Witness Fitness Cent re - Wikispaces Fitness Cent re An A ccounting ... M od ule 3: Expa ns io n Bac...

Witness Fitness CentreAn Accounting Simulation

for Students

Module 3: ExpansionB a c k g r o u n d I n f o r m a t i o n

C h a r t o f A c c o u n t sT r i a l B a l a n c e

S o u r c e D o c u m e n t sA c c o u n t i n g F o r m s

C o m p u t e r I n s t r u c t i o n s

Student’s Manual

CGA–Canada Module 3/page 2

School Accounting Modules

Background Information

After finishing the first year of operation in grand fashion—a net income of over $20,000.00—Ted and TarynWinslow quickly decided to dissolve the partnership agreement and replace it with a company charter. The company’s legal name became Witness Fitness Centre Ltd.

The type of ownership was not the only change. Taryn wanted to expand the Centre’s mission of promotingrobust living by moving into a new retail market: health foods and vitamins. Ted felt the idea was so promising thathe proposed the company should reach the wholesale market as well.

The above ambitions were quickly realized. The shareholders, Ted and Taryn, increased the mortgage on theirluxurious condominium by $60,000. They then invested the money in Witness Fitness Centre Ltd.

The company was able to open a retail outlet that offered vitamins, health foods, health products, and fitness-related merchandise to the general public. In addition, a contract was secured with a manufacturer that enabledWitness Fitness Centre Ltd. to distribute vitamins, health foods, and health products to retailers throughout theprovince. The brand name of this product line was T ’N’ T, referring, of course, to Ted ’N’ Taryn! All the changeswere exciting challenges, especially to two energetic but slightly inexperienced entrepreneurs.

The expansion started well. A warehouse was found, and the Fitness Centre was renovated so that it could handlethe retail operations. Stores began accepting the T ’N’ T merchandise, and the fitness memberships continued toincrease in number.

Late in the year, however, signs of financial woe began to appear when accounts payable invoices were notbeing paid promptly. The situation reached a point in July where the bank loan had to be increased by $25,000in order to pay most of the outstanding accounts. This injection of cash was especially needed because August isa slow month for the fitness side of the operations.

Just how bad is the financial picture? Well, Ted and Taryn are not really sure. It is your job, though, to find out!After processing August’s transactions, you will complete the accounting cycle for the year. Oh yes, there will onceagain be a year-end party; however, depending on your findings, it looks as though you might be munching oncarrot sticks instead of caviar.


School Accounting Modules

Revenue401 Wholesale Sales405 Retail Sales410 Membership Fees415 Drop-in Fees420 Sales Returns/Allowances425 Discounts Allowed

Expenses501 Purchases503 Purchase Returns/Allowances505 Discounts Earned507 Freight-in510 Salaries Expense515 Rent Expense520 Advertising Expense525 Insurance Expense530 Loan Interest Expense535 Miscellaneous Expense540 Bookkeeping Expense545 Office Expense550 Equipment Maintenance555 E. I. Expense560 C. P. P. Expense565 Telephone Expense570 Utilities Expense575 Cash Short and Over580 Choreography Expense585 Bank Charges590 Bad Debts Expense595 Supplies Expense597 Depreciation Expense

CHART OF ACCOUNTS

Assets101 Bank103 Petty Cash105 Accounts Receivable110 Allowance for Doubtful Accounts115 Merchandise Inventory120 Supplies125 Prepaid Insurance150 Fitness Equipment155 Acc. Dep./Fitness Equipment160 Store Equipment165 Acc. Dep./Store Equipment170 Furniture and Office Equipment175 Acc. Dep./Furniture and Office Equip.

Liabilities201 Bank Loan Payable210 Accounts Payable225 E. I. Payable230 C. P. P. Payable235 Employees’ Income Tax Payable240 GST Charged on Sales245 GST Paid on Purchases250 PST Payable

Shareholders’ Equity301 Common Stock305 Retained Earnings399 Income Summary


WITNESS FITNESS CENTRE LTD.TRIAL BALANCE

July 31, 20-3

(Continued on the next page)

101 Bank 38 4 1 2 93 103 Petty Cash 5 0 00 105 Accounts Receivable 1 6 4 8 08 110 Allowance for Doubtful Accounts 4 3 6 00 115 Merchandise Inventory 4 2 5 89120 Supplies 8 3 2 48 125 Prepaid Insurance 1 9 7 6 00 150 Fitness Equipment 16 0 1 2 14 155 Acc. Dep./Fitness Equipment 1 1 0 0 00 160 Store Equipment 6 5 7 0 88 170 Furniture and Office Equip. 9 5 1 42 175 Acc. Dep./Furn. & Office Equip. 2 0 0 00 201 Bank Loan Payable 33 0 0 0 00 210 Accounts Payable 8 4 5 34 225 E.I. Payable 4 3 0 58 230 C.P.P. Payable 3 4 3 24 235 Employees’ Income Tax Payable 1 6 6 1 21 240 GST Charged on Sales 2 6 2 0 38 245 GST Paid on Purchases 1 4 8 6 16 250 PST Payable 1 4 9 09301 Common Stock 60 0 0 0 00 401 Wholesale Sales 447 5 3 15 405 Retail Sales 36 0 4 2 48 410 Membership Fees 987 5 9 36 415 Drop-in Fees 45 0 4 8 64 420 Sales Returns/Allowances 5 6 2 87 425 Discounts Allowed 4 1 2 32 501 Purchases 45 8 3 2 15 503 Purchase Returns/Allowances 8 1 9 47 505 Discounts Earned 1 6 1 00 507 Freight-in 5 3 8 0 21 510 Salaries Expense 101 2 0 0 00 515 Rent Expense 79 2 0 0 00 520 Advertising Expense 9 4 4 4 12 530 Loan Interest Expense 8 4 0 03


535 Miscellaneous Expense 3 1 2 04 540 Bookkeeping Expense 2 2 0 0 00 545 Office Expense 5 1 2 76 550 Equipment Maintenance 9 1 7 00 555 E.I. Expense 3 1 8 7 81 560 C.P.P. Expense 1 8 5 6 80 565 Telephone Expense 8 8 2 77 570 Utilities Expense 4 1 9 9 76 575 Cash Short and Over 1 3 2 56 580 Choreography Expense 7 8 5 00 585 Bank Charges 1 4 5 76

326 3 6 9 94 326 3 6 9 94

WITNESS FITNESS CENTRE LTD.TRIAL BALANCE

July 31, 20-3


90 006 3096 300 00

320 0022 4080 00262 40

Aug 4 20-3Cash

1 Annual Membership to Ed Coleman, 320 00182 Coach Rd. Ciborea City,V8N 1A6 747-1015

Aug 4 20-330/60/90

We paid August’s rent today—cheque 437 for $7,704.00 ($4,100.00 for thecentre, $3,100.00 for the warehouse, and $504 GST). Both rent amounts arecharged to the Rent Expense account.

Aug 3

698A

697A

FORM 3

FORM 2

FORM 1

1 Quarterly Membership to Chris Rainseford 90 004732 Bird Rd. Ciborea City,V6L 1C6 273-7900


4178 Delivery from Vitality Vitamins, Soya City to 184.62T ’N’ T Vitamins, 10 Dun St., Ciborea City V8A 6L2

184.6212.92

197.54

Code Description Amount

T ’N’ T Vitamins

N/30

A 419

20-3 08 05

T ’N’ T Vitamins 10 Dun Street Ciborea City V8A 6L2

S-CargoSoya City

7143 CAug. 3 20-32/10; N/30

Quantity Number Description Unit Price Amount

6 doz. Herbal Deodorant (per dozen) 14 13.20 79.20144 B Complex 100 mg 90s 18 9.60 1 382.4036 Garlic Extract 90s 21 8.22 295.92

1 757.52123.03

$1 880.55

0127BAug. 5, 20-31/10 N/30Ciborea CityS-Cargo

Quantity Description Item Unit Price Amount

FORM 6

FORM 5

FORM 4

600 4137 P Calcium Plus 100s 2.27 1 362.001440 4774 P Vitamin C Chewables 4.62 6 652.80480 6221 P Zinc 90s 4.52 2 169.60

10 184.40712.91

$10 897.31

Sold to: Herb’s Health House, P.O. Box B12Copper Cove V2N 1R6 374-8219

3 Magazine ads running in August 1250.00 3750.00

262.504012.50


Number Quantity Description Price Amount

36 Calcium 80s 19 4.13 148.6836 Potassium 100s 23 3.93 141.48

290.1620.31

310.47

Aug. 8 20-31/10 N/30Shipping PointInner - city

0128B

Sold to: The Vitamin Complex (703) 697-300160 Lactate Lane, Ciborea City V8B 7W2

607 AC 200 Tofu Ice Cream 2.27 454.00703 AP 500 Tofu Lasagne 1.29 645.00492 BB 700 Tofu Scrambled Eggs 1.13 791.00

1890.00132.30

2022.30

T ’N’ T Vitamins and Health Products10 Dun Street, Ciborea City V8A 6L2

GST 7%Total

266 AAug. 6 20-3N/30


Quantity Description Unit Price Amount

FORM 9

FORM 8

FORM 7

20-3 08 051/15;N/30Ciborea City

30789

8/7TW

8/7TW


No. 049

August 8, 20-3

124.00 112.00 144.00 136.00 160.00 192.00 868.0064.18 50.89 75.42 77.18 105.67 118.69 492.0313.17 11.40 15.36 14.92 18.60 21.75 95.203.85 3.05 4.53 4.63 6.34 7.12 29.52

205.20 177.34 239.31 232.73 290.61 339.56 1484.75

The weekly summary for cash sales follows. P lease make journal entries forthe amounts in the Totals column.

Aug 8

1000 3123Q Magnesium 100s 1.97 1 970.001000 4897P Selenium 100s 2.11 2 110.00

4080.00285.60

$4 365.60


S-CargoSoya City

Quantity Number Description Unit Price Amount

FORM 12

FORM 11

FORM 10

Aug. 3, 20-32/10;N/30

7312 C

8/8TW

644 AB 600 Herbal Toothpaste 0.57 342.00519 AB 360 Herbal Shampoo 1.78 640.80

982.8068.80

1051.60


PSTSubtotal

GST

TOTAL

1 File folders (pkg. of 100) 21.36 21.366 Invoices (pkg. of 1000) 51.87 311.22

19.95

352.5323.28

375.81

3081920-3 08 07

4369 Delivery from Vitality Vitamins, 147.93Soya City to T ’N’ T Vitamins, 10 Dun St. Ciborea City, V8A 6L2

147.9310.36

158.29


10 Dun Street Ciborea City V8A 6L2Witness Fitness Centre August 10, 20-3

Net 30 Days

T ’N’ T Vitamins and Health Products10 Dun Street Ciborea City V8A 6L2

20-3 08 08N/30A 503 T ’N’ T Vitamins


FORM 14

FORM 15

FORM 13

1/15, N/30Ciborea City

8/10TW



Sold to: Organic Options Ltd. 493-8888712 Milky Whey Rd. Ciborea C. V2P 9P9


$.99 $15.15 N/A TW$14.16

Yoghurt delivered was spoiled — invoice 0129 B.

Organic Options Ltd.712 Milky Whey Rd. Ciborea City V2P 9P9 Aug 12, 20-3

021

T ’N’ T Vitamins and Health Products10 Dun Street Ciborea City V8A 6L2

751AD 400 Carrot Juice 1.24 496.00321AD 200 Papaya Juice 0.71 142.00476AD 100 Guava Juice 0.75 75.00

713.0049.91

762.91

24 Tofu Scrambled Eggs 12 2.06 49.4448 Manna Munchies 8 1.09 52.3224 Yoghurt 13 0.59 14.16

115.928.11

124.03

Aug. 11 20-31/10 N/30Ciborea CityInner-City

0129B


FORM 18

FORM 17

FORM 16

20-3 08 111/15;N/30Ciborea City

30927

8/13TW



20-3 08 13T ’N’ T Vitamins and Health Products10 Dun Street Ciborea City V8A 6L2

We will be updating our computer equipment soon! I wrote cheque 438 today forthe following invoice. I trust you are an electronic whiz.

Aug 14

!

From Vitamin Complex in full settlement of their account.They paid within 10 days, so a discount was granted onthe “pre-GST” total (see invoice 0128 B).

TW

307.57

FORM 20

FORM 19

#312

FORM 21

321AD -50 Customer ordered 200 units of .71 35.50Papaya juice, but only 150 weredelivered (invoice #30927 dated08/11/-3

35.502.49

37.99

Aug 13


No. 050

Today, we wrote cheque 439 for $149.09 to pay the provincial sales tax collected in July. Also, a certified cheque was drawn and made payable to the Receiver General of Canada. The total,$2,435.03, represented last month’s payroll funds that were withheld. The $2,435.03 was allocated to the following plans: Employment Insurance — $430.58; Canada Pension P lan — $343.24; Employees’ Income Tax — $1,661.21.

PST

August 10 to 15, 20-3

104.00 132.00 140.00 124.00 156.00 184.00 840.0074.14 61.33 60.22 105.33 110.99 136.91 548.9212.47 13.53 14.02 16.05 18.69 22.46 97.224.45 3.68 3.61 6.32 6.66 8.21 32.93

195.06 210.54 217.85 251.70 292.34 351.58 1519.07

Aug 15

Quantity Description Price Amount

Witness Fitness Centre10 Dun Street, Ciborea City

8/14/-3

834P2

“When the chips are down,A Bit of Bytes is the place to be.”

FORM 24

FORM 23

FORM 22

1 Gateway Computer 1976.00 1976.001 SuperScript Printer 899.00 899.00

172.503047.50201.25

3248.75

600 4172 S Acidophilius 90s 2.97 1782.00600 4672 P Stress Tabs 4.49 2694.00360 4139 M Chromium 200s 2.15 774.00

5250.00367.50

$5617.50



5013 Delivery from Vitality Vitamins Soya City to T ’N’ T 193.12Vitamins, 10 Dun St., Ciborea City V8A 6L2

193.1213.52

206.64

T ’N’ T Vitamins

20-3 08 17N/30A 612

Quantity Number Description Price Amount

S-CargoSoya City


7386 CAug. 15 20-32/10; N/30

320 0022 4080 00262 40

1 Annual Membership to Michael Pezim, 320 00911 Interior Ave. Ciborea CityV9K 1B9 999-0011

699A

FORM 27

FORM 26

FORM 25

Aug 17,20-330/60/90

8/17TW

Aug 19

P lease note the discount given to the 700th person to take out a fitness membership.

24 Guava Juice 7 1.35 32.40

32.402.27

34.67


Aug. 19 20-31/10, N/30Ciborea CityInner-City

Unfortunately, Michael Pezim, our most recent member, sprained an ankleyesterday. He has received a full refund. P lease refer to invoice 699 A.

342.40 TW80.00262.4022.40

Michael Pezim 022

Aug 18, 20-3

FORM 30

FORM 29

FORM 28

Sold to: Roots and Fruits 649 Thyme Square Ciborea City V8G 1H5

0130B



Aug 21

1 Annual Membership to Hannah Seraphim, 4025 320 00Willow St., Ciborea City V2Z 3S1 261-9364Less Discount for 700th member: 80 00

240 0016 80256 800 00

We sent cheque 441 to pay for next year’s insurance coverage. P lease refer to thefollowing invoice.

Aug 22

Hey! We need to get organized. Some purchase discounts this month were missed.I paid invoice no. 07386 C (Vitality Vitamins) today with cheque 440 for $5512.50.I wanted to make sure that we obtained a 2% discount on the “pre-GST” total.Check the invoice so that the proper journal entry can be made.

Aug 20, 20-330/60/90

FORM 33

FORM 32

FORM 31

700A

25 T-Shirts - 100% Cotton 8.97 224.2525 Shorts - 100% Cotton 10.13 253.2520 Body Suits 23.10 462.0050 Leotards 6.60 330.00

1269.50n/a

88.871358.37


No. 051


124.00 116.00 132.00 148.00 140.00 176.00 836.0080.11 63.12 77.45 89.65 120.33 105.97 536.6314.29 12.54 14.66 16.64 18.22 19.74 96.094.81 3.79 4.65 5.38 7.22 6.36 32.21

223.21 195.45 228.76 259.67 285.77 308.07 1500.93

August 17 to 22, 20-3

GST Registration 397872495

043 A Stock - Fire and Theft 490.00512 C Equipment - Fire and Theft 140.00611 F Business Interruption 980.00300 D Public Liability 520.00

2 130.00149.10

2 279.10


FORM 36

FORM 35

FORM 34

8/24

TW


We took advantage of the good discount of fered by Fantastic Fitness Fads& Fashions by paying invoice no. 413A today (cheque 444). Refer to thesource documents to make the proper journal entry.

Aug 26

Aug 25

Cheques 442 and 443 were sent to Tell Telephone Company and Northern LightsElectric Co. respectively to settle August’s telephone bill ($72.43) and utility bill($343.62). I do not know what portions of the cheques were for GST, but I amsure you can do the calculations.


25 T-Shirts sold were 100% polyester instead of 224.25100% cotton, as requested. They have been returned.

224.25n/a

15.70239.95

FORM 39

FORM 38

FORM 37

8/25

TW


Aug 27

You will be happy to find cheque 446 for $200.00 for your bookkeeping work.In your euphoria, do not forget to record the entry.

112 Miscellaneous Exp. 5 10 113 Office Exp. 19 98114 Office Exp. 8 42115 Miscellaneous Exp. 9 13

2 9845 610 00

45 614 39

50 00

Aug 26, 20-3 445

FORM 40

FORM 41


0240121

Interest on a demand loan 357 50

Aug 26, 20-3

Aug 26, 20-3

Monthly Service Charge 6 95

Witness Fitness Centre 10 Dun StreetCiborea City V8A 6L2

Witness Fitness Centre 10 Dun StreetCiborea City V8A 6L2

Aug 28

The bank statement arrived today; it included the following debit memos.

FORM 44

FORM 43

FORM 42


0240121


Note: If you are using a computer to complete this project, ignore the amounts belowand use the payroll section in your accounting software to pay the employees.

No. 052

Aug 31

To clear of f the account, we paid this month’s collection of the provincial sales tax early(cheque 453). I cannot recall the total amount–you will have to check your records inorder to make the journal entry. Note: the GST will not be submitted until next month.

I took the following totals from the payroll register so that you will be able to make the proper journal entries:Gross salaries, $9200.00; employees’ income taxes, $1661.21; CPP deductions, $171.62; EI deductions,179.41; and total payroll cheques , $7187.76 (no.s 447-452). Also, do not forget to record the company’scontributions to the required payroll plans.

Aug 31

August 24-29, 20-3

136.00 92.00 148.00 100.00 148.00 156.00 780.0059.34 98.27 87.23 66.33 105.34 94.57 511.0813.67 13.32 16.47 11.64 17.73 17.54 90.373.56 5.90 5.23 3.98 6.32 5.67 30.66

212.57 209.49 256.93 181.95 277.39 273.78 1412.11

FORM 47

FORM 46

FORM 45


FORM 49

FORM 48

Here is some information that you will need to complete the year-end activities:1) J.N. Fonda’s account was declared uncollectable.2) We had some troubling news about some of our other accounts receivable. We therefore

estimated that $916.00 of outstanding amounts will not be paid.3) The insurance policy for 20-3 has expired. It originally cost $1976.00.4) A count revealed that Supplies on hand totalled $406.15. If you are not using accounting

software, you need to know that Merchandise Inventory was also counted and totalled$31,273.88.

5) Depreciation was calculated as follows: Fitness Equipment $1100.00; Store Equipment$570.00; Furniture and Office Equipment $405.00.

Since we are closed today for the year-end stock count and clean-up, you will beable to fully concentrate on your final activities for this fiscal year. These include:1) Journal Proof 2) Posting 3) Schedules of Accounts Receivable andAccounts Payable 4) Trial Balance — do this directly on the work sheet 5) Adjustments — information to follow 6) Work Sheet 7) Income Statement8) Balance Sheet 9) Adjusting and Closing Entries — journalize and post10) Post-Closing Trial Balance.

8:00 a.m.Aug 31

Aug 31

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