QUICKBOOKS PRO 2008
Workshop 7 – The Paint Place
Mini Practice Set – Working With a Perpetual Inventory System
In this final workshop you will review key concepts for a perpetual inventory system by exploring the features in QuickBooks’ Inventory module. As usual, the tasks in this workshop build on skills learned in previous workshops, so be sure to complete Workshops 1 through 6 before beginning this one.
You will need to download the Paint Place data file for QuickBooks 2008 from the MyAccountingLab website before beginning this workshop. Refer to the Installing QuickBooks Pro and Student Data Files document for instructions on downloading this file.
One of the most powerful features of a computerized accounting system is its ability to maintain perpetual inventory records easily and accurately. You already experienced this in the previous workshop. QuickBooks Pro accommodates only the average costing method of inventory. This means that you cannot use the FIFO or LIFO costing methods.
And now for some background on The Paint Place. This company, owned by Mike Poole, sells various types of paint. The company uses the Inventory module to track inventory and the Customer and Vendor modules to sell and purchase inventory. The Paint Place extends payment terms of 2/10, n/30 to all customers. Likewise, vendors extend the company discount payment terms.
Information on the company’s inventory at February 29, 2008 appears next.
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You are now ready to begin the tasks in the workshop.
1. Open QuickBooks Pro 2008 and then open the company file named The Paint Place.
2. Click Company on the main menu and select Company Information. Add your name or initials to the end of the company name and click OK to store the changes.
Add Your Name to the company Name
Open the Company Data File
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3. You manage inventory items from the Item List. Click Lists on the main menu and select Item List to open the window illustrated next.
4. You will now add a new item. Click the Item button at the bottom and select New.
5. For Type, choose “Inventory Part”.
6. TAB to Item Name/Number and enter “006”.
7. TAB to Description on Purchase Transactions and enter “Oil Flat”.
8. TAB to Cost and the software copies the description to the Description on Sales Transactions field. The Cost field tracks the last price paid to purchase the item. Since this is a new item, you will not change the value supplied.
9. TAB to COGS Account and lookup “5050 Cost of Goods Sold”
10. TAB to Sales Price and enter “16.95”.
11. TAB to Income Account and lookup “4110 Sales”.
12. TAB to Asset Account and lookup “1130 Merchandise Inventory”.
13. TAB to As of and enter “3/1/2008” as the date. The completed item is illustrated next.
Managing Inventory Items
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14. Click OK to store the item.
15. If you need to change information on existing items then simply highlight an item and then click Item to select Edit Item.
16. Click X to close the Item List.
17. Now use your knowledge learned in other workshops to enter the following March transactions. This time we have not labeled the software window to use for transactions.
2008 Mar.
1 Sold the following item to Elaine Anderson on account. Invoice number 5469 for $89.75. Terms of 2/10, n/30. Quantity Item Description 5 Oil Semi‐Gloss
Record Transactions
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2008 Mar.
3 Received invoice number 6892 for $1,504 from Wholesale Paints for purchasing the following item. Terms of 2/10, n/30. Be sure to use the Items tab and change the cost. When asked to update the item cost, check the box to turn off future messages and click Yes. Quantity Item Description Cost 200 003 Latex High‐Gloss $7.52
3 Received invoice number 675 for $906 from Painter's Supply for purchasing the following item. Terms of 2/10, n/30. Quantity Item Description Cost 100 004 Oil High‐Gloss $9.06
4 Sold the following item to Jake Kerns on account. Invoice number 5470 for $89.75. Terms of 2/10, n/30. Quantity Item Description 5 004 Oil High‐Gloss
6 Received check number 8723 for $3,225.13 from Wes Young paying invoice number 5468, less a 2 percent discount of $65.82. Make sure to set the Deposit to account to 1110 Cash.
7 Paid $1,082.84 to Vantage Tints for invoice number 5658, less a 3 percent discount of $33.49. Print on check number 2345.
14 Sold the following item to Elaine Anderson on account. Invoice number 5471 for $169.50. Terms of 2/10, n/30. Quantity Item Description 10 002 Latex Semi‐Gloss
17 Received invoice number 6943 for $1,134 from Wholesale Paints for purchasing the following item. Terms of 2/10, n/30. Quantity Item Description Cost 150 002 Latex Semi‐Gloss $7.56
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2008 Mar.
19 Received invoice number 691 for $1,618.75 from Painter's Supply for purchasing the following item. Terms of 2/10, n/30. Quantity Item Description Cost 175 005 Oil Semi‐Gloss $9.25
21 Sold the following item to Jake Kerns on account. Invoice number 5472 for $179.50. Terms of 2/10, n/30. Quantity Item Description 10 005 Oil Semi‐Gloss
24 Sold the following item to Elaine Anderson on account. Invoice number 5473 for $448.75. Terms of 2/10, n/30. Quantity Item Description 25 005 Oil Semi‐Gloss
25 Received invoice number 787 for $465 from Painter's Supply for purchasing the following item. Terms of 2/10, n/30. Quantity Item Description Cost 50 005 Oil Semi‐Gloss $9.30
31 Sold the following item to Jake Kerns on account. Invoice number 5474 for $718.00. Terms of 2/10, n/30. Quantity Item Description 40 005 Oil Semi‐Gloss
18. You will now view reports on inventory activity. First, look at a report on sales activities. Open the Report Center and select the Sales category. Open the Sales by Item – Detail report illustrated next. Enter “3/1/08” to “3/31/08” as the filtering dates. This report provides unit sales activity for the month.
Displaying and Printing Inventory Reports
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19. Close the report and next open a report covering purchase activities. Choose the Purchases category and open the Purchases by Item ‐ Detail report illustrated next. Enter the filtering dates illustrated. This report shows units purchased during the month along with purchase price.
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20. Close the report.
21. Next, select the Inventory category and open the Inventory Valuation ‐ Summary report illustrated next. Enter the filtering date of “3/31/08”. This report shows the ending value of inventory at March 31 and the Asset Value total on this report should reconcile to the March ending balance in the inventory general ledger account.
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22. Close the report.
23. We will look at one last report. Open the Physical Inventory Worksheet illustrated next. This report is used when conducting a physical count of inventory. Although the software tracks item quantities, companies must still conduct a periodic physical count to confirm that physical quantities reconcile to software quantities. In addition, physical counts will identify damaged or obsolete items.
24. Close the report and the Report Center.
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25. Let us assume that The Paint Place conducted a physical count of inventory and discovered that two items of Latex Flat paint were damaged. You will now post this adjustment to inventory.
26. Click Vendors on the main menu and point to Inventory Activities to select Adjust Quantity/Value on Hand to open the window illustrated next.
27. Enter “3/31/08” as the Adjustment Date and keep the Ref. No. provided.
28. In Adjustment Account, lookup and select “5050 Cost of Goods Sold” because this is an adjustment for damaged goods. Note: Click OK if you are prompted about adjusting inventory to income or expense accounts.
29. Place your cursor in the New Qty field and enter 640.
30. TAB to Qty Difference and the software supplies a negative difference of 2.
31. Place your cursor in the Memo field and enter “Damaged gallons”. The completed window is illustrated next.
Inventory Adjustments
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32. Notice that this entry will debit cost of goods sold for $14.94. By default, the credit will be posted to 1130 Merchandise Inventory.
33. Click Save & Close.
34. Now redisplay the Inventory Valuation ‐ Summary report. Notice that the quantity on hand for item 001 is now 640 units.
35. Close the report.
36. Print the following reports to document your tasks.
a. Trial Balance for 3/31/08 (Total = $97,424.02)
b. Aged Receivables for 3/31/08 (Total = $6,664.25)
c. Aged Payables for 3/31/08 (Total = $8,653.54)
d. Inventory Valuation Summary for 3/31/08 (Total Asset Value = $33,698.06)
e. Standard Profit & Loss for 3/1/08 to 3/31/08 (Net Income = $804.56)
f. Standard Balance Sheet for 3/31/08 (Total Assets = $93,113.73)
Print Reports
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37. Back up your work and include the company name.
38. You have finished the workshop and can exit the software.
Backup and Exit the Software