oddfalls practice set

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Odd Falls Trading Company

A Practice Problemfor

ACC 2301

University of Houston - Downtown

Profits on the sale of this practice set will be deposited in theAccounting Excellence Fund to benefit accounting and business students

INTRODUCTIONThis short practice problem gives you, the student, an opportunity to practice the accountingconcepts and skills acquired in an introductory financial accounting course. The objective of thepractice problem is to have you complete a comprehensive example of the accounting cycle.You will evaluate transactions, use the general journal to record events, adjust the accounts,close the temporary accounts, maintain an ongoing general ledger, prepare a worksheet andprepare financial statements.

In following the instructions for the Practice Problem, keep in mind that an accountant prepares accounting

records in a neat fashion and in proper format. If you prepare this practice set by hand, using a pencil for the

accounting work gives you a better opportunity to maintain neat records.

COMPANY OPERATIONSThe Odd Falls Trading Company, a sole proprietorship owned by Max Gator, began operations atthe beginning of the month in SmallTown, Texas. Odd Falls sells items such as small officemachines, office supplies, magazines, make-up, hair products, etc. and is located in a newshopping mall. Odd Falls sells on account to some customers and on a cash basis to other

customers.

Odd Falls has retained you to install the companys manual accounting system, to implement

the system, to maintain the companys accounting records, and to produce monthly financial

statements. The accounting system for accounting records and financial statements includesthe general journal, general ledger accounts, the worksheet, the Multiple-Step IncomeStatement, the Statement of Owners Equity, and the classified Balance Sheet.

Additionally, Odd Falls has asked you to prepare the unadjusted trial balance, theadjusted trial balance, and the post-closing trial balance.

ACC 2301 OddFallsPractice Set Information 1


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Odd Falls Trading Company, continued

Odd Falls Trading Company specifies these accounting method choices:1 -- use the gross method to record all purchases and all sales;2 -- special journals or subsidiary ledger accounts are not yet needed;3 -- do not make any provision for income taxes since this is the first month of operations;

4 -- use the perpetual inventory method;Hint: Determine the cost per unit foreach inventory purchase.

5 -- record inventory cost valuation on a FIFO basis;6 -- use the accounts receivable method for computing bad debt expense;7 -- take a full month of depreciation for assets purchased in the first half of the month;8 -- take a half-month of depreciation for assets purchased in the second half of the month.

REQUIREMENTS

As the accountant for Odd Falls Trading Company, you must1 -- Record the transactions for the month in the general journal.

2 -- Post the general journal entries to the general ledger accounts andalso provide the proper referencing and running totals.

3 -- Prepare the trial balance, based on the ledger balances, before adjusting entries are made.4 -- Prepare the worksheet.5 -- Prepare any necessary adjusting journal entries to the general ledger accounts.6 -- Post the adjusting journal entries to the general ledger accounts.7 -- Prepare the adjusted trial balance, based on the ledger balances.8 -- Prepare the closing journal entries as of the month end.9 -- Post the closing journal entries to the general ledger accounts.10 -- Prepare the post-closing trail balance, based on the ledger balances.11 -- Prepare the financial statements, including the

Multiple-step Income StatementStatement of Owner's Equityclassified Balance Sheet



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Odd Falls Trading Company, continued

CHART OF ACCOUNTS

Accountum er ccount

101 Cash105 Accounts Receivable

106 Allowance for Doubtful Accounts

108 Inventory

110 Office Supplies

120 Prepaid Rent

123 Prepaid Insurance

125 Store Fixtures

126 Accum. Depr.-Store Fixtures

130 Office Equipment

131 Accum. Depr.-Office Equipment200 Accounts Payable

205 Salaries Payable

210 Interest Payable

215 Notes Payable

300 Capital

305 Withdrawals

400 Sales Revenue

402 Sales Returns and Allowances

404 Sales Discounts

501 Cost of Merchandise Sold

510 Salaries Expense

512 Freight-Out

514 Depreciation Expense

516 Rent Expense

518 Bad Debts Expense

520 Utilities Expense

525 Supplies Expense

530 Insurance Expense

535 Interest Expense

540 Bank Charges Expense

NOTE: All accounts are specified. Do not create any new accounts.

List each account, in numerical order, in the general ledger.

Each account listed on any trial balance or the worksheet should be listed in numerical order.



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Day The Odd Falls Trading Company

1 Max Gator contributes the following as start-up capital for The Odd Falls Trading CompanyCash 40,000.00$Equipment (to be depreciated on the straight-line basis) 30,000.00$The equipment is estimated to last the following number of years 9The estimated salvage value at the end of the estimated life will be 3,000.00$

1 Max hires a store clerk to help with stocking of inventory and sales. Max will pay the clerk a monthly salary of 2,200.00$Max has instituted a payroll process of paying employees on the first and fifteenth of each month.

1 Odd Falls borrows cash from the Small Town Bank in the amount of. 50,000.00$The loan is for one year at the following interest rate of 4%

3 Odd Falls finds rental space in the newest mall in town.Odd Falls pays M & M Realty the following rent for this month and the next four as well) 10,000.00$Total months of initial lease 5

5 Odd Falls pays cash to Office Depot for office supplies in the amount of 700.00$

7 Odd Falls orders inventory on credit from Texas Novelties with payment terms of 2/10, n/30.The order was for the following number of items 400The order cost for each item was 30.00$The total order on account from Texas Novelties was 12,000.00$

9 After inspecting the inventory, Odd Falls returns the following number of items due to defects in quality 50Therefore, the total amount of inventory returned to Texas Novelties was 1,500.00$Odd Falls will not expect a refund for any freight charges paid by Odd Falls related to this return of inventory

14 After proper consideration of the discount terms, Odd Falls pays for the inventory purchased on account

15 Odd Falls makes a sale on account to Valley High School (terms 2/10, n/30, FOB destination)The sale was for the following number of items 300The sale price for each item was 40.00$The total sale on account to Valley High School was for 12,000.00$

ACC 2301 OddFalls

Practice Set Transactions 4


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15 Odd Falls paid Cajun Shipping to ship the goods to Valley High. Odd Falls will not collect this from Valley.The amount paid to Cajun for the shipping cost was 90.00$

15 Odd Falls paid the clerk hired back on the first of the month. Nothing was withheld from the clerk's salary payment.

16 Odd Falls prepays American Republic Insurance Co. for an insurance policy lasting this number of months 3The amount paid to American for the liability and casualty coverage policy was 1,500.00$

16 Odd Falls buys store fixtures from Office Depot in the amount of 20,000.00$

Odd Falls made a cash down payment of 5,000.00$The remaining balance placed on account with Office Depot was 15,000.00$The equipment is estimated to last the following number of years 5The estimated salvage value at the end of the estimated life will be 2,000.00$Odd Falls' fixtures will be depreciated on the double-declining-balance basis

16 Max Gator withdraws the following amount of cash from the company account 2,500.00$

18 Odd Falls receives payment (after discount as appropriate) on the A/R with Valley High

20 Odd Falls orders inventory on credit from Small Town Supply Company with payment terms of n/30.The order was for the following number of items 600The order cost for each item was 20.00$The total order on account from Small Town Supply Company was 12,000.00$

21 When the inventory arrives, Odd Falls pays Small Town Shipping Company directly for the freight bill of 200.00$

22 Odd Falls makes a sale to the Nearby Shrine.The sale was for the following number of items 300The sale price for each item was 40.00$Therefore, the total sale to the Nearby Shrine was for 12,000.00$Cash received from Nearby Shrine at the time of the sale was 8,000.00$The remaining balance placed on account (terms 2/10, n/30) with Nearby Shrine was 4,000.00$

23 Nearby Shrine returned this number of items for full refund; it did not have enough room to store the items. 20

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26 Odd Falls receives a utility bill from Small Town Lighting and Power (due 7th of next month) in the amount of 250.00$

31 Odd Falls received its current month's bank statement, which it was able to reconcile after identifying the following:Service charge by the bank in the amount of 40.00$Fee for new accounts in the amount of 5.00$

31 Additional information as of the end of month includes:Office supplies on hand 200.00$Physical count of inventory on hand of 370Max Gator estimates the following percentage of accounts receivable will be uncollectible 2%

*** Remember that there may be other necessary adjustments in addition to those indicated above.Hint: The chart of accounts might indicate accounts requiring adjustments.

ACC 2301 OddFalls



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The Odd Falls Trading Company

General Journal

Day Account Titles and Explanations Ref. Debit Credit

ACC 2301 OddFallsPractice Set General Journal 7


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General Journal

Day Account Titles and Explanations Ref. Debit Credit



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General Journal

Date Account Titles and Explanations Ref. Debit Credit



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General Journal

Date Account Titles and Explanations Ref. Debit Credit



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General Ledger

Account: CASH Acct. No: 101

Day Explanation Ref. Debit Credit Balance

Account: A/R Acct. No: 105


ACC OddFallsPractice Set General Ledger 11


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The Odd FallsVariety Store

General Ledger

Account: ADA Acct. No: 106


Account: Inventory Acct. No: 108


Account: Office Supplies Acct. No: 110




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The Odd FallsVariety Store

General Ledger

Account: Prepaid Rent Acct. No: 120


Account: Prepaid Insurance Acct. No: 123


Account: Store Fixtures Acct. No: 125




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General Ledger

Account: A/D - Store Fixtures Acct. No: 126


Account: Office Equipment Acct. No: 130


Account: A/D - Office Equipment Acct. No: 131




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General Ledger

Account: A/P Acct. No: 200


Account: Salaries/P Acct. No: 205


Account: Interest/P Acct. No: 210




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General Ledger

Account: N/P Acct. No: 215


Account: Capital Acct. No: 300


Account Withdrawals Acct. No: 305




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General Ledger

Account:Sales Revenue Acct. No:400


Account: Sales Returns & Allowances Acct. No: 402


Account: Sales Discounts Acct. No: 404




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General Ledger

Account: Cost of Merchandise Sold Acct. No: 501


Account: Salaries Expense Acct. No: 510


Account: Freight-Out Acct. No: 512




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General Ledger

Account: Depreciation Expense Acct. No: 514


Account: Rent Expense Acct. No: 516


Account: Bad Debts Expense Acct. No: 518




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General Ledger

Account: Utilities Expense Acct. No: 520


Account: Supplies Expense Acct. No: 525


Account: Insurance Expense Acct. No: 530




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General Ledger

Account: Interest Expense Acct. No: 535


Account: Bank Charges Expense Acct. No: 540


Account: Income Summary Acct. No: 999




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Trial BalanceEnd of Month One

Acct. No. Account Titles Debits Credits


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Adjusted Trial BalanceEnd of Month One



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Post-Closing Trial BalanceEnd of Month One



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Worksheet

End of Month One

Trial Balance Adjustments Adjusted Trial Balance Income Statement Balanc

Acc. # Account Titles Debits Credits Debits Credits Debits Credits Debits Credits Debits

ACC 2301 OddFallsPractice Set


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The Odd Falls Trading CompanyINCOME STATEMENT

For the ending of the first month

ACC OddFallsPractice Set Financial Statements 26


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The Odd Falls Trading CompanySTATEMENT of CAPITAL [or OWNER'S EQUITY]

For the ending of the first month

ACC OddFallsPractice Set Financial Statements 27


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The Odd Falls Trading CompanyBALANCE SHEETFor the first month

oddfalls practice set

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