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CASE STUDY Events During January Event Date 1 January 3 Employees are paid monthly on the first business day of the month for work done in the previous month. (Ignore payroll taxes for this assignment) Accounting wrote and distributed the paychecks 2 GBI received $60,000 in safety product inventory and $40,000 in raw materials from Dallas Bike Basics. This inventory was ordered on December 28. The payment terms for the invoice total of $100,000 are net 10 days. GBI paid the CWX shipping company $1500 with a manual check for the shipment of the goods base on the weight. The bill of lading showed that the safety product inventory arrived in 5 boxes with an average weight of 40 lbs per box. and the raw materials came on a pallet and weighed 300 lbs Windy City Bikes in Chicago, IL ordered $22,500 of bicycle accessories from GBI. The cost of the accessories (to GBI) is $15,000. The goods were shipped to Windy City immediately via UPS using Windy City\'s UPS shipping number. The terms of payment for Windy City\'s order are 3/10 net 30 days. 3 GBI received payment of $24,000 from Northwest Bikes in Seattle, WA for the balance due on their account. 4 January 7 GBI\'s account on the utility company website is updated at the end of each month when the meter is read. GBI uses this data to accrue the expenses at the end of each month (in this case on December 31st) This allows recognition of the expense in the correct period. Expenses are usually accrued at the end of the month as Accrued Expenses\". GBI paid the December utility bill via the company\'s automatic electronic bill pay program 5 January 10 GBI\'s advertisement in the English language edition of Italian Cycling Journal was published today. This ad was prepaid at the end of August for six months of advertising, September through 6 February, (Four months of advertising have already been used.) The office manager in San Diego ordered $380 of office (operatin supplies from Staples. While on the way back from a delivery, one g) 7 January 11 e warehouse staff picked up the Staples order and brought it to GBI\'s office. GBI has an account with Staples and payment terms are net 10. Operating supplies expense is figured at the end of the month determined by the amount of supplies used during the month GBI ordered $75000 in raw materials from Space Bike Composites in Houston, TX. Terms of payment to Space Bikes are net 30 ©SAP AG

Solution

Date Particulars Debit Credit January 3 Payable - Salaries & Wages           94,313                   Bank           94,313 January 3 Finished Product Consumption expense           60,000 Raw Material Consumption expense           40,000                   Accounts Payable (Direct Posting Account)         100,000 Cost of goods sold           15,000                   Inventory - Trading goods           15,000 January 3 Finished Product Consumption expense (1500/340*40)                176 Raw Material Consumption expense (1500/340*300)             1,324                   Bank             1,500 January 3 Accounts Receivable (Direct Posting Account)           22,500                   Sales Revenue           22,500 January 7 Bank           24,000                   Accounts Receivable (Direct Posting Account)           24,000 January 10 Accrued Expenses             2,200                   Bank             2,200 January 10 Advertising Expense             1,200                   Prepaid Advertising             1,200 January 11 Supplies Expense                380                   Accounts Payable (Direct Posting Account)                380 January 11 Bank           21,825 Sales Discount                675                   Accounts Receivable (Direct Posting Account)           22,500 January 12 Accounts Payable (Direct Posting Account)        100,000                   Bank         100,000 January 13 Production Machinery, Equipment and Fixtures (7500+1300)             8,800                   Bank             2,000                   Accounts Payable (Direct Posting Account)             6,800 January 17 Accounts Payable (Direct Posting Account)           15,890                   Bank           15,890 January 17 Accounts Receivable (Direct Posting Account)        128,000                   Sales Revenue         128,000 Cost of Goods Sold           78,000                   Inventory - Finished Goods (Direct Post)           78,000 January 17 Raw Material Consumption expense           75,000 Shipping Expense                600                   Accounts Payable (Direct Posting Account)           75,600 January 17 Bad Debts Expense             4,200                   Accounts Receivable (Direct Posting Account)             4,200 January 18 Bank           90,000                   Accounts Receivable (Direct Posting Account)           90,000 January 19 Accounts Payable (Direct Posting Account)                380                   Bank                380 January 19 Accounts Receivable (Direct Posting Account)             2,963                   Sales Revenue             2,750                   Accrued Tax - Output                213 Cost of Goods Sold             1,300 (Adjusting Entry)                  Finished Goods             1,200                   Bank                100 January 25 Prepaid Advertising             9,000                   Bank             9,000 January 26 Accounts Receivable (Direct Posting Account)           27,000                   Sales Revenue           27,000 Shipping Expense                400 January 27 Accounts Payable (Direct Posting Account)           32,000                   Bank           32,000 January 31 Prepaid Rent             4,000                   Bank             4,000 January 31 Accounts Payable (Direct Posting Account)             6,800                   Bank             6,800 January 31 Accounts Receivable (Direct Posting Account)        358,500                   Sales Revenue         358,500 January 31 Bad Debts Expense             8,081 (Adjusting Entry)                   Allowance for Bad Debts             8,081 January 31 Supplies Expenes             8,212 (Adjusting Entry)                   Inventory-Operating Supplies             8,212 January 31 Depreciation Expense             5,760 (Adjusting Entry)                   Accumulated Depreciation - Machinery (Direct Post)             5,760 January 31 Utilities (electricity & phone) Expense             2,200 (Adjusting Entry)                   Accrued Expenses             2,200 January 31 Insurance             3,000 (Adjusting Entry)                  Prepaid insurance             3,000 January 31 Labor           94,313 (Adjusting Entry)                  Payables - Salaries and wages           94,313 Rate of Depreciation on Opening Balance Accumulated Depreciation - Machinery (Direct Post)           48,000 Production Machinery, Equipment and Fixtures (Direct post)        408,000 Rate             11.76 Depreciation for the month of January on Opening balance             4,000 Depreciation on Bar-code System             1,760 Total Depreciation for the Month of january             5,760