COMPREHENSIVE PROBLEM ON THE ACCOUNTING CYCLE
During the month of May 20–, The General’s Favorite Fishing Hole engaged in the following transactions. These transactions required an expansion of the chart of accounts as shown below.
| Assets Revenues |
| 101 Cash 401 Registration Fees |
| 122 Accounts Receivable 404 Commission Revenue |
| 142 Office Supplies |
| 144 Food Supplies Expenses |
| 145 Prepaid Insurance 511 Wages Expense |
| 146 Prepaid Subscriptions 512 Advertising Expense |
| 161 Land 521 Rent Expense |
| 171 Buildings 523 Office Supplies Expense |
| 171.1 Accum. Depr.––Buildings 524 Food Supplies Expense |
| 181 Fishing Boats 525 Telephone Expense |
| 181.1 Accum. Depr.––Fishing Boats 533 Utilities Expense |
| 182 Surround Sound System 535 Insurance Expense |
| 182.1 Accum. Depr.––Surround Sound Sys. 536 Postage Expense |
| 183 Big Screen TV 537 Repair Expense |
| 183.1 Accum. Depr.––Big Screen TV 540 Depr. Exp.––Buildings |
| 541 Depr. Exp.—Surround Sound Sys. |
| Liabilities |
| 202 Accounts Payable 542 Depr. Exp.––Fishing Boats |
| 219 Wages Payable 543 Depr. Exp.––Big Screen TV |
|
546 Satellite Programming Exp. |
|
Owner’s Equity 548 Subscriptions Expense |
| 311 halobas , Capital |
| 312 Halobas, Drawing |
| 313 Profit & loss |
Consider the following transaction
May 1 In order to provide snacks for guests on a 24-hour basis, Halobas signed a contract with Hurji Snack . Hurji Snack will install vending machines with food and drinks and pay a 10% commission on all sales. Estimated payments are made at the beginning of each month. Halobas received a check for $200, the estimated commission on sales for May.
2 Halobas purchased a surround sound system and big screen TV with a digital satellite system for the guest lounge. The surround sound system cost $3,600 and has an estimated useful life of five years and no salvage value. The TV cost $8,000, has an estimated useful life of eight years, and has a salvage value of $800. Halobas paid cash for both items.
2 Paid for May’s programming on the new digital satellite system, $125.
3 Halobas’s office manager returned $100 worth of office supplies to Gagga Office
Supply. Halobas received a $100 reduction on the account.
3 Deposited registration fees, $52,700.
3 Paid rent for lodge and campgrounds for the month of May, $40,000.
3 In preparation for the purchase of a nearby campground, Halobas invested an additional $600,000.
May 4 Paid Gagga Office Supply on account, $400.
4 Purchased the assets of a competing business and paid cash for the following: land,
$100,000; lodge, $530,000; and fishing boats, $9,000. The lodge has a remaining useful life of 50 years and a $50,000 salvage value. The boats have remaining lives of five years and no salvage value.
5 Paid May’s insurance premium for the new camp, $1,000. (See above transaction.)
5 Purchased food supplies from Olbirtat Super Market on account, $22,950.
5 Purchased office supplies from Gagga Office Supplies on account, $1,200.
7 Halobas Night paid $40 each for one-year subscriptions to Fishing Illustrated, Fishing
Unlimited, and Fish Master. The magazines are published monthly.
10 Deposited registration fees, $62,750.
13 Paid wages to fishing guides, $30,000. (Don’t forget wages payable.)
14 A guest became ill and was unable to stay for the entire week. A refund was issued in the amount of $1,000.
17 Deposited registration fees, $63,000.
19 Purchased food supplies from Olbirat Super Market on account, $18,400.
21 Deposited registration fees, $63,400.
23 Paid $2,500 for advertising spots on National Sports Talk Radio.
25 Paid repair fee for damaged boat, $850.
27 Paid wages to fishing guides, $30,000.
28 Paid $1,800 for advertising spots on billboards.
29 Purchased food supplies from Acme Olbirat Market on account, $14,325.
30 Paid utilities bill, $3,300.
30 Paid telephone bill, $1,800.
30 Paid olbirat Super Market on account, $47,350.
31 Halobas withdrew cash for personal use, $7,500.
Adjustment information at the end of May is provided below.
(a) Total vending machine sales were $2,300 for the month of May.
(b) Straight-line depreciation is used for the 10 boats purchased on April 2 for
$60,000. The useful life for these assets is five years and there is no salvage value. A full month’s depreciation was taken in April on these boats. Straight- line depreciation is also used for the two boats purchased in May. Make one adjusting entry for all depreciation on the boats.
(c) Straight-line depreciation is used to depreciate the surround sound system.
(d) Straight-line depreciation is used to depreciate the big screen TV.
(e) Straight-line depreciation is used for the building purchased in May.
(f) On April 2, Halobas paid $9,000 for insurance during the six-month camping season. May’s portion of this premium was used up during this month.
(g) Halobas received his May issues of Fishing Illustrated, Fishing Unlimited, and Fish Master.
(h) Office supplies remaining on hand, $150.
(i) Food supplies remaining on hand, $5,925.
(j) Wages earned, but not yet paid, at the end of May, $6,000.
REQUIRED
1. Enter the transactions in a general journal
2. Post the entries to the general ledger. (If you are not using the working papers that accompany this text, you will need to enter the account titles, account numbers, and balances from April 30 in the general ledger accounts.)
3. Prepare a trial balance on a work sheet.
4. Complete the work sheet.
5. Journalize the adjusting entries on the general journal.
6. Post the adjusting entries to the general ledger.
7. Prepare the income statement.
8. Prepare the statement of owner’s equity.
9. Prepare the balance sheet.
10. Journalize the closing entries
11. Post the closing entries to the general ledger.
12. Prepare a post-closing trial balance.
