Transaction PracticeSet–B&GCo.

You have been hired as an accountant for B&G Co., a corporation performing diverse consulting services in Detroit, Michigan. B&G Co. prepares financial statements on monthly bases.

ProjectScope:You are torecord thetransactionsfor December,prepare the monthlyadjustments,andprepare the financialstatements using theExcelworkbook provided.Then you willclose the fiscalyearandprepare the books for next year.

Directions:The assignment encompassestwo files: Project DirectionsandTransactions (thisWorddocument) andForms (a separateExcelworkbook).Your solution shouldbe workedin Exceland thecompletedExcelworkbook submittedfor grading.

You shoulduseExcelformula where appropriateandcellreferences to carryforwardvalues andnumbersbetween worksheets withinthe workbook. Simply typing values in Excelwillresultin a reducedscore,evenif the correctsolutionisprovided. Youshould use formulawherever possible.

1. Analyze thenarrative to prepare andrecord the transactionsfor December tothe General Journal.

2. Post the journal entries toledger accounts using T-accounts (Don’t forget the opening balances from the information given on thepost-closing trial balance on Nov. 30th.)

3. Completethe trialbalance on theworksheet.

4. Analyze thenarrative to prepareAdjusting Entries and record themto the T-accountsandtheworksheet.

5. Prepare the Adjusted TrialBalance on theworksheet.

6. Carry forwardthe appropriate balances to the IncomeStatement andBalance Sheet columnsonthe worksheet.

7. Prepare IncomeStatementandtheRetained EarningsStatement for the month endedDecember 31, 2015andBalance Sheet as ofDecember 31,2015in goodforms.Use the multi-step format for the Income Statement.

8. Close the income statement accounts, posting any net income or loss to retained earnings. Post the closing entry to the general journal and the T-accounts.

Due Date: Oct. 26th,2015 (11:00pm) .

Note: You can work on this project individually or with your classmates as a team (the number of members up to three).

The following is the post-closing trial balance of the B&G Co. on Nov. 30th, 2015:

B&G Co.
Post-closing Trial Balance
November 30th, 2015
Cash $41,500
Accounts Receivable 20,000
Supplies 9,000
Equipment 10,000
Accumulated Depreciation $5,000
Land 10,500
Accounts Payable 8,000
Salaries Payable 10,000
Common Stock* 50,000
Retained Earnings 18,000
$91,000 $91,000
* 50,000 shares authorized, 20,000 shares issued and outstanding

Transactions in December 2015:

Dec. 1 The equipment was completely destroyed by the regional earth quake. “Loss by earthquake” was recognized. Assume that the transaction meets the requirements of an extraordinary item.
1 Lent 20,000 to another company and received a 2 year note. The note has a 9% interest rate. Interest will be paid annually on Dec. 1st of 2016 and2017.
2 Purchased new equipment that costs $12,000 and issued 1,000 shares of common stock (no-par stock) to the equipment seller.
3 Cash payment on accounts payable amounted to $6,000.
4 Sold land for $13,000 cash.
10 Collected $15,000 as payment for amounts previously billed.
15 Paid monthly salaries of $20,000 to employees
16 Issued 1,000 shares of preferred stock at $10 per share
17 Purchased 500 shares of ABC corporation’s common stock at $15 (per share) and classify the securities as available-for-sales securities
20 Found that the company incorrectly overstated its November account receivable and sales revenue by $1,000 and made a journal entry to correct the error.
31 Performed services for various customers for $30,000 cash and another $30,000 on account during December.
31 Dividends of $5,000 were declared and paid. $ 1,025 is paid to preferred stockholders and the rest is paid to the common stock holders.
31 ABC corporation declared $ 5 dividend per share (to common stock holders). It will be paid in 2016.

* Additional information

1. Ignore tax effect.

2. Salaries expenses incurred but not paid prior to Dec. 31st totaled $10,500.

3. The company received the bill for utility services (electricity) that the firm used during December in the amount of $6,000. The company will pay the bill in Jan. 2016.

4. $3,000 of supplies remained at the end of December.

5. The company decided to use the “Allowance” method for possible accounts receivable write-offs in the future and recorded the 5% of the outstanding account receivable as “Allowance for doubtful account” and “Bad debt expense”. Since the company did not use the method before, the beginning balance of the allowance is zero.

6. The equipment purchased on Dec. 2nd depreciates $200 per month.

7. The common stock price of ABC Corporation on December 31st is still $ 15 per share.


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