Monthly Accounting Transactions
Next, you will be reviewing a series of events that have occurred during the month of January 20YY and recording and posting as appropriate the necessary journal entries.
DESCRIPTION OF EVENTS OCCURRING during January, 20YY
|#||Date||Description of Event|
|1||January 2, 20YY||Employees are paid on the first day of the month for work performed during the previous month (because of the New Year’s holiday, this month they are paid on the 2nd). Total wages paid on this date were $38,000. (Ignore payroll taxes for this assignment.)|
|2||January 2, 20YY||Cottonwood paid rent for the current month. The amount of the payment was $10,000.|
|3||January 4, 20YY||Cottonwood signed and paid for an annual advertising agreement with the PRCA for banner ads on the PRCA website. Cottonwood’s advertisements will be posted to the website starting in April 20YY and run until March 31, 20YY+1. The amount of the agreement is $7,000.
|4||January 7, 20YY||Cottonwood receiveda shipment of event merchandise from the Rodeo Outfitters Company. This merchandise was ordered on December 15th and was delivered by Viking Freight. Rodeo Outfitters paid Viking for the shipping charge of $812. Cottonwood is to pay Rodeo Outfitters $96,000 based on terms of net 30.|
|5||January 8, 20YY||Cottonwood received an order from the FFA rodeo in LaJunta Colorado, (LJ FFA), for $17,000 in event merchandise. The Cottonwood customer service representative confirmed that the LJ FFA Rodeo’s account was paid current and they had sufficient credit available to cover the new sale. The order was then sent to the warehouse where it was picked and prepared for shipping. The merchandise was shipped via UPS at a cost of $215, which was paid by Cottonwood. Cost of the merchandise shipped was $12,500. Terms of the sale are net 30.|
|6||January 12, 20YY||Alamo Conference Center in Texas placed an order with Cottonwood via email. Cottonwood’s sales rep wrote up the order, checked their credit and sent the order information to the warehouse for shipping. The sale amount was $108,100, which included $90,320 in resale merchandise and $17,780 in event merchandise. The cost of the resale merchandise was $60,418 and the cost of the event merchandise was $13,953. The goods were shipped that day. Cottonwood paid the shipping expense of $897. Payment terms for the order are net 15.|
|7||January 14, 20YY||Cottonwood paid the invoice for the items from Rodeo Outfitters received on January 7th.|
|8||January 16, 20YY||After extensive collection effort including having a collection agency contact the party, Cottonwood was notified today that the Fly-by-Knight Rodeo has gone out of business. They owed Cottonwood $2,000 on account. Cottonwood now deems that debt as being uncollectible and removes it from their books. Note the company uses an Allowance for Doubtful Accounts account.|
|9||January 19, 20YY||Cottonwood received customer checks totaling $13,110 for payment on outstanding accounts.|
|10||January 20, 20YY||Cottonwood remitted (paid) any sales tax collected in the prior quarter to the State of California. (Note: Sales tax is collected and paid quarterly).|
|11||January 23, 20YY||The FFA Rodeo in LaJunta Colorado (January 8th) returned $5,000 in event merchandise as excess merchandise. The merchandise was inspected and restocked. FFA is given a credit to their account for the returned merchandise. The credit is for the $5,000 minus a 10% restocking fee. The cost of the goods is $2,500. FFA LaJunta paid the return shipping of $58. (Note: Restocking Fees are accounted for as Misc. Revenue.)|
|12||January 31, 20YY||Employee’s payroll is calculated for the month. The January salary expense is $37,000. This amount is to be paid on February 1, 20YY. Ignore payroll taxes.|
Using these account balances and additional adjustment information below, record adjusting journal entries. Adjustment information as of January 31, 20YY not already given in the original transaction(s):
1. Warehouse and office equipment was placed in service on January 1, 20YY-5 and is expected to last 10 years and has no salvage value. Cottonwood depreciates fixed assets on a straight-line Depreciation is rounded to the nearest dollar and assets are depreciated on a monthly basis (i.e. number of days in the month is not of consequence).
2. On February 2, Cottonwood received a $3,500 bill from PG&E for utilities consumed during January and the January AT&T bill in the amount of $350. The items are both treated as utility expense.
3. Liability insurance for the 20YY fiscal year was paid at the end of November 20YY-1. Liability insurance is assumed to be utilized uniformly monthly over the one-year policy period.