Question

Practice Problem in Accounting

The Golf Club

Instructions

Use the following TRANSACTIONS AND ADDITIONAL INFORMATION to complete the General Journal, Ledger, Worksheet and Financial Statements for the first month of operations for The Golf Club. Use the Perpetual Inventory method as discussed in class for all sales of merchandise.  

                       

TRANSACTIONS

TRANSACTION #	DATE	TRANSACTION DESCRIPTION
1	Jan 1	At the beginning of January, three friends organized The Golf Club by contributing $40,000 each to begin the new business in exchange for shares of stock.
2	Jan 2	Signed a one-year lease on an existing golf club and golf course for The Golf Club and made a $45,000 advance payment for the first four month’s rent.
3	Jan 2	The Golf Club purchased the following fixed assets, paying 20% down and giving a two-year, 6% APR, note for the balance. Principle and interest are due at maturity. Furniture………………..$24,000 Fixtures…………………$4,320 Equipment……………...$79,200                                       $107,520
4	Jan 3	Purchased a 6-month insurance policy on The Golf Club and its contents and paid the premium of $4,500 in advance.
5	Jan 3	Purchased office supplies for $700 on an open account from Kelli’s Office Supplies. The Golf Club has 30 days to pay for the supplies.
6	Jan 3	Purchased on account a total of 100 shirts with an embroidered Golf Club logo from C & C Creations at a price of $10 per shirt. These shirts are available for resale to customers.
7	Jan 3	Purchased concessions for $4,200 from Delta Distributing, Inc. These concessions consist of energy drinks, chips, crackers, nuts etc., and are available for resale to customers. The Golf Club paid 25% down and put the balance on account.
8	Jan 3	Sold 75, twelve-month memberships to The Golf Club for $2,250 each. All membership dues were collected in cash.
9	Jan 3	Purchased a 6-month maintenance contract with Larry’s Landscaping to provide grounds maintenance. Paid $7,800 in advance for this service.
10	Jan 5	Provided 60 hours of golf lessons to members. Fees are charged at a rate of $60/hour. Of these fees, $650 was collected in cash and the balance was billed to individual member’s accounts.
11	Jan 6	Received a bill for $250 from The Golf Club’s attorney for legal services rendered.
12	Jan 8	Sold 44 shirts to a corporate member, Allen & Associates for $22 each. Collected $450 in cash and the balance is owed to The Golf Club on account.
13	Jan 14	Purchased an additional $300 in office supplies on open account from Kelli’s Office Supplies.
14	Jan 15	Paid wages and salaries of $2,250 to Golf Club employees.
15	Jan 15	Sold 25, twelve-month memberships to the club for $2,250 each. Collected the dues in cash.
16	Jan 15	The concessions stand reported sales of merchandise for $5,500 for the first half of the month. The concessions that were sold had an original cost of $2,800. All of these transactions were billed directly to each member’s account.
17	Jan 16	Purchased additional concessions for $1,800 from Delta Distributing on open account.
18	Jan 18	Paid the total amounts due to C&C Creations, the Golf Club’s attorney and Kelli’s Office Supplies.
19	Jan 19	Sold 36 of the shirts purchased on January 3 to individual customers for $30 each. Collected 30% in cash, the balance is owed to the Golf Club on account.
20	Jan 22	The Golf Club declared and paid a dividend of $1,000 to each shareholder.
21	Jan 26	Collected the balance of what was owed on account from Allen & Associates.
22	Jan 28	Received a utility bill that totaled $980 for the month. It is due Feb. 14.
23	Jan 31	Fees for golf lessons for the last half of January (billed to members accounts) = $4,680
24	Jan 31	Cash sales of shirts (8 @ $30 each) = $240. These shirts were purchased by the Golf Club on Jan. 3.
25	Jan 31	Sales for concessions during the last half of January (30% collected in cash) = $5,000 Cost of concessions sold from January 16-30 = $2,400
26	Jan 31	Cash received during January for services billed to member’s accounts = $4,400
27	Jan 31	Cash received for visitor’s greens fees (fee to play the golf course) = $1,250
28	Jan 31	Purchased additional fixtures for the golf club totaling $2,650. The total amount was paid in cash.

ADDITIONAL INFORMATION:

1. Depreciation expense for the month of January should be calculated using the straight-line method with the following useful lives (no salvage value is anticipated. If necessary, round to the nearest whole dollar):

Furniture 8 years

Fixtures 8 years

Equipment 5 years

   

2. At the end of the month, a physical count was taken of the Golf Club’s assets, inventories and supplies. It revealed the following information:

1. Eight of the shirts for resale were on hand at January 31.  

2. Concession merchandise still on hand as of January 31 amounted to $685.

3. Salaries earned by employees but unpaid at January 31 totaled $3,200.

       4. There were $400 of Office Supplies still on hand as of January 31.

Round to the nearest dollar.

Which account is not closed out in the closing entries?

Group of answer choices

Salary Expense

Sales Revenue

Unearned Revenue

Dividends

Loss on Shrinkage

The correct journal entry for transaction #12 includes a:

Group of answer choices

debit to Cash for $968

credit to Sales Revenue for $440

credit to Inventory – Shirts for $968

debit to Cost of Goods Sold for $968

credit to Inventory – Shirts for $440

The correct journal entry for transaction #8 would include a:

Group of answer choices

debit to Cost of Goods Sold

credit to Cash

credit to Sales Revenue

credit to Unearned Revenue

Both A and D

As a result of transaction #18:

Group of answer choices

Assets increase

Assets decrease

Liabilities decrease

Liabilities increase

Both B and C

Answer 1

1)correct option is "C"

Amount financed with note : 102600 total (1-.20 down) = 82080

Interest per month =Amount financed * rate *n/12

                     = 82080 *.06 *1/12

                     = 410.4 (rounded to 410)

Account title	Debit	credit
Interest expense	410
Interest payable		410

2)Correct option is "B"

The Journal entry to record Salaries earned by employees but unpaid at September 30 totaled $3,300

Account title	Debit	credit
Salaries expense	3300
salaries payable		3300

3)Correct option is "C"

supplies available for use =Purchase made on Sep 3 + Sep 14

                            = 675 +250

                           = 925

Supplies used = Supplies available for use-supplies at end

                   = 925 -425

                     = 500

Account title	Debit	credit
Supplies expense	500
supplies		500

4)correct option is "D"

Inventory shrinkage calculations :

Concessions	Shirts
Sep 3 -Purchase	4200	Sep 3 -Purchase	100 shirts at $ 12 per shirt
Sep 15- sold	-2800	Sep 8 -sold	-44
Sep 16 -Purchase	1800	Sep 19 -sold	-36
Sep 30 -sold	-2400	Sep 30 -sold	-8
Sep 30 -In hand	-675	Sep 30 -in hand	-7
Shrinkage	125	Shrinkage	5 shirts *12 =60

Account title	Debit	credit
loss on shrinkage	185
Inventory-shirts		60
Inventory -concessions		125