Accounting Information System a. Brief overview As part of his “going green” ini
ID: 2435238 • Letter: A
Question
Accounting Information System
a. Brief overview
As part of his “going green” initiative in previous years, Mr. Marks moved away from a manual
accounting system to electronic records. The books of the business are currently maintained in
Microsoft Excel, and the following accounting records are included:
• General Journal
• General Ledger
• Accounts Receivable Subsidiary Ledger
• Accounts Payable Subsidiary Ledger
• Trial Balance
• Adjusted Trial Balance
• Multi-Step Income Statement
• Owner’s Equity Statement
• Classified Balance Sheet
Mr. Marks has provided you with the November 30, 20xx Trial Balance and the prior year financial
statements. These items are included in the electronic workbook. The books of the Company are
closed once a year on December 31.
Note: DO NOT under any circumstances make any changes to information provided within the
Financial - Prior Year and the Trial Balance - 11 30 xx tabs in the Principles of Accounting
Simulation - Student's Answer - Excel File workbook.
b. Policies and Procedures for Significant Business Activities
Offroad’s accounting policies and procedures are detailed below and should be followed when
recording transactions.
General
Transactions are recorded on a daily basis. Posting to the general ledger is performed on a daily
basis.
Merchandise Inventory
Offroad uses the perpetual inventory method. Cost of goods sold is estimated at 65% of sales or
services provided.
Sales and Services
Sales of merchandise are made, and routine services are performed, for cash and on credit. The
Company offers terms of 2/10, n/30 for all credit sales and service transactions.
Purchases
Offroad does not have contracts with its suppliers, thus the terms of merchandise purchases are
determined by the various suppliers at the time of the purchase.
Depreciation
The Company depreciates all applicable fixed assets using the Straight-Line Depreciation
Method. As of December 31, 20xx, the Company’s management has estimated the useful lives
and the salvage values of fixed assets to be as follows:
Asset Useful Life Salvage Value
Building 50 years $10,000
Office Equipment 6 years 5,500
Office Furniture 10 years 4,500
Trucks 8 years 6,000
c. Chart of Accounts
Below are all the general ledger accounts used by Offroad. In order to accurately enter the
accounting transactions for the Company, you will need to familiarize yourself with the accounts
shown below.
Assets Liabilities
Cash Notes Payable
Accounts Receivable Accounts Payable
Allowance For Doubtful Accounts Unearned Revenue
Merchandise Inventory Mortgage Payable - Current Portion
Merchandise Inventory - Accessories & Parts Federal Income Tax Withholding Payable
Office Supplies FICA Taxes Payable
Prepaid Insurance State Unemployment Tax Payable
Prepaid Advertisement Federal Unemployment Tax Payable
Land Interest Payable
Building Salaries Payable
Accumulated Depreciation - Building Utilities Payable
Office Equipment Mortgage Payable - Long-Term Portion
Accumulated Depreciation - Office Equipment
Office Furniture
Accumulated Depreciation - Office Furniture Owner's Equity
Trucks A. Marks, Capital
Accumulated Depreciation - Truck A. Marks, Drawing
Revenue Expenses
Sales Revenue Cost of Goods Sold
Service Revenue Office Salaries Expense
Sales Returns & Allowances Store Salaries Expense
Sales Discounts Payroll Tax Expense
Interest Expense
Office Supplies Expense
Repair & Maintenance Expense
Insurance Expense
Delivery Expense
Utilities Expense
Advertisement Expense
Bad Debt Expense
Depreciation Expense - Trucks
Depreciation Expense - Building
Depreciation Expense - Office Equipment
Depreciation Expense - Office Furniture
Notes relating to expense classification: The building is divided into a store and an office. Utilities
Expense, Insurance Expense, and Depreciation - Building Expense relates to both the store and the
office and should be allocated as follows:
i. 40% is attributable to the operation of the store.
ii. 60% is attributable to the operation of the office.
Transactions for December 20xx
December 01
Borrowed $50,000.00 from North Bank by signing a 6%, 12 month note. Interest payments are due on January 01 and July 01 throughout the life of the note.
December 01
Issued Check No. 5855 for $3,840.00 to Rainey Dae Insurance Company for a one-year insurance policy on the building, effective January 01 next year.
December 01
Issued Check No. 5857 for $1,600.00 to Sterling Supply Company in exchange for office supplies.
December 01
Distributed the net salaries amount for the bi-weekly period ending 11/30/xx, which was accrued in
November, to employees via direct deposits.
Note: This entry should include a credit to the Cash account.
December 02
Issued Check No. 5858 for $4,500.00 to Xtreme Sports Magazine to run a two page advertisement for six months, effective January 01 next year.
December 02
Issued Check No. 5859 for $1,727.18 to Portland Lending Bank for monthly mortgage payment: Interest Payable for $ 643.85 and Mortgage Payable for $1,083.33.
December 03
Sold two XTRM - X23F ATVs to a cash customer for $6,500.00 each.
December 03
Billed customer A. Reece $565.24, for service work performed on his XTRM - X23F ATV. The costs of parts and accessories totaled $367.41 (Invoice No. SA20123).
December 04
Received a check for $6,370.00 from customer C. Diaz as payment on her account, less discount (Invoice No. SI18453).
December 04
Purchased ATV parts and accessories from supplier Dust Quest ATV Supply Company on account for $1,365.25 (Invoice No. SP11653). Freight costs amounted to $24.50, with terms FOB destination.
December 07
Issued Check No. 5860 for $1,765.26 to purchase office equipment from P.N. Sill
Equipment Company.
December 07
Issued Check No. 5861 for $27,300.00 to Winding Trail ATVs as payment on their account, less discount, on a November 27 purchase of merchandise inventory (Invoice No. IP5676). The terms of the purchase were 2/15, n/60.
December 08
Sold on account three XTRM - X23F ATVs to customer S. Paulson for $6,500.00 each, terms 2/15, n/60 (Invoice No. S12861). The goods were shipped FOB destination point via carrier US Shipping Company. The transportation costs will be paid later upon receipt of the invoice.
December 08
Exchanged an old truck and signed a $14,000.00 6%, 4 month note for a similar new truck. The old truck had an original cost of $32,000.00, accumulated depreciation of $11,000.00, and a fair value of $21,000.00.
December 09
Issued Check No. 5862 for $475.29 to We Fix It Truck Repair Services for repair and maintenance work performed on trucks.
December 09
Received a check for $6500.00, in exchange for the sale of one XTRM - X23F ATV.
December 10
Owner A. Marks withdrew $4,000.00 cash for personal use (Check No. 5864).
December 11
Purchased office furniture from Woodland Furniture, Inc., for $10,000.00 by signing a 6%, 5 month note.
December 11
Sold on account one XTRM - X23F ATV to customer S. Thompson for $6,500.00, terms 2/10, n/30 (Invoice No. S12862). Freight costs amounted to $104.20, with terms FOB shipping point.
December 11
Issued Check No. 5865 for $201.23 to Portland Utilities Co. to pay the November 20xx utilities bill.
December 11
Issued Check No. 5866 for $1,365.25 to Dust Quest ATV Supply Company for ATV parts and accessories purchased on December 04 (Invoice No. SP11653).
December 14
Granted customer S. Paulson credit for one XTRM - X23F ATV returned from the December 08 transaction (Invoice No. S2861).
December 14
The bi-weekly payroll for the period ending December 14 is as follows:
Salaries:
Store Salaries $2,000
Office Salaries 4,080
Total $6,080
Witholdings:
FICA Taxes $547
Federal Income Tax Withholding 1,155
Total $1,702
Net Salaries $4,378
The payroll distribution of the net salaries amount is made to employees via direct deposits.
Note: The entry for the payment made to employees should include a credit to the Cash account.
December 14
The following represents the employer’s payroll taxes:
Payroll Taxes
FICA Taxes $547
Federal Unemployment Tax 36
State Unemployment Tax 243
Total $826
Payment of Payroll Taxes will be made to the appropriate government authorities next month.
December 15
Issued Check No. 5867 to the appropriate government authorities to pay for the prior month’s FICA Taxes $1,094.00, Federal Income Tax Withholding $2,310.00, Federal Unemployment Tax $72.00, and State Unemployment Tax $486.00.
December 15
Received a check for $754.54 from customer L. Walker as payment on his account (Invoice No. SA20122).
December 16
Purchased merchandise from supplier Quest ATVs on account for $16,900.00, terms 2/15, n/60 (Invoice No.
IP12003).
December 16
Received a check for $13,000.00 from customer H. Lincoln as payment on her account (Invoice No. SI18452).
December 16
Issued Check No. 5868 for $12,223.12 to Dirty Trail ATVs as payment on their account, less discount, on a November 30 purchase of merchandise inventory (Invoice No. IP2576). The terms of the purchase were 1/20, n/45.
December 17
Issued Check No. 5869 for $181.23 to US Shipping Company for payment of shipping costs incurred on the December 08 sale to customer S. Paulson.
December 18
Returned and was granted credit for two XTRM - X23F ATVs purchased on December 16 from supplier Quest ATVs. The total costs of the merchandise returned amounted to $8,450.00.
December 21
Purchased ATV parts and accessories from supplier ATV Supply Company on account for $2,500.23 (Invoice No. SP11983).
December 21
Received a check from S. Paulson as payment for the balance due from his purchase on December 08, less discount (Invoice No. S2861).
December 21
Received a check from S. Thompson as payment for the net balance due from his purchase on December 11, (Invoice No. S2862).
December 22
Issued check No. 5870 for $279.42 to US Shipping Company for payment of shipping costs incurred on merchandise purchased.
December 23
Issued Check No. 5871 for $1,125.45 to ATV Supply Company as payment for ATV parts and accessories purchased on account on November 23 (Invoice No. SP32653).
December 23
Issued Check No. 5872 for $4,671.99 to purchase a photocopy machine from OfficeThings.com, an eBusiness.
December 28
Received a check for $873.25, for service work performed on a customer’s XTRM - X23F ATV. The costs of parts and accessories totaled $567.61 (Invoice No. SA20123).
December 28
Sold on account two XTRM - X23F ATVs to customer P. Simon for $6,500.00 each, terms 2/10, n/30 (Invoice No. S12863).
December 28
The bi-weekly payroll for the period ending December 28 is as follows:
Salaries:
Store Salaries $2,000
Office Salaries 4,080
Total $6,080
Witholdings:
FICA Taxes $547
Federal Income Tax Withholding 1,155
Total $1,702
Net Salaries $4,378
The payroll distribution of the net salaries amount is made to employees via direct deposits.
Note: The entry for the payment made to employees should include a credit to the Cash account.
December 28
The following represents the employer’s payroll taxes:
Payroll Taxes
FICA Taxes $547
Federal Unemployment Tax 36
State Unemployment Tax 243
Total $826
Payment of Payroll taxes will be made to the appropriate government authorities next month.
December 29
Issued Check No. 5873 for $650.00 to purchase additional office supplies from Sterling Supply Company.
December 30
Received a check from customer A. Reece for service work performed on his XTRM - X23F ATVs on December 03 (Invoice No. SA20123).
December 31
Received $19,500.00 from R. Morizio, a long standing customer, as an advance payment for two XTRM - X23F ATVs to be held for him until January 15 next year, when he returns from his European vacation.
December 31
The Company hired Ms. Johanna Lopez as a Sales Clerk. It was agreed that she will be paid $600 per week, and her starting date would be on Monday, January 04 next year.
Instructions
With regards to the December 20xx activities for Offroad ATV Company, you are required to complete the following:
a. Journalize the December 20xx transactions for the Company in the General Journal. (Note: Omit
explanations for journal entries).
WILL Give A Lifesaver, Thank You
Explanation / Answer
1-Dec Cash 50000 Notes Payable 50000 1-Dec Prepaid Insurance 3840 Bank 3840 1-Dec Supplies 1600 Bank 1600 1-Dec Salaries Payable Cash 2-Dec Prepaid Advertising 4500 Cash 4500 2-Dec Interest Payable 643.85 Mortgage Note Payable 1727.18 Cash 1727.18 3-Dec Cash 13000 Sales Revenue 13000 3-Dec Accounts Receivable 565.24 Sales and Service Revenue 565.24 3-Dec Cost of Spare parts 367.24 Inventory of spare parts 367.24 4-Dec Cash 6370 Accounts Receivable 6370 4-Dec TV Parts and Accessories Inventory 1365.25 Accounts Payable 1365.25 7-Dec Office Equipment 1765.26 Bank 1765.26 7-Dec Accounts Payable 27857.14 Cash 27300 Discount Received 557.14 8-Dec Accounts Receivable 19500 Sales and Service Revenue 19500 8-Dec New Truck 35000 Accumulated Depreciation 11000 Old Truck 32000 Notes Payable 14000 9-Dec Repair Services 475.29 Bank 475.29 9-Dec Bank 6500 Services Revenue 6500 10-Dec Drawings 4000 Cash 4000 11-Dec Office Furniture 10000 Notes Payable 10000 11-Dec Accounts Receivable 6500 Sales and Service Revenue 6500 11-Dec Accounts Payable 201.23 Cash 201.23 11-Dec Accounts Payable 1365.25 Cash 1365.25 14-Dec Sales Returns 6500 Accounts Receivable 6500 14-Dec Salaries Expense 6080 Salaies Payable 4378 Taxes Payable 1702 Salaies Payable 4378 Cash 4378 14-Dec Tax Expense 826 FICA Taxes 547 Federal Unemployment Tax 36 State Unemployment Tax 243 15-Dec Taxes Payable 3962 Cash 3962 16-Dec Merchandise Inventory 16900 Accounts Payable 16-Dec Cash 13000 Accounts Receivable 13000 17-Dec Accounts Payable 12346.58 Cash 12223.12 Discount Received 123.46 17-Dec Transportation Costs 181.23 Bank 181.23 18-Dec Accounts Payable 8450 Merchandise Inventory 8450 21-Dec Merchandise Inventory 2500.23 Accounts Payable 2500.23 21-Dec Cash 6370 Disount Expense 130 Accounts Receivable 6500 22-Dec Shipping Expenses 279.42 Shipping Expenses 279.42 23-Dec Accounts Payable 125.45 Cash 125.45 23-Dec Office Equipment 4671.99 Bank 4671.99 28-Dec Bank 873.25 Sales and Service Revenue 873.25 28-Dec Cost of Sales and Service Revenue 561.61 Parts and Accessories Inventories 561.61 28-Dec Accounts Recivable 6500 Sales Revenue 6500 28-Dec Salaries Expense 6080 Salaries Payable 4378 Taxes Payble 1702 28-Dec Tax Expense 826 FICA Tax 547 Federal Unemployment Tax 36 State Unemployment Tax 243 29-Dec Office Supplies 650 Bank 650 30-Dec Bank 564.24 Accounts Receivable 564.24 31-Dec Cash 19500 Unearned Sales and Service Revenue 19500 No journal Entry required
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