Comprehensive Problem More Co Is A Merchandising Business

Comprehensive Problemmore Co Is A Merchandising Businessthe Account

Enter the balances of each of the accounts in the appropriate balance column of a four-column account (General Ledger). Write Balance in the item section, and place a check mark (✓) in the Post Reference column. Journalize the transactions in a sales journal, purchases journal, cash receipts journal, cash payments journal, or general journal as illustrated in chapter 7. Also post to the Accounts Receivable and Accounts Payable Subsidiary ledgers. Total each column on the special journals and prove the journal. Post the totals of the account columns and individually post the other columns as well as the general journal. Prepare the Schedule of Accounts Receivable and the Schedule of Accounts Payable (their total amount must equal the amount in their controlling general ledger account). Prepare the unadjusted trial balance on the worksheet. Complete the worksheet for the year ended December 31, 2012, using the following adjustment data: a. Merchandise inventory on December 31 $111,040 b. Insurance expired during the year 1,250 c. Store supplies on hand on December d. Depreciation for the current year needs to be calculated. More Co. uses the Straight-line method, the store equipment has a useful life of 10 years with no salvage value. (NOTE: the purchase and return will not be included as the dates of the transactions were after the 15th of the month). e. Accrued salaries on December 31: Sales salaries $350 Office salaries f. The note payable terms are at 8%, payment is not being made until Jan. 3, 2013. Interest must be recognized for one month (round answer to the nearest dollar amount). Prepare a multiple-step income statement, a statement of owner’s equity, and a classified balance sheet in good form. Journalize and post the adjusting entries. Journalize and post the closing entries. Indicate closed accounts by inserting a line in both balance columns opposite the closing entry. Prepare a post-closing trial balance.

Paper For Above instruction

The comprehensive accounting problem for More Co. involves meticulous recording, journalizing, posting, and preparing financial statements for a merchandising business operating under a perpetual inventory system with the last-in, first-out (LIFO) method. The problem guides through the entire accounting cycle for the fiscal year ending December 31, 2012, including analyzing transactions, adjusting entries, and preparing financial statements, ensuring accuracy and adherence to proper accounting principles.

Introduction

More Co. operates as a merchandising enterprise with a diverse inventory comprising four types of television entertainment units. Its accounting framework requires careful management of various accounts, including assets, liabilities, revenues, expenses, and owner’s equity. The comprehensive tasks include maintaining general ledger accounts, recording transactions in appropriate journals, preparing schedules, adjusting entries, financial statements, and closing the books to close out the accounting period.

Initial Account Balances and Transactions

As of November 30, 2012, More Co.’s account balances reflect typical merchandising enterprise accounts: cash, accounts receivable, inventory, prepaid insurance, store supplies, store equipment, accumulated depreciation, accounts payable, salaries payable, notes payable, owner’s capital, drawings, sales, returns and allowances, discounts, cost of goods sold, and various expenses. The company’s inventory system is perpetual, and the historical transactions during December 2012 involve purchasing inventory, sales, returns, discounts, and miscellaneous expenses.

Recording and Posting Transactions

The activities reported, such as purchasing inventory, selling units on credit and cash, paying expenses, and issuing returns, are to be entered into detailed journals: sales journal for sales, purchases journal for inventory acquisitions, cash receipts journal for collections, cash payments journal for disbursements, and a general journal for miscellaneous transactions like adjusting entries and depreciation. All postings should be made to subsidiary ledgers for receivables and payables, facilitating detailed tracking of customer and supplier balances.

Account Reconciliation and Schedules

Totaling each journal column, verifying the totals, and posting all amounts to their corresponding general ledger accounts form the core of the process. Subsequently, schedules of accounts receivable and payable must be prepared, ensuring the total amounts match the general ledger controls, which aids in verifying the integrity of the records before financial statement preparation.

Trial Balance and Adjustments

An unadjusted trial balance is constructed from the ledger balances to verify the equality of debits and credits prior to adjustments. Adjustment entries are then made to reflect year-end estimates: inventory count adjustments, expired insurance, store supplies on hand, depreciation of store equipment, accrued salaries, and the recording of interest expense related to the note payable for December. These adjustments ensure that the financial statements will accurately reflect the company’s financial position and performance for 2012.

Financial Statements

With adjusting entries posted, a multi-step income statement delineates gross profit, operating expenses, and net income, providing insight into operational efficiency. The statement of owner’s equity begins with the opening balance, adds net income, and subtracts drawings, culminating in the closing owner’s equity balance. The classified balance sheet organizes assets into current and long-term, liabilities into current and long-term, and owner’s equity, presenting a clear and professional view of More Co.’s financial standing.

Closing the Books and Post-Closing Trial Balance

The final phase involves journalizing and posting closing entries to reset revenue and expense accounts to zero, transferring net income to owner’s capital. Closing entries are recorded with a clear indication (line in both balance columns) to identify the closed accounts. A post-closing trial balance is then prepared to ensure all temporary accounts are zeroed out and the ledger is balanced for the new accounting period.

Conclusion

This comprehensive accounting project exemplifies the full cycle of financial record-keeping for a merchandising enterprise, emphasizing accuracy, consistency, and adherence to accounting standards. The meticulous application of journal entries, trial balances, adjustments, and financial statements fosters an understanding of how accounting data translate into meaningful financial insights, crucial for managerial decision-making and external reporting.

References

• Accounting Principles (12th Edition). Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso. Wiley, 2019.
• Horngren's Financial & Managerial Accounting (7th Edition). Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan. Pearson, 2018.
• IRS Publication 583: Starting a Business, Maintaining Records, and Business Income & Expenses. Internal Revenue Service, 2020.
• Financial Accounting Standards Board (FASB). Accounting Standards Codification. FASB, 2022.
• American Institute of CPAs. Audit and Accounting Guide: Revenue Recognition. AICPA, 2020.
• Gibson, C.H. Financial Reporting & Analysis. South-Western College Pub, 2015.
• Wild, John J., Shaw, Ken, and Chiappetta, Ken. Fundamental Accounting Principles. McGraw-Hill Education, 2018.
• AccountingCoach. Basic Accounting Concepts and Principles. 2022.
• Investopedia. Merchandising Business Definition. 2023.
• United States Small Business Administration. Recordkeeping for Small Business. SBA.gov, 2021.