PROJECT: SPREADSHEET APPLICATIONS FOR BOOKKEEPING

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1 PROJECT: SPREADSHEET APPLICATIONS FOR BOOKKEEPING The Bernards had quite a successful year in their newly opened Pennsylvania store. Matt and Julie Bernard have engaged their bookkeeper, Barb Burke, to prepare the shop s Trial Balance, Net Income Statement, and Balance Sheet, which will be forwarded to their CPA. The Pennsylvania shop will use the same Chart of Accounts set-up in Practice Set 1. You ll notice one or two accounts have been added for this final project. The shop has been open for eight months. The grand opening was on November 1st of last year. The store s fiscal year will be July 1st June 30th. Barb Burke calculated the shop s unadjusted trial balance sheet in May after the store had officially closed for the season. There are five separate worksheets for you to complete in this project. The worksheets are in an Excel format. The cells highlighted in light yellow are input cells. If you don t have Excel, you ll need to manually calculate the worksheets. Be sure to read the all the instructions for this project and review the worksheets before you begin your work. Worksheet Overview 1. Use the Adjusted Trial Balance Worksheet Project, Part 1 (tab 1). If you ll be completing the project without spreadsheet software, you can access PDF copies of the required worksheets in the Resources tab in the left-hand menu. The unadjusted balances have been inserted for your convenience. Enter the adjusting entries. (Specific information relating to these entries can be found below.) Calculate the Adjusted Trial Balance. This should be similar to a simplified version shown on page 178 in your textbook. Input from the Adjusted Trial Balance, the Balance Sheet, and the Income Statement. This should be similar to that shown on page 184 in your textbook. 2. Use Project, Part 2 Aggregation of Income Account Worksheet (tab 2). Aggregate the Income Statement Accounts. This should be similar to that shown on pages 211 and 212 in your textbook, although the format is slightly different. STATEMENTS, CONTROLS, AND RECORDS 99

2 3. Use Project, Part 3, to prepare the company s Income Statement and Vertical Analysis Worksheet (tab 3). Prepare an Income Statement and vertical analysis for the eightmonth period ending June 30th. This should be similar to that shown on page 216 in your textbook. 4. Use Project, Part 4 Aggregated Balance Sheet Worksheet (tab 4). Aggregate the Balance Sheet Accounts. This should be similar to that shown on pages 198 and 199 in your textbook; again, the format is slightly different. 5. Use Project, Part 5 Balance Sheet and Key Ratio Worksheet (tab 5). Prepare the Balance Sheet for the eight-month period ending June 30th. Also, calculate the current ratio, quick ratio, and debt-to-equity ratio for the Mile High Ski and Snowboard Shop. Part 1: Adjusted Trial Balance Barb has found the following adjusting entries that need to be made to the Unadjusted Trial Balance. Prepare the Adjusting Journal Entries, and enter them onto the Adjusting Entries column of the Adjusted Trial Balance worksheet. Denote the entry number of each adjustment in the entry # column. Note: Some items won t require an adjusting entry. Read each item carefully. 1. Business insurance was purchased in November for $12,000, which covers a 12-month period. An entry needs to be made between prepaid and insurance expense. This entry has been done for you and should be used as an example of how the rest of the entries should be completed. 2. Depreciation needs to be calculated for all of the fixed-asset accounts. Computer equipment, computer software, and furniture and fixtures will be depreciated using the straight-line method over 60 months. Machinery will be depreciated over 84 months using the straight-line method of accounting. 3. An entry was made incorrectly recording the Note Payable interest and principal payments to the Other Accrued Liability account. The entry should have been made to Interest Expense and the Notes Payable accounts. The loan has a monthly payment of $ The shop has paid $2,439 in interest and $5,565 in principal over the past eight months. A. The note was used to purchase a customer list. The asset will have a life of 10 years, and it should be amortized evenly over the 10-year period. You ll need to record the amortization. 100 STATEMENTS, CONTROLS, AND RECORDS

3 B. The loan has a monthly payment of $1, The short-term portion of the loan (the next 12 months of payments) needs to be reclassed from account 400 Note Payable to account 335 Short- Term Portion of Notes Payable. C. As stated above, the original interest expense of $2,439 was incorrectly recorded in the Other Accrued Liabilities account number 320 for the eight-month period. You ll need to make an adjusting journal entry to correct this. You ll need to reclassify the error to the interest expense account. D. The principal amount of $5,565 was also incorrectly recorded in Other Accrued Liabilities account number 320. You ll need to make an adjusting entry, moving this from Accrued Other and reducing the Long-Term Note Payable account. 4. Several late payables were received but not recorded. These payables were for clothing and accessories discounted after the season and will be sold next year. The total late payable amount is $6, Inventory is valued correctly at the lower of cost or market. 6. Since it s the shop s first year, it could be hard to estimate what the balance in the allowance for doubtful accounts should be. But based on the Bernard s New York store and the similarities of both, Mrs. Bernard estimated the allowance should be 5 percent of Accounts Receivable. 7. Mr. and Mrs. Bernard collect their salary throughout the year. They re paid one week in arrears. Their gross payroll for a week is $3,942, and the employer portion of tax associated with the accrual is 15 percent. You ll need to make an adjusting entry to record the one week of salary and tax expense. 8. Rent is $3,000 per month and is prepaid on the first day of the month. 9. Utilities this time of year are low and run $275 a month. Services are billed for the previous month at the beginning of the next month. For example, June s utility invoice would be sent at the beginning of July. You ll need to adjust for this. 10. The shop s CPA has advised the Bernards that their estimated tax liability for the year will be $51,924. They ve made payments through the end of May of $45,434. The remaining amount will need to be accrued. Total the adjusting entries to be sure they zero out. Your next step will be to combine the Unadjusted Trial Balances and the Adjusting Entries to calculate the Adjusted Trial Balance. Next, divide the accounts into either Net Income or Balance Sheet accounts and enter into the appropriate columns. Hint: The net balance of both the Income and Balance Sheets accounts will be $158,977. STATEMENTS, CONTROLS, AND RECORDS 101

4 Part 2: Aggregation of Income Account Aggregate the Net Income account balances. You can use Project, Part 2, to complete this task. This should be similar to that shown on page 184 in your textbook. Remember, the format is slightly different. Part 3: Income Statement/Vertical Analysis Prepare an Income Statement and Vertical Analysis for the eight- month period ending June 30. This should be similar to that shown on page 216 in your textbook. Part 4: Aggregated Balance Sheet Aggregate the Balance Sheet Accounts. This should be similar to that shown on pages 198 and 199 in your textbook. Again, remember the format is slightly different. Part 5: Balance Sheet and Key Ratios Prepare the Balance Sheet for the eight-month period ending June 30. Also, you need to define and calculate the current ratio, quick ratio, and debt-to-equity ratio for the Mile High Ski and Snowboard Shop. SUBMITTING YOUR WORK When you complete all five parts of your project, you must submit all of your work to the school. Keep in mind that the results of this project will be graded. Once you ve completed all five parts of this assignment, log in to the student portal at To log in, you will need the username and password that you received via . From the Student Portal page, enter your username and password (Figure 1). Then click Login. 102 STATEMENTS, CONTROLS, AND RECORDS

5 Figure 1 The Home or Dashboard page of the Student Portal displays. To access your courses, click Courses in the upper right-hand banner (Figure 2). Figure 2 STATEMENTS, CONTROLS, AND RECORDS 103

6 Click on Courses to access your My Workspace page (Figure 3). Click on More Sites and navigate to the final segment of your program (Figure 4). Figure 3 Figure 4 Click on Assignments on the left-hand navigation menu (Figure 5). Figure STATEMENTS, CONTROLS, AND RECORDS

7 Click on the link for your graded project under Assignment title in the center of your screen (Figure 6). Figure 6 Click on the Choose File button at the bottom of the page to locate and attach your finished project. When you ve attached your file, check the Honor Pledge box to confirm that you re submitting your own work for the assignment. Then click Submit (Figure 7). Figure 7 STATEMENTS, CONTROLS, AND RECORDS 105

8 You ll see a confirmation message that tells you your project has been successfully submitted to the school (Figure 8). Figure STATEMENTS, CONTROLS, AND RECORDS

9 Grading Rubric: Spreadsheet Applications for Bookkeeping Part 1: Adjusted Trial Balance Part 2: Aggregation of Income Account Part 3: Income Statement/ Vertical Analysis Part 4: Aggregated Balance Sheet Part 5: Balance Sheet and Key Ratios Grading Considerations Points/Actual Points/Actual Points/Actual Points/Actual Points/Actual Student made a reasonable attempt to complete the project component. Student used correct Excel template (or manual worksheet) and saved properly for submission. Student accurately identified required data for each statement or balance sheet. Student accurately completed all statements and balance sheets per answer keys. 2/ 2/ 2/ 2/ 2/ 3/ 3/ 3/ 3/ 3/ 5/ 5/ 5/ 5/ 5/ 10/ 10/ 10/ 10/ 10/ Total Points Possible Total Points Earned (Each Part) Sum of Points from Parts 1 5 = (Project Grade) Total Grade = STATEMENTS, CONTROLS, AND RECORDS 107