Happy-Go-Lucky Corporation – Shadow Valley Golf Course
Part III –June 2012
Due Wednesday May 8, 2013
Description of Part III:
As with Part I and II, Part III is to be completed using the Double-Entry accounting software. Students will work in teams of two. This part of the project will entail preparing transactions for entry into the Happy-Go-Lucky Company books. To assist you with the required calculations a Calculation Template has been included as a Tab in the June Excel Template. The Template includes calculation forms for the following:
Calculation of Golf Lesson Unearned Revenue to recognize for June
Interest Expense on the Note Payable
Depreciation on the Golf Course Fix Assets
Calculation of Gain/Loss on Sale of Golf Carts
Calculation of the Allowance for Doubtful Accounts
Calculation of Income Tax Expense
Part III – Business Events and Transactions for June 2012 (Month 3)
Record the following to complete transactions that were accrued/deferred in May 2012:
June 1, 2012: Paid May accrued interest to Bank.
June 4, 2012: Happy-Go-Lucky Corporation recorded the cash collected on its accounts receivables. The company collected $148,705 of the outstanding May receivables.
June 7, 2012: Happy-Go-Lucky paid its outstanding accrued May payroll of $2,000 plus an additional $2,500 for salaries incurred between June 1 and June 6.
June 7, 2012: Happy-Go-Lucky paid the outstanding accounts payable as of May 31, 2012 of $141,820. The full amount owed for May was paid.
June 8, 2012: Happy-Go-Lucky paid $2,750 maintenance expense for the first week of June.
June 2012 Transactions:
Record the following transactions that occurred during the month of June on June 30, 2012 unless listed otherwise. Some transactions are cash and some accruals/deferrals:
• Happy-Go-Lucky determined that they needed to buy office supplies for the first time in June. On June 1st they purchased $1,850 in supplies from Office Depot and paid for it in cash. You will need to create an asset account called “Office Supplies”.
• Happy-Go-Lucky had excess cash on hand and decided it would be in their best interest to pay down part of their loan with Stearns Bank. Pay down the note $35,000 on June 1st.
• With the onset of the warm weather in June, total Greens Fees Revenues collected in cash for the month was $40,000.
• Total Rental Fees for golf clubs, carts, etc. collected in cash for the month were $12,500.
• Additional golf course maintenance expenses for the month paid by check on June 23rd were $21,000.
• Happy-Go-Lucky has finished the last two weeks of golf lessons for the students that paid in April (4 weeks of revenue earned in May and 2 weeks in June). The golf students who paid in May began their lessons in June. So they have earned 4 of the six weeks that the students paid for May. Record the golf lesson revenue earned during the month of June.
• Payroll accounting (see Chapter 8): The salary expense for rest of June was $12,000. Payroll withholdings for the employees’ federal, state and FICA withholdings totaled $2,000 which was accrued at month end for payment in July. This resulted in the net payroll paid to employees of $10,000 on June 30. Record the payroll entry as one journal entry. Credit the “Payroll Taxes Payable” account for the withholdings and cash for the net payroll the employees received. You will need to create the "Payroll Taxes Payable" account.
• Calculating and recording depreciation expense (See Chapter 7): Happy-Go-Lucky records depreciation expense every quarter (3 months of depreciation expense.) The depreciation method, asset life and salvage value are summarized below:
Asset Depreciation Method Useful Life Salvage Value
Pro Shop building Double Declining Balance 50 years $10,000
Maintenance Equipment Double Declining Balance 20 years $15,000
Golf Carts Straight- line 10 years $2,000
The depreciation calculation is made by calculating the annual depreciation amount and dividing it by 4 to get the amount for the quarter.
The company keeps separate accumulated depreciation accounts for each type of fixed asset. For example the journal entry for the Building Depreciation would be:
Accumulated Depreciation – Building
While the accumulated depreciation is recorded in separate accounts all the depreciation expense is recorded in a single Depreciation expense account.
• Management has decided that they purchased more golf carts than they actually need and has decided to sell six of the golf carts. The golf carts were sold for $11,750 cash. The transaction was completed on June 30th. Prior to the sale Happy-Go-Lucky depreciated and recorded the depreciation (see transaction above) on these golf carts before they sold them. If there is a gain on the sale you need to create a revenue account "Gain on the Sale of Assets." If there is a loss on the sale you need to create an expense account "Loss on the Sale of Assets."
Sale Price Cost Depreciation
$11,750 $14,400 Student Calculates
• Inventory Transactions: Journal Entries are needed for the transactions involving Inventory sold in the Pro Shop. The information to prepare the journal entries should be calculated by using the inventory purchases and sales worksheet information included in the Excel file. The FIFO Excel Worksheet can also be used to help calculate these entries. These 3 entries include:
1. Record the total sales for the month of June. All sales made at the Pro Shop are sold on account. The accounts receivable are due at the beginning at the following month. Use the Accounts Receivable and Sales accounts,
2. Record the total Cost of Goods Sold for the month of June. (To make this calculation you will need to complete the FIFO Inventory Worksheet).
3. Record the total purchases for the month of June. All purchases are made on account and due at the beginning of the following month.
Record June 2012 Month End Adjusting Entries:
• Accrue the Interest Expense on the Note Payable for June 2012 (Use the Excel Calculation Template).
• Happy-Go-Lucky must record the expense for insurance used during June 2012.
• At the end of the month, additional Maintenance Expense of $3,000 was incurred, but not yet paid.
• Office Supplies on hand as of June 30th were $500. You will need to create an Office Supplies Expense account to adjust the Office Supplies account set up on June 1st to the actual supplies on hand.
• Inventory Shrinkage: The Company took a physical inventory on June 30, 2012. The items physically on hand agreed to the perpetual inventory records (Excel FIFO worksheets) for the golf clubs, golf shoes and golf balls. However 4 golf bags were missing.
The physical inventory count was 4 bags lower per the physical inventory than shows on the perpetual inventory records.
FIFO WKSHT Inventory
Golf Bags 19 15
The company has begun an investigation. However, despite the outcome of the investigation, the perpetual record for the golf bags needs to be adjusted. Set up an account called “Inventory Shrinkage” as an expense account. Write off 4 golf bags by making an adjustment to the Excel worksheet and making an adjusting entry in the accounting software to reduce Inventory and increase the Inventory Shrinkage account for the value of the missing golf bags.
June Bank Reconciliation: July 5th 2012
Happy-Go-Lucky received the bank statement from its bank for June 2012. The bank statement for Happy-Go-Lucky showed a balance of $105,050 as of June 30. The book balance for cash is $105,480.
An examination of the bank statement disclosed the following:
• Outstanding checks totaled $1,400
• The bank had issued a $300 debit memo for two insufficient funds (NSF) checks.
• Deposits in transit were $1,500.
• The bank issued a debit memo for services fees to the company of $30.
A. Reconcile the balance shown on the bank statement with the unadjusted balance of the company's cash account.
B. Prepare the general journal entry necessary to adjust the cash balance per books to the true cash balance. Date this Journal entry as June 30, 2012.
• Setting up an Allowance for Doubtful Accounts (Chapter 5): Happy-Go-Lucky made the following estimates related to its Accounts Receivable accounts. The Company uses the “Aging of Accounts Receivable” method to establish its allowance for bad debts. The company had the following information available at the end of June to set up the allowance for bad debts and record bad debt expense:
Current Receivables 30 Day Receivables (outstanding < 30 days) (outstanding > 30 days) Receivables $211,330 $12,542 Percent estimated to be uncollectable 1% 5%
• Round the required journal entry to the nearest dollar (don’t put cents in your dollar amounts)
• Uncollectable Account Write-off: The Company decided that the $600 NSF check from the April 2012 bank reconciliation was uncollectible and wrote the checks off against the Allowance for Bad Debts account.
• Calculating Income Tax Expense: Happy-Go-Lucky needs to accrue income tax expense for the quarter ending June 30th. To calculate income tax expense you must:
1) Complete all journal entries for the month (except for the income tax journal entry).
2) Determine the total net income for the quarter ended June 30th (Print an income statement for the quarter (April 1st thru June 30th).
3) Multiply the net income for the quarter by a 30 % tax rate..
4) Record this entry on June 30th.
Income Tax Expense
Income Tax Payable
You will need to set up the two related accounts - Income Tax Expense and Income Tax Payable.
5) Print out the Income Statements and Balance Sheet as discussed below:
Requirements Due Wednesday, May 8, 2012:
Here is the list of documents you will need to print and turn in for Part III. Staple the documents in the exact order as you see them listed. Also make sure your group member names are on the front of the Bank Reconciliation as well as on each of the accounting software printouts.
Part III – June
Print these from the Excel file:
• Calculations Template
• June Bank Reconciliation
• Statement of Cash Flows
• June Student FIFO
• Statement of Cash Flows
Print these from the Double Entry Accounting Software:
• Trial Balance
• Income Statements - June (June 1 - June 30) and Quarter (April 1 – June 30)
• Balance Sheet as of June 30, 2012