Reference no: EM132459393
You are the partner in self-service kiosks that rent movies and video games. The following information provides homework instructions, a chart of accounts and accounting transactions for the month of June 2020.
Problem 1. The homework spreadsheet has been initiated for this homework assignment with tabs marked: Chart of Accts, Journal, Ledger, TB Worksheet and Finl Statements. Familiarize yourself with the chart of accounts before analyzing the monthly transactions.
Problem 2. Using the provided spreadsheet, you are to enter the original monthly transactions into the Journal using the chart of accounts to guide your entries. Leave a blank line between transactions.
ORIGINAL MONTHLY TRANSACTIONS
June 1: You and Maria each contribute $50,000 cash to start the new business. You immediately hire an attorney to establish Kiosk Kountry as a corporation. The corporation then issues you and Maria each a 1,000-share certificate of stock to acknowledge your ownership.
June 1: Kiosk Kountry makes a $3,000 advance rental payment for the summer (June-August) for an office space to manage the new business.
June 1: Acme Supply delivers and installs kiosks, expected to last five years, and a computer system, expected to be useful for three years. Acme Supply provides an invoice, indicating that the cost of the kiosks is $75,000 and the cost of the computer system is $10,800. The corporation makes a 10 percent cash down payment. The balance must be paid in fifteen days to avoid a 1 percent late payment charge.
June 2: Kiosk Kountry purchases 1,000 movies, 250 video games and 48 additional cases from DVD-tastic Distributors, having negotiated an average price of $15 per movie, $24 per game and $2 per case. The purchase includes extra movie and game cases in event of loss. Because of your previous dealings with the distributor, you are granted credit for thirty days. These assets are expected to have useful lives of two years.
June 3: Maria negotiates a three-year $30,000 loan from the Next-to-Last National Bank and signs a promissory note. The new movies and computer are used as collateral for the note. The note carries 5 percent annual interest. Both the interest and principal are payable in full in three years.
June 5: Kiosk Kountry purchases office supplies and other promotional materials from Supplies Unlimited for $1,200, with payment due in thirty days.
June 8: After interviews with the three top candidates, you hire Dana to work full time in the office and to do the bookkeeping. Dana's salary will be $3600 per month, paid at the beginning of the month following the month worked. Dana starts work immediately and will be paid June's salary in full on July 2.
June 12: A check is written to Acme Supply for full payment of the account arising from purchase of the kiosks and computer system.
June 21: A $250 bill for services provided in June is received from Kiosk Kountry 's attorney and is immediately paid.
June 30: Kiosk Kountry totals its movie and game rental revenues for June. A total of $12,510 has been received for movies and $21,150 for games
June 30: Kiosk Kountry totals additional revenues for June from the sale of 8 replacement cases for movies and games. A total of $20 has been received.
Problem 3. After recording the journal entries, post the transactions to the appropriate account in the Ledger.
Problem 4. Determine the month end balance in each account and enter that balance in the Trial Balance (TB) column of the Worksheet. Be sure the debits and credits balance, correct any errors.
Problem 5. At the end of June, Maria reminds Dana that adjustments are needed to ensure that all revenues earned during the period are reported and all expenses incurred in generating the revenues are recognized for a proper matching. Kiosk Kountry must make the following adjustments in the general journal. Leave a blank line between transactions.
ADJUSTING ENTRIES
June 30: Record Dana's salary, keeping in mind that she doesn't receive a check until next month.
June 30: Bills totaling $450 for telephone and other utilities for the month of June are received on June 30. Payment will be made in July.
June 30: Record interest accrued on the bank loan for one month.
June 30: Dana estimates that approximately 80 percent of the supplies purchased early in June remain on hand at the end of the month.
June 30: Record prepaid rent that expired during the month of June.
June 30: Record straight-line depreciation of the kiosks, computers, movies, games and cases for one month with no salvage value.
Problem 6. Record the Adjustment amounts in the Worksheet Adjustment column. Be sure the debits and credits balance, correct any errors.
Problem 7. Post the adjusting entries to the appropriate account in the Ledger.
Problem 8. Determine the adjusted balances in each account and enter all account balances in the Adjusted Trial Balance (TB) column of the Worksheet. Be sure the debits and credits balance, correct any errors.
Problem 9. Update the worksheet Balance Sheet by copy/pasting the asset, liability and equity account balances into the two columns. Update the worksheet Income Statement by copy/pasting the revenue and expense account balances into the two columns. You will have to "plug-in" a number for retained earnings to get both of these sections to balance, since you have not completed closing entries to move the temporary account balances into retained earnings.
Problem 10. Once your worksheet is complete and balanced, use the information to link the data to the financial statements tab, both income statement and balance sheet.
Problem 11. The final journal entries for the month of June include zeroing out the income statement accounts. Make the appropriate closing entries in the general journal. Recall all revenue and expenses are closed into retained earnings.
Problem 12. Post the closing entries to the general ledger to update the balances of the temporary (income statement) and permanent (balance sheet) accounts.
Assume that at the beginning of July you decide to convert part of your movie and video game inventory from rentals to sales of used movies and video games.
Problem 13. Initially, you convert 20% of your July 1 movie rental inventory to the used movie resale inventory and 10% of your July 1 video game inventory to the used video game resale inventory. You expect to sell the movies for 50% over cost and the used video games for 20% over original cost. You will need to add an account to the Chart of Accounts tab, make it bold so I can see which one you added.
Problem 14. Then you will need to add a July entry to your general journal for the conversion of the inventory.
Problem 15. What would you as the owner/manager like to know about these inventory changes in your business to assess whether you made the right decision? Add a tab to your spreadsheet to answer this question.