Reference no: EM131288880
The purpose of the Accounting Cycle Project is for EACH student to apply their understanding of the accounting cycle of a merchandising business, cash, accounts receivable, plant assets, and liabilities. It is intended to assist the student in demonstrating their understanding of the concepts and procedures involved in Financial Accounting and to prepare for the Final Exam.
Each student will complete the project without assistance from a person other than Marthanne, their current ACT 205 instructor, AND Gabe, her TA. Marthanne's office (Rockwell 246) hours are M,W,F from 11:05 to 11:50am and from 12:55 to 1:40pm AND T,R from 3 to 4:40pm. Gabe's office (Rockwell 246) hours are T,R from 10am to 3pm.
Each student will use their completed project to answer questions on the Accounting Cycle Project Quiz which will be worth 20 of the 50 points available for the project. The remaining 30 points will be earned by completing the project.
A paper copy of the completed project will be handed in with the quiz at the beginning of the class period on November 30th, 2016, for sections 001, 002, and 004. A paper copy of the completed project will be handed in with the quiz at the beginning of the class period on December 1st, 2016, for section 003. COMPLETED PROJECTS AND/OR PROJECT QUIZZES HANDED IN AFTER THAT TIME AND DATE WILL NOT BE ACCEPTED.
Mitchell Company's trial balance at November 30th, 2016, is presented below. All 2016 transactions have been recorded except for the items described below as "unrecorded transactions".
Debit Credit
Cash $ 28,000
Accounts receivable 36,800
Allowance for doubtful accounts $ 500
Notes receivable (due in 2017) 10,000
Inventory 36,200
Prepaid insurance 3,600
Land 20,000
Buildings 150,000
Acc Depn, building 50,000
Equipment 60,000
Acc Depn, equipment 24,000
Accounts payable 27,300
Unearned rent revenue 6,000
Notes payable (due in 2017) 11,000
Notes payable (due in 2029) 35,000
Common stock, no par 50,000
Retained Earnings 63,600
Dividends 21,000
Sales Revenue 900,000
Cost of goods sold 630,000
Salaries & wages expense 110,000
General expenses 61,800 _______
Total $1,167,400 $1,167,400
Unrecorded transactions:
1. On May 1, 2016, Mitchell made a cash purchase of equipment for $13,200 plus sales taxes of $600.
2. On July 1, 2016, Mitchell sold for $3,500 cash equipment which originally cost $5,000. Accumulated depreciation on this equipment at January 1, 2016, was $1,800. This equipment had been depreciated using the straight-line method assuming a residual value of $500 and a useful life of 5 years.
3. December transactions:
a. Dec 8, received $18,700 from customers in payment on their accounts (no discount is applicable).
b. Dec 10, sold merchandise for cash $9,450. The cost of the merchandise sold is $5,670.
c. Dec 14, purchased merchandise on account from Elizabeth Company, $16,000, terms 2/10,n/30.
d. Dec 15, purchased supplies for cash $500.
e. Dec 16, returned merchandise to Elizabeth Company, $1,000.
f. Dec 17, sold merchandise on account to Perry Company $13,400, terms 3/15, n/30. The cost of the merchandise was $8,040.
g. Dec 19, Paid $9,000 for wages due employees.
h. Dec 22, paid Elizabeth Company.
i. Dec 23, wrote off an uncollectible account in the amount of $600.
j. Dec 29, received payment from Perry Company.
4. Mitchell aged its accounts receivable and estimated that uncollectible accounts will be $4,000.
5. The note receivable is a one-year, 8% note dated April 1, 2016. No interest accrual has been recorded.
6. The balance in prepaid insurance represents payment of a $3,600, 6-month premium paid on September 1, 2016.
7. The building is being depreciated using the straight-line method over 30 years. The residual value is $30,000.
8. The equipment owned prior to this year (2016) is being depreciated using the straight-line method over 5 years and the residual value is 10% of cost.
9. The equipment purchased on May 1, 2016, is being depreciated using the straight-line method over 5 years with a residual value of $0.
10. Unpaid salaries and wages at December 31, 2016, total $4,000.
11. The unearned rent revenue of $6,000 was received on December 1, 2016, for 3 month's rent. Mitchell began renting an unused portion of their building to a tenant on that date.
12. Both the current and long-term notes payable are dated March 1, 2016, and carry a 6% interest rate. No interest accrual has been recorded.
REQUIRED:
a. Prepare journal entries for the unrecorded transactions listed above,
b. Post the entries to T-accounts. The following accounts might also be used when journalizing and posting the above transactions: interest receivable, interest expense, interest payable, interest revenue, salaries & wages payable, rent revenue, gain on disposal of plant asset, loss on disposal of plant asset, bad debt expense, depreciation expense, insurance expense, rent expense, and supplies.
c. Prepare a December 31, 2016, trial balance.
d. Prepare the necessary closing journal entries.
e. Prepare a multiple-step income statement for 2016.
f. Prepare a stockholders' equity statement for 2016.
g. Prepare a December 31, 2016, classified balance sheet.
Unrecorded transactions 4-12 represent adjusting journal entries and are dated December 31, 2016.
Net income = $72,298Total Assets = $248,498
I suggest that your first step be to post the numbers from the Nov 30 trial balance into T-accounts. These are your beginning balances.