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ACC 310 Spring 2006 Practice Case ACC 310 Whited 2021 Accounting Practice Set This case is designed to reinforce certain technical accounting skills that are a prerequisite to a solid understanding of...

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ACC 310 Spring 2006 Practice Case
ACC 310 Whited 2021 Accounting Practice Set
This case is designed to reinforce certain technical accounting skills that are a prerequisite to a solid understanding of the generally accepted accounting principles that underlie preparation of general purpose financial statements.
You are tasked with the preparation of a set of 2021 financial statements for Brian Burns Technology Corp., a company that purchases merchandise inventory for resale.
You will be required to prepare journal entries, post those entries the general ledger, and prepare year-end adjustments, an adjusted trial balance, income statement, balance sheet, and statement of cash flows. Brian Burns Technology Corp. uses the following chart of accounts (note that you may not use all these accounts):
Account Number    Account Title
    100    Cash
    110    Accounts Receivable
    115    Allowance for Doubtful Accounts (AFDA)
    120    Interest Receivable
    130    Inventory
    135    Supplies
    140    Prepaid Rent
    145    Prepaid Insurance
    150    Available for Sale Investments (non-cu
ent)
    160    Land
    170    Buildings
    175    Accumulated Depreciation – Buildings
    180    Equipment
    185    Accumulated Depreciation – Equipment
    190    Patents
    210    Accounts Payable
    220    Salaries Payable
    225    Utilities Payable
    230    Interest Payable
    235    Unearned Rent
    240    Income Taxes Payable
    245    Dividends Payable
    250    Notes Payable
XXXXXXXXXX XXXXXXXXXXDiscount on Notes Payable
        
    300    Common Stock
    310    Additional Paid-In Capital
    320    Retained Earnings
    325    Dividends
    330    Accumulated Other Comprehensive Income
    350    Treasury Stock
    
400    Sales Revenue
    410    Interest Revenue
    420    Rent Revenue
    430    Dividend Revenue
    
    500    Cost of Goods Sold
    510    Salaries Expense
    515    Bad Debt Expense
    520    Rent Expense
    525    Supplies Expense
    530    Depreciation Expense – Buildings
    535    Depreciation Expense – Equipment
    540    Patent Amortization Expense
    550    Utilities Expense
    560    Insurance Expense
    570    Interest Expense
    590    Income Tax Expense
In addition to the income statement, balance sheet, and statement of cash flows, compile the following:
· General Ledger serves as a T-Account for each account. Post all journal entries to the general ledger to assist in forming the trial balance.
· Adjusted Trial Balance lists ALL accounts after adjusting journal entries but before closing journal entries
All students must prepare their own solution to this project; however, you may discuss your work with other students.
Notes for Journal Entries:
1) Brian Burns uses perpetual inventory system and LIFO
2) All credit sales discounts are recorded using the net method – customers receive a 3 percent discount if they pay within 30 days.
3) Purchase discounts are recorded using the net method
4) All depreciation is straight line.
Additional Information for Journal Entries
Brian Burns records accruals for utilities expense as an adjusting journal entry at the end of each year. They pay utilities once a year on January 31st for the prior year. NOTE: There is no payment for utilities on January 31st of 2021 because January 1 of 2021 is the first day of operations.
January 1    Sold 10,000 shares of common stock for $95 per share.
    
    Bo
owed $2,000,000 at 8 percent with interest payable semi-annually (on July 1 and January 1).
    
Purchased 1,000 units of inventory at $150 a piece on credit from Biggie Smalls Inc. Terms are 2/10; n/60
Paid $480,000 for 2 years of rent in advance
Purchased office supplies costing $10,000 with cash
Jan 20    Paid Biggie full amount owed
Feb 10    Sold 100 units inventory with a list price of $22,000 to M Jagger on credit.
    Sold 140 units of inventory for cash of $30,000.
    
March 15    Bought 1,000 units of inventory at $170 a piece from Wolfpack Corporation with cash
April 30    Sold 150 units of inventory for cash of $30,000
June 30    Purchased land and a building. A $200,000 cash down payment was required and a $800,000 note was accepted by the seller for the balance (12 percent interest payable each year on June 30). The fair value of the land at the date of purchase was deemed to be 300,000 and the fair value of the building was 900,000. The building has an estimated residual value of $0 and a useful life of 30 years.
September 1    Brian Burns began subleasing extra space to DJ Moore. DJ Moore paid for $60,000 for six months’ in advance.
October 1    Purchased equipment for in exchange for a $30,000 non-interest bearing note due in one year. The equipment has an estimated residual value of $2,000 and a useful life of 8 years. Note: Assume an effective interest rate of 8 percent.    
October 1    Purchased one year of insurance in advance for $12,000
October 14    Sold 400 units of inventory to H Gilmore for $100,000 on credit
October 30    H Gilmore paid half of the amount owed
Dec 1    Repurchased 1,000 shares of stock for $120/share
Dec 15    Declared a dividend of $2/share. The dividend will be distributed to shareholders on January 19, 2021.
Dec 15    H Gilmore went bankrupt so Brian Burns wrote off the balance owed by H Gilmore as uncollectible (hint: Directly write-off this Account since no allowance has been made yet).
Dec 20    Purchased office supplies for $13,000 in cash.
Dec 25    Sold 150 units of inventory to J Lennon for $30,000 on Credit
Dec 31    Sold 1,000 units Inventory for $200,000 in Cash
Information for Adjusting Entries as of 12/31/21
A count of office supplies revealed $12,000 in office supplies as of 12/31
Receive the 2021 utility bill for $25,000, payable on January 31st 2021.
All depreciation is straight line.
Brian Burns uses the balance sheet method for estimating bad debts and estimates that 5 percent of outstanding A/R at year-end will be uncollectible.
The income tax rate for 2018 is 21%.
*Remember to record any necessary accruals related to the transactions (e.g., interest expense, unearned rent)

Brian Burns Technology Corp. – General Journal (2021 Transactions) – THIS IS A TEMPLATE, YOU WILL NEED MORE LINES
    Date
    Account Name/GL Account #
    Debit
    Credit
    EX
    Cash (100)
    XXX
    
    
    Sales Revenue (400)
    
    
    
    
    
    
    1/1
    Cash
    950,000
    
    
    Common Stock
    
    950,000
    
    
    
    
    1/1
    Cash
    2,000,000
    
    
    Note Payable
    
    2,000,000
    
    
    
    
    1/1
    Inventory
    150,000
    
    
    Accounts Payable
    
    150,000
    
    
    
    
    1/1
    Prepaid Rent
    480,000
    
    
    Cash
    
    480,000
    
    
    
    
    1/1
    Supplies
    10,000
    
    
    Cash
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
Brian Burns Technology Corp. – Adjusting Journal Entries - THIS IS A TEMPLATE, YOU WILL NEED MORE LINES
    Date
    Account Name/GL Account #
    Debit
    Credit
    EX
    Interest Expense
    XXX
    
    
    Interest Payable
    
    XXX
    
    
    
    
    
    
    
    
Brian Burns Technology Corp. – Closing Journal Entries THIS IS A TEMPLATE, YOU WILL NEED MORE LINES
    Date
    Account Name/GL Account #
    Debit
    Credit
    EX
    Salaries Expense
    
    XXX
    EX
    Retained Earnings
    XXX
    
    
    
    
    
    EX
    Sales
    XXX
    
    EX
    Retained Earnings
    
    XXX
    
    
    
    
    
    
    
    
Brian Burns Technology Corp. – General Ledger THIS IS A TEMPLATE, YOU WILL NEED MORE LINES
· This is like a T-Account. Copy each journal entry relating to the account. After all debits and credits are posted to an account, the far right column will be your total. This will help you prepare the trial balance. Each account with a journal entry will appear on the General Ledger.
    Acct #
    Acct Name
    Debit
    Credit
    Balance – DR or (CR)
    100
    Cash
    XXXX
    
    
    
    
    
    
    
    Etc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
Brian Burns Technology Corp. – Adjusted Trial Balance
· There will be one line item for each account with the ending balance from the General Ledger. This will include all accounts – temporary and permanent PRIOR TO CLOSING TEMPORARY ACCOUNTS TO RETAINED EARNINGS (RETAINED EARNINGS ACCOUNT WILL JUST BE ZERO ON THIS)
    Account #
    Account Name
    Debit Balance
    Credit Balance
    100
    Cash
    XXXXX
    
    
    
    
    
    110
    Accounts Receivable
    XXXXX
    
    
    
    
    
    Etc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
Prepare the following Financial Statements for 2021:
· Income Statement
· Balance Sheet
· Statement of Cash Flows (Indirect Method)
10
Answered Same Day Mar 15, 2021

Solution

Nitish Lath answered on Mar 16 2021
158 Votes
JE
        Journal entries
        Date    Particulars    Debit    Credit
        1-Jan    Cash    950,000
            Common stock        950,000
            (To record issuance of common stock)
        1-Jan    Cash    2,000,000
            Notes payable        2,000,000
            (To record bo
wings)
        1-Jan    Inventory    147,000
            Accounts payables        147,000
            (To record purchase of inventory)
        1-Jan    Prepaid rent    480,000
            Cash        480,000
            (To record prepaid rent)
        1-Jan    Supplies    10,000
            Cash        10,000
            (To record office supplies)
        20-Jan    Interest expenses    3,000
            Accounts payable    147,000
            Cash        150,000
            (To record payment to suppliers)
        10-Feb    Accounts receivables    21,340
            Sales revenue        21,340
            (To record sales revenue)
        10-Feb    Cash    30,000
            Sales revenue        30,000
            (To record sales revenue)
        10-Feb    Cost of goods sold    35,280
            Inventory        35,280
            (To record COGS)
        15-Mar    Inventory    170,000
            Cash        170,000
            (To record purchase of inventory)
        30-Apr    Cash    30,000
            Sales revenue        30,000
            (To record sales revenue)
        30-Apr    Cost of goods sold    25,500
            Inventory        25,500
            (To record COGS)
        30-Jun    Land    250,000
            Building    750,000
            Cash        200,000
            Notes payable        800,000
            (To record purchase of land and building)
        1-Sep    Cash    60,000
            Unearned rent        60,000
            (To record rent in advance)
        1-Oct    Equipment    30,000
            Notes payable        30,000
            (To record purchase of equipment)
        1-Oct    Prepaid insurance    12,000
            Cash        12,000
            (To record payment of insurance)
        14-Oct    Accounts receivables    97,000
            Sales revenue        97,000
            (To record sales revenue)
        14-Oct    Cost of goods sold    68,000
            Inventory        68,000
            (To record COGS)
        30-Oct    Cash    48,500
            Accounts receivables        48,500
            (To record collection from customers)
        1-Dec    Treasury stock    120,000
            Cash        120,000
            (To record purchase of treasury stock)
        15-Dec    Dividends     18,000
            Dividends payable        18,000
            (To record dividend accrued)
        15-Dec    Bad debt expenses    48,500
            Accounts receivables        48,500
            (To record bad debts w/off)
        20-Dec    Supplies     13,000
            Cash        13,000
            (To record purchase of supplies)
        25-Dec    Accounts receivables    29,100
            Sales revenue        29,100
            (To record sales revenue)
        25-Dec    Cost of goods sold    25,500
            Inventory        25,500
            (To record COGS)
        31-Dec    Cash    200,000
            Sales revenue        200,000
            (To record sales revenue)
        31-Dec    Cost of goods sold    153,900
            Inventory        153,900
            (To record COGS)
        1-Jul    Interest expenses    80,000
            Cash        80,000
            (To record payment of interest exp)
        Adjusting
        31-Dec    Supplies expenses    11,000
            Supplies         11,000
            (To record supplies expenses)
        31-Dec    Utilities expenses    25,000
            Utilities payable        25,000
            (To record utilities exp)
        31-Dec    Depreciation expenses- Building    12,500
            Depreciation expenses- Equipment    875
            Accumulated depreciation- Building        12,500
            Accumulated depreciation- Equipment        875
        31-Dec    Bad debt expenses    2,522
            Provision for bad debts        2,522
            (To record bad debt expenses)
        31-Dec    Income tax expenses    0
            Income taxes payable
            (To record taxation expenses)
        31-Dec    Interest expenses    128,000
            Interest payable        128,000
            (To record interest accrued)
        31-Dec    Insurance expenses    3,000
            Prepaid insurance        3,000
            (To record insurance expenses)
        31-Dec    Rent expenses    240,000
            Prepaid rent        240,000
            (To record rent expenses)
        31-Dec    Unearned rent    40,000
            Rent revenue        40,000
            (To record unearned rent)
Ledgers
            CASH ACCOUNT                    COMMON STOCK ACCOUNT                    NOTES PAYABLEACCOUNT
            Acct Name    Debit    Credit    Balance – DR or (CR)        Acct Name    Debit    Credit    Balance – DR or (CR)        Acct Name    Debit    Credit    Balance – DR or (CR)
            Common stock    950,000        950,000        cash        950,000    950,000        cash        2,000,000    2,000,000
            Notes payable    2,000,000        2,950,000                            land        800,000    2,800,000
            Prepaid...
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