Assignment Step

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Question: Assignment Step 1. Create journal entries for January transactions (some events may not involve j…
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1. Create journal entries for January transactions (some events
may not involve journal entries) in excel, and then transfer the
entries into T-account ledgers, then trial balance.

Event
Date  Description of
Event

1 January 3 Employees are paid monthly on the first business day of the
month for work done in the previous month. The total payroll for
the previous month is $110,000. (Ignore payroll taxes for this
assignment.) Accounting wrote and distributed the paychecks
2 GBI received $55,692 in safety product inventory and $37,128 in
raw materials from Dallas Bike Basics. This inventory was ordered
on December 28. The payment terms for the invoice total of $92,820
are net 10 days. GBI paid the CWX shipping company $550 with a
manual check for the shipment of the goods. The bill of lading
showed that the safety product inventory arrived in 6 boxes with a
total weight of 120 lbs and the raw materials came on a pallet and
weighed 100 lbs.
3 Windy City Bikes in Chicago, IL ordered $22,000 of bicycle
accessories from GBI. The cost of the accessories (to GBI) is
$15,180. 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 2/10 net 30 days.
4 January 7 GBI received payment of $16,850 from Northwest Bikes in
Seattle, WA for the balance due on their account.
5 January 10 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 of
$988 via the company’s automatic electronic bill pay program.
6 GBI’s advertisement in the English language edition of Italian
Cycling Journal was published today. This ad was prepaid at the end
of July for six months of advertising, August through January,
(Five months of advertising have already been used.)
7 January 11 The office manager in San Diego ordered $350 of office
(operating) supplies from Staples. While on the way back from a
delivery, one of the 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.
8 GBI ordered $99,418 in raw materials from Space Bike Composites
in Houston, TX. Terms of payment to Space Bikes are net 30.
9 GBI received payment from Windy City Bikes for their order from
January 3. Windy City paid the invoice amount less the discount for
paying within 10 days.
10 January 12 GBI paid $92,820 via bank transfer for the inventory order that
they received from Dallas Bike Basics January 3.
11 January 13 In order to better track inventory, GBI ordered a bar-coding
and tracking system which will be installed and tested by Computer
Specialists, Inc. (CSI). The system will allow employees to track
inventory using mobile devices and special software which will link
into their new computerized accounting system. The barcode system
costs $5,995 (including sales tax) and CSI will charge GBI $1,200
for the installation and tests. GBI paid a deposit of $3,000 on the
system and the remainder is due and payable when the system is
installed. GBI will classify the bar-coding system as “Production
Machinery, Equipment and Fixtures”.
12 January 17 GBI paid an invoice from Lightbulb Accessory Kits for ordered
goods that were received on December 20. The amount of the invoice
from Lightbulb is $17,010 due net 30.
13 The city of Denver will be hosting a decathlon at the end of
February. The event is expected to create demand for high quality
bikes. Rocky Mountain Bikes in Denver, CO placed an order with GBI
for $128,130 worth of bicycles to be delivered immediately. Rocky
Mountain will pay the shipping. The bikes cost GBI $79,441. GBI
shipped the order immediately so that Rocky Mountain can start
promoting the bikes. Because Rocky Mountain is a good customer, GBI
is giving them special terms of net 45 days on this order.
14 GBI received raw materials inventory ordered from Space Bike
Composites January 11. Shipping charges of $802 were included in
the $100,220 invoice from Space Bike.
15 GBI received notice that Bunky’s Bicycle Emporium had declared
section 13 bankruptcy which meant GBI would not be able to collect
the $1,610 that Bunky’s owed them
16 January 18 GBI received a $89,960 funds transfer from Silicon Valley Bikes
in Palo Alto for the balance due on their account.
17 January 19 GBI paid Staples for the office supplies they received January
11.
18 SoCal Bikes in Irvine, CA placed an order for $2,300 in bicycle
helmets for a special event in February. The merchandise cost GBI
$1,380. SoCal sent a truck to the GBI distribution center in San
Diego, CA and picked up the merchandise directly from GBI’s
warehouse. Terms of payment are net 30. (Don’t forget to charge
sales tax of 8.75% for this order.)
19 January 24 Beantown Bikes in Boston, MA placed an order with GBI for
$27,450 in bicycles. The cost of the bicycles is $17,092. Beantown
Bikes is a new customer. Its buyers saw GBI’s booth at a trade
show. Because Beantown is a new customer, they must either wait
until their credit can be approved or pay for the order before GBI
will ship the bikes to them.
20 January 25 GBI has been offered the opportunity to advertise in the
Bicycle Times online magazine for a reduced price if they pay for
three months in advance. In light of the upcoming Tour de France,
the advertising is a great opportunity for GBI to get additional
recognition. The advertising will start in February. GBI wrote a
check for $15,000 for three months of advertising.
21 January 26 GBI received notification from their bank that $27,450 had been
transferred to their account from Beantown Bikes, so GBI’s
warehouse personnel shipped Beantown’s order. Beantown will be
responsible for paying Fed-X $360 for shipping the order.
22 January 27 The county approved GBI’s building plans for their new
warehouse. Estimated building costs are $1,050,000 which will be
funded via a mortgage from Bank of America. GBI plans to break
ground on the new building April 18th of this year.
23 GBI sent a $30,890 check to Night Rider Aluminum Products for
an order of bicycle parts GBI received December 30th.
24 Big Apple Bikes in New York City is expanding to another
location in New York and needs to stock the new location. GBI
received a phone order from Big Apple for $232,315 in bicycles and
$108,490 in bicycle accessories and safety gear at special discount
prices. The cost of the bicycles in this order is $169,586 and the
cost of the accessories is $65,094. Big Apple will have a contract
trucking company pick up the order when it is ready. The order is
sent to GBI’s warehouse for picking and packing which may take a
couple days. Payment terms to Big Apple for this order are net
30.
25 January 31 GBI pays sales tax once a quarter via the state’s electronic
filing and payment system. GBI filed its return and paid $3,063 in
sales tax for the quarter ending December 31.
26 GBI paid February’s rent of $4,500 for the office and warehouse
space in San Diego.
27 CSI installed and tested the new barcode system. The warehouse
manager approved the installation and commented that she thinks it
works great. GBI wrote a check to CSI for $4,195 and gave it to the
installer.
28 Big Apple’s truck arrived at GBI’s warehouse and picked up the
order from January 27th.

Adjustment information as of January 31, not already
given in the original transaction(s):

1. Based on prior experience, GBI estimates that approximately ½
% of the net credit sales (gross credit sales minus returns of
credit sales) for the month will become bad debt. GBI writes off
bad debts as they occur and recognizes bad debt expense based on
anticipated bad debts as an adjusting entry each month.

2. As a control measure, physical inventories are taken on a
periodic basis alternating between the raw materials inventory,
finished goods inventory and trading goods inventory. Physical
inventory of the trading goods inventory was taken at the end of
January. It was determined that the value of the trading goods
merchandise on hand was $40,710.

3. GBI counted the office supplies on hand after the close of
business on the last day of the month and determined the cost of
the unused office supplies to be $620.

4. Production Machinery, Equipment and Fixtures were placed in
service on January 1, 2008, are expected to last 15 years with no
salvage value. The bar-code system has a 5 year life and no salvage
value. GBI depreciates fixed assets on a straight-line basis and
those assets acquired in the first half of the month are
depreciated for the entire month, while fixed assets placed in
service during the last half of the month are not depreciated until
the second month. 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).

5. GBI used the Internet to review the monthly charges for
utilities the business consumed during January. Based on the
internet report, the amount to be billed by the utilities company
for January usage is $1,046.

6. Liability insurance for the six month period ending on
February 28 in the amount of $15,000 was paid last August on the
first of the month. Liability insurance is assumed to be utilized
uniformly over the six month policy period.

7. GBI needs to recognize the wages expense for the month. Since
all employees are paid salaries and no changes have been made, this
amount is the same as the previous month salaries. (For purposes of
this assignment, ignore manufacturing and assume all labor costs
will be expensed.)

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