Rock Ram Practice Set Instructor M. Kelley ~ Spring 2019 Student Name: ____________________________ Class Section#: _____________ Written by Maureen Crane, CSU Fresno and modified by FCC Accounting...

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Rock Ram Practice Set Instructor M. Kelley ~ Spring 2019 Student Name: ____________________________ Class Section#: _____________ Written by Maureen Crane, CSU Fresno and modified by FCC Accounting Department (updated – 1/19) FINANCIAL ACCOUNTING PRACTICE SET INDEX Introductions & Directions 1 – 3 Transaction Information 4 Adjusting Journal Entry Information 5 Beginning Trial Balance as of November 30, 2018 6 General Journal Entry Sheet 7-8 General Ledger 9-14 Worksheet …. 15 Adjusting Journal Entry Sheet 16 Income Statement and Statement of Retained Earnings 17 Classified Balance Sheet 18 Closing Journal Entry Sheet 19 Post-Closing Trial Balance 20 Financial Ratios 21 Rocky Ram, Inc. Practice Set Overview December 2018 Rocky Ram is a small company started by two Fresno City College business students who grew tired of paying high prices for textbooks. The main purpose of the business was to acquire used textbooks at discounted prices from other students. The used textbooks would be resold to other students who needed the same textbook. Rocky Ram acquired a limited inventory of used textbooks to sell to other students locally and across the country. Customers can pick up the books from the company or the company ships the books via FED Ex at the customer’s expense. The business did fairly well, and after graduation, they decided to incorporate the company to solicit more investors to assist in expanding the business. In 2018, the corporation grew tired of paying accounting fees to a local accounting firm to do the monthly accounting. The company management thought they could save money and give back to their alma mater by hiring a Fresno City College student who had successfully completed the Financial Accounting course. An accountant would only have to review the work of the student, hence, reduce monthly accounting fees. For the month of December 2018, you will be the student they have hired to do the accounting. Based on what you have learned in your Financial Accounting course, you should be able to record and communicate the financial activities of Rocky Ram, Inc. You will be journalizing Rocky Ram, Inc.’s transactions, posting the transactions to the general ledger, preparing adjusting and closing journal entries, preparing financial statements, posting adjusting and closing journal entries, and preparing trial balances for the entire month. Instruction Steps Complete each of the following steps in order (assume Rocky Ram uses a perpetual inventory system). Be sure to complete each step before you begin the next step. 1 Prepare the journal entries (if needed) to record the December 2018 transactions found on page 4. The journal entries should be written on the “General Journal” pages provided on pages 7-8 of this practice set. Remember to skip a line between each journal entry and use J1, J2, J3, etc, instead of the date. 2 After you have prepared all of the necessary entries in Step #1, post these entries to the general ledger found on pages 9-14. In the general ledger the first two columns are used to post the applicable debit or credit amount from the journal entry. The second debit and credit columns are balance columns that show the balance of the applicable account. In the post ref (reference) column of the general ledger, use the journal entry number as the reference for each entry. J1 for the first entry, J2 for the second entry and so on. Explanations are not required in the general ledger, but are recommend for customer name or vendor name for Accounts Receivable and Accounts Payable accounts, respectively. 3 After all of the account balances have been determined, enter the balance of each account in the general ledger to the debit or credit unadjusted trial balance columns of the worksheet. 4 Total the unadjusted trial balance columns of the worksheet. Total debits must equal total credits. The purpose of the trial balance is to prove the equality of debits and credits. If total debits do not equal total credits, you are out of balance and must find the difference. The following are possible explanations to determine errors: · Only posting a portion of the journal entry; look for a transaction that includes the amount of your difference and verify that both the debit & credit amounts have been posted to the correct accounts. · A debit may have been posted as a credit or vice versa; divide the difference by 2 and look at any transaction that includes that amount to verify that debits & credits are posted correctly. · Double-check the math computations. 5 Use the adjusting journal entry information found on page 5 of this practice set to prepare the formal adjusting journal entries as of December 31, 2018 on page 16. Remember to skip a line between each adjusting journal entry and use AJ1, AJ2, AJ3, etc, instead of the December 31, 2018 date. 6 Then use the adjusting journal entries to complete the adjustments columns on the worksheet. Be sure to include the appropriate reference for each debit and credit entered, i.e. 1), 2), 3), etc. 7 Total the debit and credit adjustment columns on the worksheet. Debits must equal credits. If debits do not equal credits check for the common errors suggested in Step #4. 8 Calculate the adjusted trial balance amounts in the appropriate columns of the worksheet, by taking the amounts from the unadjusted trial balance and adding or subtracting the adjustment amount to compute the adjusted balance for each account on the worksheet. 9 When the worksheet’s adjusted trial balance columns are in balance, complete the remainder of the worksheet. Income statement (revenues and expense account balances are carried over to the appropriate income statement debit or credit columns and balance sheet (asset, liability and equity) account balances are carried over to the appropriate balance sheet debit or credit columns. (See pages 133-135 in your textbook for an example.) 10 Total the income statement columns and the balance sheet columns. Debits will not equal credits when you compare the income statement columns and the balance sheet columns. The difference between the debit and credit columns of the income statement is the net income. This must be the same difference when you compare the debit and credit columns of the balance sheet. 11 Post adjusting journal entries to general ledger and balance each accounts in the general ledger. Adjusted balances per the general ledger should agree to adjusted balance per the worksheet. 12 Prepare a multiple-step income statement and statement of retained earnings for the year ended December 31, 2018. Example of these statements can be found in your text, see the Brief Review: Financial Reports and Tables (BR-2) 13 Prepare the classified balance sheet as of December 31, 2018. 14 Prepare the closing journal entries on the sheet found on page 19 to close all temporary accounts (i.e. revenue, contra-revenues, expenses, and cost of goods sold; and close the dividends and income summary accounts). Remember to skip a line between each journal entry. 15 Post the closing entries to the general ledger. In the post ref. column use CJ1 for the first closing journal entry and so on as the reference. 16 Prepare a post closing trial balance on page 20. The total debit must equal total credit and the balance must agree to your general ledger balances. 17 Calculate the following ratios for the year ended December 31, 2018 (be sure to show your computations in the spaces provided): a. Current Ratio b. Working Capital c. Profit Margin Percentage d. Debt to Total Assets Ratio Rocky Ram, Inc. December 2018 Transactions 1 On December 1, Rocky Ram, Inc. received $17,000 from Kanga Roo Inc. for partial payment of account. (First entry journalized and posted for you.) 2 On December 1, Rocky Ram, Inc. received $9,000 in advance for renting office space to Bullwinkle, Inc. for the December 1, 2018 through February 28, 2018. 3 On December 6, Rocky Ram, Inc. issued checks to Acne Corporation for $12,000, Bow & Arrow, Inc. for $8,000, and Boa Construction Inc. for $15,000 in payment on accounts. 4 On December 10, the company purchased supplies in the amount of $4,000 on account from Boa Construction Inc. (FOB Shipping Point, terms n/10, n/30), order shipped in December. 5 On December 10, Rocky Ram, Inc. received a check in the amount of $30,000 from Poodle & Co. in payment of account. 6 On December 15, Rocky Ram, Inc. made a sale in the amount of $80,000 to Poodle & Co (terms 2/10, n/30). The cost of the inventory sold was $55,000. 7 On December 17, Board of Directors declared $8,200 in dividends to be paid in January. 8 On December 20, the company paid employees $31,000 for wages earned during the period from December 1 through December 15, 2018. 9 On December 25, received full payment from Poodle & Co. for sale made December 15 (J6), within the discount period. 10 On December 25, Rocky Ram, Inc. made a sale in the amount of $140,000 to Bulldog Inc. (terms 2/10, n/30). The cost of the inventory sold was $90,000. 11 On December 28, Bulldog Inc. returned goods purchased on December 25, in the amount of $14,000. The cost of inventory was $9,000. 12 On December 28, Rocky Ram, Inc. ordered inventory from Bow & Arrow, Inc. in the amount of $50,000 (FOB Destination, terms 2/10, n/30), inventory is expected to arrive sometime in January. 13 On December 31, the company purchased office equipment costing $60,000. They paid $15,000 down on the equipment and signed a promissory note for the remaining balance. The note is due March 31, 2018. 14 On December 31, Rocky Ram, Inc. paid utility bills totaling $10,000 for utilities used during the month of December. Rocky Ram, Inc. Information for Year End Adjusting Journal Entries December 31, 2018 1 The building (cost of $180,000) was purchased on January 1, 2017 and it is expected to have a useful life of 30 years with no salvage value. Depreciation expense has been recorded through November 30, 2018. 2 Office equipment (cost of $130,000) as of November 30, 2018 was purchased on January 1, 2015. The office equipment is expected to have a useful life of 10 years with $10,000 salvage value. Depreciation expense has been recorded through November 30, 2018. 3 Insurance in the amount of $6,000 was paid