Instructions for Practice Set
OBJECTIVE: This project is designed to take you through the entire accounting cycle from analyzing transactions to the post-closing trial balance.
BACKGROUND: Cougar Hotel has been in business for a few years. The hotel operates on a calendar year and is in the current month ending December 31, 20xx. The accounting department will be closing the books on Dec 31. Observing GAAP, accrual basis of accounting is used. Below is the chart of accounts for Cougar Hotel and the balances can also be found in the Ledger.
CHART OF ACCOUNTS | |||||||||
100 | CASH | 400 | ROOM REVENUE | ||||||
110 | ACCOUNTS RECEIVABLE | 410 | FOOD REVENUE | ||||||
120 | PREPAID INSURANCE | 500 | COST OF SALES–FOOD | ||||||
130 | INVENTORY–FOOD | 600 | PAYROLL EXPENSE | ||||||
140 | FURNITURE-BEDS | 700 | UTENSIL EXPENSE | ||||||
145 | ACCUM.DEPRECIATION–BEDS | 710 | INSURANCE EXPENSE | ||||||
200 | ACCOUNTS PAYABLE | 720 | UTILITY EXPENSE | ||||||
205 | UTILITIES PAYABLE | 725 | DEPRECIATION EXPENSE – BEDS | ||||||
208 | PAYROLL PAYABLE | ||||||||
210 | UNEARNED REVENUE | ||||||||
300 | COMMON STOCK | ||||||||
310 | DIVIDENDS | ||||||||
390 | RETAINED EARNINGS |
391 INCOME SUMMARY
A CREDIT BALANCE IN THE ACCOUNTS IS NOTED BY A SET OF PARENTHESES, e.g., Accounts Payable has a credit balance of $2,900 and thus it appears as (2,900.00) in the ledger.
STEPS TO ACCOMPLISH:
Step 1. Analyze the given transactions and journalize them onto page 1 of the General Journal (J1)
Step 2. Post the transactions into the Ledger. Use J1 to denote general journal page 1
Step 3. Fill out the Trial Balance in the work sheet
Step 4. Journalize the given adjustments onto page 2 of the General Journal, and post them to the Ledger. Use J2 to denote general journal page 2
Step 5. Complete the entire Worksheet
Step 6. Complete the Financial Statements: Income Statement, Statement of Retained Earnings, and Balance Sheet
Step 7. Journalize the Closing Entries onto page 3 of the General Journal, and post them to the Ledger. Use J3 to denote general journal page 3
Step 8. Complete the Post-closing Trial Balance
TRANSACTIONS:
Dec 2 The controller purchased a one year insurance policy on Dec 1 which starts in Dec. The cost was $4,800.
Dec 2 The hotels bought some new beds to change out a few old ones. The total cost was $60,000. They are supposed to have a useful life of 5 years with a salvage value of zero. This was charged with Furniture World.
Dec 6 The banquet chef bought some utensils worth $750 from Houston Supplies. He picked up the utensils on his way into work and gave the controller the invoice. The invoice is not due till a month later, and Houston Supplies will simply bill Cougar Hotel. As these are small wares, the hotel is going to expense them instead of capitalizing them as an asset.
Dec 7 Cougar Hotel bought food inventory of $9,500 on account with Sysco.
Dec 21 Dali Corp. held its Christmas party at Cougar Hotel. The total $25,000 of food revenue was billed tothe client.
Dec 22 Dali Corp. was very pleased with the event yesterday and sent in a check of $5,000 as deposit for next year’s party.
Dec 23 ACGConsulting held its executive officers’ retreat at Cougar Hotel and the group checked out this morning. The total rooms revenue was at $20,500. The accounting office will need to bill this.
Dec 27 Paid payroll of $6,750 to employees.
Dec 28 Paid 50% of what is owed to Houston Supplies, and 75% owed to Sysco.
ADJUSTMENTS: At the end of the month, the following adjustments need to be recorded
1. A physical food inventory was taken and $755 of food remains in the storerooms.
2. Depreciation of the bed needs to be recognized.
3. The insurance used during the month needs to be adjusted.
4. The hotel used $1,375 in utilities but have not paid Reliant Energy.
5. A New Year Eve’s Party for Tanner Ltd. was held on Dec 31. The total invoice of $13,200for food needs to be billed.
6. The last pay day was the 26th and Cougar Hotel pays its employees every two weeks. Twentyemployees with wages totaling $100 per person per day needs to be accrued.
GRADING SCALE AND DUE DATES:
Items | Grade | Due Dates |
1. Journalize Transactions-J1 | 10 | 2/17 |
2. Post Transactions of J1 | 10 | 2/17 |
3. Adjustments-J2 | 10 | 3/10 |
4. Post Adjustments of J2 | 5 | 3/10 |
5. Worksheet | 20 | 3/10 |
6. Income Statement | 7 | 3/10 |
7. Retained Earnings Statement | 3 | 3/10 |
8. Balance Sheet | 10 | 3/10 |
9. Closing Entries – J3 | 10 | 3/10 |
10. Post Closing Entries of J3 | 5 | 3/10 |
11. Post-closing trial balance | 10 | 3/10 |
TOTAL | 100 |