activities
    5. 1.4 Explain Why Accounting Is Important to Business Stakeholders
    6. 1.5 Describe the Varied Career Paths Open to Individuals with an Accounting Education
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
  3. 2 Introduction to Financial Statements
    1. Why It Matters
    2. 2.1 Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate
    3. 2.2 Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses
    4. 2.3 Prepare an Income Statement, Statement of Owner’s Equity, and Balance Sheet
    5. Key Terms
    6. Summary
    7. Multiple Choice
    8. Questions
    9. Exercise Set A
    10. Exercise Set B
    11. Problem Set A
    12. Problem Set B
    13. Thought Provokers
  4. 3 Analyzing and Recording Transactions
    1. Why It Matters
    2. 3.1 Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements
    3. 3.2 Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions
    4. 3.3 Define and Describe the Initial Steps in the Accounting Cycle
    5. 3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
    6. 3.5 Use Journal Entries to Record Transactions and Post to T-Accounts
    7. 3.6 Prepare a Trial Balance
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  5. 4 The Adjustment Process
    1. Why It Matters
    2. 4.1 Explain the Concepts and Guidelines Affecting Adjusting Entries
    3. 4.2 Discuss the Adjustment Process and Illustrate Common Types of Adjusting Entries
    4. 4.3 Record and Post the Common Types of Adjusting Entries
    5. 4.4 Use the Ledger Balances to Prepare an Adjusted Trial Balance
    6. 4.5 Prepare Financial Statements Using the Adjusted Trial Balance
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  6. 5 Completing the Accounting Cycle
    1. Why It Matters
    2. 5.1 Describe and Prepare Closing Entries for a Business
    3. 5.2 Prepare a Post-Closing Trial Balance
    4. 5.3 Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity
    5. 5.4 Appendix: Complete a Comprehensive Accounting Cycle for a Business
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  7. 6 Merchandising Transactions
    1. Why It Matters
    2. 6.1 Compare and Contrast Merchandising versus Service Activities and Transactions
    3. 6.2 Compare and Contrast Perpetual versus Periodic Inventory Systems
    4. 6.3 Analyze and Record Transactions for Merchandise Purchases Using the Perpetual Inventory System
    5. 6.4 Analyze and Record Transactions for the Sale of Merchandise Using the Perpetual Inventory System
    6. 6.5 Discuss and Record Transactions Applying the Two Commonly Used Freight-In Methods
    7. 6.6 Describe and Prepare Multi-Step and Simple Income Statements for Merchandising Companies
    8. 6.7 Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory System
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  8. 7 Accounting Information Systems
    1. Why It Matters
    2. 7.1 Define and Describe the Components of an Accounting Information System
    3. 7.2 Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders
    4. 7.3 Analyze and Journalize Transactions Using Special Journals
    5. 7.4 Prepare a Subsidiary Ledger
    6. 7.5 Describe Career Paths Open to Individuals with a Joint Education in Accounting and Information Systems
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  9. 8 Fraud, Internal Controls, and Cash
    1. Why It Matters
    2. 8.1 Analyze Fraud in the Accounting Workplace
    3. 8.2 Define and Explain Internal Controls and Their Purpose within an Organization
    4. 8.3 Describe Internal Controls within an Organization
    5. 8.4 Define the Purpose and Use of a Petty Cash Fund, and Prepare Petty Cash Journal Entries
    6. 8.5 Discuss Management Responsibilities for Maintaining Internal Controls within an Organization
    7. 8.6 Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries
    8. 8.7 Describe Fraud in Financial Statements and Sarbanes-Oxley Act Requirements
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  10. 9 Accounting for Receivables
    1. Why It Matters
    2. 9.1 Explain the Revenue Recognition Principle and How It Relates to Current and Future Sales and Purchase Transactions
    3. 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches
    4. 9.3 Determine the Efficiency of Receivables Management Using Financial Ratios
    5. 9.4 Discuss the Role of Accounting for Receivables in Earnings Management
    6. 9.5 Apply Revenue Recognition Principles to Long-Term Projects
    7. 9.6 Explain How Notes Receivable and Accounts Receivable Differ
    8. 9.7 Appendix: Comprehensive Example of Bad Debt Estimation
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  11. 10 Inventory
    1. Why It Matters
    2. 10.1 Describe and Demonstrate the Basic Inventory Valuation Methods and Their Cost Flow Assumptions
    3. 10.2 Calculate the Cost of Goods Sold and Ending Inventory Using the Periodic Method
    4. 10.3 Calculate the Cost of Goods Sold and Ending Inventory Using the Perpetual Method
    5. 10.4 Explain and Demonstrate the Impact of Inventory Valuation Errors on the Income Statement and Balance Sheet
    6. 10.5 Examine the Efficiency of Inventory Management Using Financial Ratios
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  12. 11 Long-Term Assets
    1. Why It Matters
    2. 11.1 Distinguish between Tangible and Intangible Assets
    3. 11.2 Analyze and Classify Capitalized Costs versus Expenses
    4. 11.3 Explain and Apply Depreciation Methods to Allocate Capitalized Costs
    5. 11.4 Describe Accounting for Intangible Assets and Record Related Transactions
    6. 11.5 Describe Some Special Issues in Accounting for Long-Term Assets
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  13. 12 Current Liabilities
    1. Why It Matters
    2. 12.1 Identify and Describe Current Liabilities
    3. 12.2 Analyze, Journalize, and Report Current Liabilities
    4. 12.3 Define and Apply Accounting Treatment for Contingent Liabilities
    5. 12.4 Prepare Journal Entries to Record Short-Term Notes Payable
    6. 12.5 Record Transactions Incurred in Preparing Payroll
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  14. 13 Long-Term Liabilities
    1. Why It Matters
    2. 13.1 Explain the Pricing of Long-Term Liabilities
    3. 13.2 Compute Amortization of Long-Term Liabilities Using the Effective-Interest Method
    4. 13.3 Prepare Journal Entries to Reflect the Life Cycle of Bonds
    5. 13.4 Appendix: Special Topics Related to Long-Term Liabilities
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  15. 14 Corporation Accounting
    1. Why It Matters
    2. 14.1 Explain the Process of Securing Equity Financing through the Issuance of Stock
    3. 14.2 Analyze and Record Transactions for the Issuance and Repurchase of Stock
    4. 14.3 Record Transactions and the Effects on Financial Statements for Cash Dividends, Property Dividends, Stock Dividends, and Stock Splits
    5. 14.4 Compare and Contrast Owners’ Equity versus Retained Earnings
    6. 14.5 Discuss the Applicability of Earnings per Share as a Method to Measure Performance
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  16. 15 Partnership Accounting
    1. Why It Matters
    2. 15.1 Describe the Advantages and Disadvantages of Organizing as a Partnership
    3. 15.2 Describe How a Partnership Is Created, Including the Associated Journal Entries
    4. 15.3 Compute and Allocate Partners’ Share of Income and Loss
    5. 15.4 Prepare Journal Entries to Record the Admission and Withdrawal of a Partner
    6. 15.5 Discuss and Record Entries for the Dissolution of a Partnership
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  17. 16 Statement of Cash Flows
    1. Why It Matters
    2. 16.1 Explain the Purpose of the Statement of Cash Flows
    3. 16.2 Differentiate between Operating, Investing, and Financing Activities
    4. 16.3 Prepare the Statement of Cash Flows Using the Indirect Method
    5. 16.4 Prepare the Completed Statement of Cash Flows Using the Indirect Method
    6. 16.5 Use Information from the Statement of Cash Flows to Prepare Ratios to Assess Liquidity and Solvency
    7. 16.6 Appendix: Prepare a Completed Statement of Cash Flows Using the Direct Method
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  18. Financial Statement Analysis
  19. Time Value of Money
  20. Suggested Resources
  21. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
    14. Chapter 14
    15. Chapter 15
    16. Chapter 16
  22. Index
PB1.

LO 7.2On June 30, Isner Inc.’s bookkeeper is preparing to close the books for the month. The accounts receivable control total shows a balance of $550, but the accounts receivable subsidiary ledger shows total account balances of $850. The accounts receivable subsidiary ledger is shown here. Can you help find the mistake?

Accounts Receivable Subsidiary Ledger. Six Columns, labeled left to right: Date, Item, Reference, Debit, Credit, Balance. Apple Account, Number 1103. Line One: June 1; Beginning Balance; Blank; 150; Blank; 150. Line Two: June 12; Check Received; CR 122; 150; Blank; 300. Orange Account, Number 1107. Line One: June 15; Invoice 234; SJ 24; 200; Blank; 200. Pear Account, Number 1110. Line One: June 20; Invoice 235; SJ 24; 350; Blank; 350. Banana Account, Number 1115. Line One: Blank, Beginning Balance; Blank; 2,661; Blank; 2,661. Line Two: June 18; Check Received; CR 122; Blank; 2,661; 0.
PB2.

LO 7.4Piedmont Inc. has the following transactions for the month of July.

Jul. 1 Sold merchandise for $4,000 to Pinetop Inc. (account number PT152) and offered terms of 1/10, n/30, on July 1, invoice # 1101
Jul. 5 Sold merchandise to Sherwood Inc. (account number SH 224), Invoice # 1102 for $2,450 cash on July 5
Jul. 9 Sold merchandise, invoice #1103, to Cardinal Inc. (account number CA 118) for $5,000, and offered terms of 3/10, n/30
Jul. 9 Received payment from Pinetop Inc.
Jul. 22 Received payment from Cardinal Inc. after expiration of the discount period
Jul. 30 Received a refund check in the amount of $120 from the insurance company (credit Insurance Expense, account number 504)
  1. Record the transactions for Piedmont Inc. in the proper special journal, and post them to the subsidiary ledger and general ledger account.
  2. Record the same transactions using QuickBooks, and print the special journals and subsidiary and general ledger. Your solution done manually should match your solution using QuickBooks.
PB3.

LO 7.4Use the journals and ledgers that follow. Total and rule (draw a line under the column of numbers) the journals. Post the transactions to the subsidiary ledger and (using T-accounts) to the general ledger accounts. Then prepare a schedule of Accounts Payable.

Purchases Journal. Five Columns, labeled left to right: Date, Purchase Order Number, Account Credited, Account Number, Debit Merchandise Inventory and Credit Accounts Payable, Line One: April 4, 2019; 57346; Murphy Corporation; AP146; 1,235, 50. Line Two: April 7, 2019; 57347; Jensen Company; AP234; 678; 25. Line Three: April 15, 2019; 57348; Murphy Company; AP146; 715; 19. Cash Disbursements Journal, page 102. Eleven Columns, labeled left to right: Date, Check Number, Payee, Cash Credit, Reference, Accounts Payable Debit, Purchase Discounts Credit. The last four columns are headed Other Accounts: Account Number, Checkmark, Debit, Credit. Line One: April 1; 1251; Rent; 800; Blank; Blank; Blank; 526; Blank; 800; Blank. Line Two: April 7; 1252; Murphy Corporation; 1,210.79; AP 155; 1,235.50; 24.71; Blank; Blank; Blank; Blank. Line Three: April 15; 1253; Country Bank (loan); 3,090; Blank; Blank; Blank; 222; Blank; 3,000; Blank. Line Four: Blank; Blank; Interest; Blank; Blank; Blank; Blank; 563; Blank; 90; Blank. Line Five: April 16; 1254; Jensen Company; 657.90; AP 234; 678.25; 20.35; Blank; Blank; Blank; Blank.
PB4.

LO 7.4Comprehensive Problem: Manual Accounting Information System versus QuickBooks

The following problem is a comprehensive problem requiring you to complete all of the steps in the accounting cycle, first manually and then by entering the same transactions and performing the same steps using QuickBooks. This will demonstrate the important point that a manual accounting information system (AIS) and a computerized AIS both allow the user to perform the same steps in the accounting cycle, but they are done differently.

In a manual system, every step must be performed by the user. In contrast to this, in a computerized system, for each transaction, the user determines the type of transaction it is and enters it in the appropriate data entry screen. The computer then automatically places the transactions in transaction files (the equivalent of journals in a manual system). The user then instructs the system to post the transaction to the subsidiary ledger and at the end of the month to the general ledger. The computer can do the posting automatically.

Other steps done automatically by the computer are preparing a trial balance, closing entries, and generating financial statements. The user would have to provide the computer with information about adjusting entries at the end of the period. Some adjusting entries can be set up to be done automatically every month, but not all. When we say the computer can do a specific step “automatically,” this presumes that a programmer wrote the programs (i.e., detailed step-by-step instructions in a computer language) that tell the computer how to do the task. The computer can then follow those instructions and do it “automatically” without human intervention.

Problem

Assume there is a small shoe store in your neighborhood with a single owner. The owner started the business on December 1, 2018, and sells two types of shoes: a comfortable sneaker that is something athletes would purchase, and a comfortable dress shoe that looks dressy but has the comfort of a sneaker. The name of the business is The Shoe Horn. Complete tasks A and B that follow, using the detailed instructions for each. Following is a list of all transactions that occurred during December 2018.

a. Dec. 1 Jack Simmons, the owner contributed a $500,000 check from his personal account, which he deposited into an account opened in the name of the business, to start the business.
b. Dec. 1 He rented space that had previously been used by a shoe store and wrote check no. 100 for $9,000 for the first six month’s rent.
c. Dec. 2 He paid for installation and phone usage $300 (check no. 101)
d. Dec. 2 He paid for advertising in the local paper $150 (check no. 102). The ads will all run in December.
e. Dec. 2 He purchased $500 of office supplies (check no. 103)
f. Dec. 3 He paid $300 for insurance for three months (December 2018, January and February 2019 using check no, 104).
g. Dec. 4 He purchased 800 pairs of sneakers at $40 a pair– on account from Nike (using purchase order no. 301). Payment terms were 2/10, net 30. Assume the shoe store uses the perpetual inventory system.
h. Dec. 5 He purchased 500 pairs of dress shoes from Footwear Corp. on account for $20 a pair (using purchase order no. 302). Payment terms were 2/10, net 30
i. Dec. 10 He made a sale on account of 20 pairs of sneakers at $100 a pair, to a local University – Highland University (sales invoice number 2000) for their basketball team. Payment terms were 2/10 net 30.
j. Dec. 11 He made a sale on account of 2 pairs of dress shoes at $50 a pair (sales invoice no. 2001) to a local charity, U.S. Veterans, that intended to raffle them off at one of their events.
k. Dec. 12 He made a sale on account to The Jenson Group of 300 pairs of dress shoes at $50 a pair, to use as part of an employee uniform. Payment terms were 2/10 net 30.
l. Dec. 14 He made a cash sale for 2 sneakers at $120 each and 1 pair of shoes for $60.
m. Dec. 14 He paid the amount owed to Footwear Corp (check no 105)
n. Dec. 17 Highland University returned 2 pairs of sneakers they had previously purchased on account.
o. Dec. 18 He received a check from Highland University in full payment of their balance.
p. Dec. 20 He made a cash sale to Charles Wilson of three pairs of sneakers at $120 each and 1 pair of dress shoes at $60.
q. Dec. 20 He made a partial payment to Nike for $20,000 (check number 106)
r. Dec. 23 Received a $400 utility bill which will be paid in January.
s. Dec. 27 Received a check from The Jenson Group in the amount of $9,000.
t. Dec. 28 He paid $2,000 of his balance to Nike (check number 107)
  1. Enter all of the transactions and complete all of the steps in the accounting cycle assuming a manual system. Follow the steps to be performed using a manual system.
  2. Enter the transactions into QuickBooks, complete all of the steps in the accounting cycle, and generate the same reports (journals trial balances, ledgers, financial statements). Follow the steps to be performed using a manual system. Follow the steps to be performed using QuickBooks.

Steps to be performed using a manual system

  1. For each of the transactions listed for the month of December 2018, identify the journal to which the entry should be recorded. Your possible choices are as follows: general journal (GJ), cash receipts journal (CR), cash disbursements journal (CD), sales journal (SJ), or purchases journal (PJ). Templates for the journals and ledgers have been provided.
  2. Enter each transaction in the appropriate journal using the format provided.
    Sales Journal template, page 10. Seven columns, labeled left to right: Date, Account, Terms, Reference, Invoice Number, Accounts Receivable Debit Sales Credit, Cost of Goods Sold Debit Inventory Credit. Purchases Journal template, page 15. Six columns, labeled left to right: Date, Account, Terms, Reference, Invoice Number, Inventory Debit Accounts Payable Credit. Cash Disbursements Journal template, page 25. Twelve columns, labeled left to right: Date, Description, Check Number, Reference, Cash Credit, Accounts Payable Debit, Inventory Debit, Purchases Discount Credit. The last four columns are headed Other: Account Number, Reference, Debit, Credit. Cash Receipts Journal template, page 30. Eleven columns, labeled left to right: Date, Description, Reference, Cash Debit, Accounts Receivable Credit, Sales Credit, Sales Discount. The last four columns are headed Other: Account Number, Reference, Debit, Credit.
  3. Open up Accounts Receivable subsidiary ledger accounts for customers and Accounts Payable subsidiary ledger accounts for vendors using the format provided. Post each entry to the appropriate subsidiary ledger on the date the transaction occurred.
    Accounts Receivable Subsidiary Ledger template. Highland University (HU). Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. Accounts Receivable Subsidiary Ledger template. U.S. Veterans (USV). Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit.. Accounts Receivable Subsidiary Ledger template. Jensen Group (JG). Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit.. Accounts Payable Subsidiary Ledger template. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. Accounts Payable Subsidiary Ledger template. Footwear Corp. (FC). Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit.
  4. Total the four special journals, and post from all of them to the general ledger on the last day of December. You should open ledger accounts for the following accounts:
    • Cash
    • Accounts Receivable
    • Merchandise Inventory
    • Prepaid Insurance
    • Prepaid Rent
    • Office Supplies
    • Accounts Payable
    • Purchases Discounts
    • Utilities Expense Payable
    • Jack Simmons, Capital
    • Sales
    • Sales Returns and Allowances
    • Sales Discounts
    • Cost of Goods Sold
    • Rent Expense
    • Advertising Expense
    • Telephone Expense
    • Utilities Expense
    • Office Supplies Expense
    • Insurance Expense
    General Ledger template. Cash Account, Number 100. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Accounts Receivable Account, Number 102. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Merchandise Inventory Account, Number 110. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Prepaid Insurance Account, Number 118. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Prepaid Rent Account, Number 119. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Office Supplies Account, Number 125. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Accounts Payable Account, Number 200. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Purchases Discount Account, Number 111. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Utilities Expense Payable Account, Number 210. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Jack Simmons, Capital Account, Number 500. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Sales Account, Number 300. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Sales Returns and Allowances Account, Number 301. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Sales Discounts Account, Number 302. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Cost of Goods Sold Account, Number 400. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Advertising Expense Account, Number 420. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Rent Expense Account, Number 403. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Telephone Expense Account, Number 410. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. Utilities Expense Account, Number 418. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Office Supplies Expense Account, Number 418. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit. General Ledger template. Insurance Expense Account, Number 408. Seven columns, labeled left to right: Date, Item, Reference, Debit, Credit. The last two columns are headed Balance: Debit, Credit.
  5. Compute balances for each general ledger account and for each Accounts Receivable and Accounts Payable subsidiary ledger account.
  6. Prepare a trial balance.
  7. Prepare an accounts receivable schedule and an accounts payable schedule.
  8. Prepare adjusting journal entries based on the following information given, record the entries in the appropriate journal, and post the entries.
    • There were $100 worth of office supplies remaining at the end of December.
    • Make an adjusting entry relative to insurance.
    • There was an additional bill received in the mail for utilities expense for the month of December in the amount of $100 that is due by January 10, 2019. Jack Simmons intends to pay it in January.
    General Ledger template, page 1. Five columns, labeled left to right: Date, Description, Reference, Debit, Credit.
  9. Prepare an adjusted trial balance
  10. Prepare closing journal entries, record them in the general journal, and post them.
    General Ledger template, page 1. Five columns, labeled left to right: Date, Description, Reference, Debit, Credit.
  11. Prepare an Income statement, Statement of Owner’s Equity, and Balance Sheet.

Steps to be performed using QuickBooks. You can access a trial version of QuickBooks (https://quickbooks.intuit.com/pricing/) to work through this problem.

  1. Set up a new company called The Shoe Horn using easy step interview.
  2. You will be adding a bank account, customizing preferences, adding customers, adding vendors, adding products, and customizing the chart of accounts. You will not need to enter opening adjustments since you are entering transactions for a new company, so there are no opening balances. QuickBooks should automatically create a chart of accounts, but you can customize it, and you will need to enter information for a customer list, vendor list, and (inventory) items list.
  3. Use “QB transactions” to enter each of the following transactions for the month of December 2018. You can use Onscreen Journal to enter transactions into the general journal, and Onscreen Forms to enter transactions that will end up in the special journals. Identify the type of transaction it is: a sale, a purchase, a receipt of cash, or a payment by check. The categories QuickBooks uses are banking and credit card, customers and sales, vendors and expenses, employees and payroll (not needed in this problem), and other. Note: there is no need to identify the journal as in a manual system or to enter a journal entry, because in an AIS like QuickBooks, you enter the transaction information, and behind the scenes, QuickBooks creates a journal entry that gets added to a transaction file (the equivalent of a journal). After the transactions for the month have been entered, you can print out each of the five journals.
  4. Enter the following transactions using the appropriate data entry screens based on the type of transaction it is, as identified in step 3.
    a. Dec. 1 Jack Simmons, the owner contributed a $500,000 check from his personal account, which he deposited into an account opened in the name of the business, to start the business.
    b. Dec. 1 He rented space that had previously been used by a shoe store and wrote check no. 100 for $9,000 for the first six month’s rent.
    c. Dec. 2 He paid for installation and phone usage $300 (check no. 101)
    d. Dec. 2 He paid for advertising in the local paper $150 (check no. 102). The ads will all run in December.
    e. Dec. 2 He purchased $500 of office supplies (check no. 103)
    f. Dec. 3 He paid $300 for insurance for three months (December 2018, January and February 2019 using check no, 104).
    g. Dec. 4 He purchased 800 pairs of sneakers at $40 a pair– on account from Nike (using purchase order no. 301). Payment terms were 2/10, net 30. Assume the shoe store uses the perpetual inventory system.
    h. Dec. 5 He purchased 500 pairs of dress shoes from Footwear Corp. on account for $20 a pair (using purchase order no. 302). Payment terms were 2/10, net 30
    i. Dec. 10 He made a sale on account of 20 pairs of sneakers at $100 a pair, to a local University – Highland University (sales invoice number 2000) for their basketball team. Payment terms were 2/10 net 30.
    j. Dec. 11 He made a sale on account of 2 pairs of dress shoes at $50 a pair (sales invoice no. 2001) to a local charity, U.S. Veterans, that intended to raffle them off at one of their events.
    k. Dec. 12 He made a sale on account to The Jenson Group of 300 pairs of dress shoes at $50 a pair, to use as part of an employee uniform. Payment terms were 2/10 net 30.
    l. Dec. 14 He made a cash sale for 2 sneakers at $120 each and 1 pair of shoes for $60.
    m. Dec. 14 He paid the amount owed to Footwear Corp (check no 105)
    n. Dec. 17 Highland University returned 2 pairs of sneakers they had previously purchased on account.
    o. Dec. 18 He received a check from Highland University in full payment of their balance.
    p. Dec. 20 He made a cash sale to Charles Wilson of three pairs of sneakers at $120 each and 1 pair of dress shoes at $60.
    q. Dec. 20 He made a partial payment to Nike for $20,000 (check number 106)
    r. Dec. 23 Received a $400 utility bill which will be paid in January.
    s. Dec. 27 Received a check from The Jenson Group in the amount of $9,000.
    t. Dec. 28 He paid $2,000 of his balance to Nike (check number 107)
  5. Generate and print a trial balance. Use QB reports to print this and other reports.
  6. Prepare and enter adjusting entries based on the following information given, and print them.
    • There were $100 worth of office supplies remaining at the end of December.
    • Make an adjusting entry relative to insurance
    • There was an additional bill received in the mail for utilities expense for the month of December in the amount of $100 that is due by January 10, 2019. Jack Simmons intends to pay it in January.
  7. Generate and print an adjusted trial balance.
  8. QuickBooks will automatically prepare closing journal entries.
  9. Print the financial statements: the Income Statement (same as Profit and Loss Statement) and the Balance Sheet.
  10. Print all of the five journals. After the transactions for the month have been entered, you can print out each of the five journals (general journal, cash receipts journal, cash disbursements journal, sales journal, purchases journal).
  11. Print the general ledger and the accounts receivable and accounts payable subsidiary ledgers.
  12. Compare the items you printed from QuickBooks to what you have manually prepared. The content should be identical, although the format may be slightly different. Note: while the results are the same, the QuickBooks software did many of the steps for you automatically.
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