The AC Speed Corporation is owned and operated by Andrew Muld. The company manufactures two types of electronic speed chips for corvettes and other cool cars. Partially assembled units are purchased and then the company wires the chips to conform with their recently granted patent.
The business was founded in 1998 by Mr. Muld and now owns it's own office building, manufacturing plant, and equipment. The company was organized as a sole-proprietorship; however, in 2001 the business was converted to a corporation. The company uses the accounting year of January 1 to December 31. Andrew has been busy building the business and has not developed an extensive accounting system. The company uses the accrual basis of accounting, prepares monthly financial statements, and makes all adjusting entries (prepaids, accruals, and depreciation) at the end of each month. The company uses a perpetual inventory system and the allowance method is used to account for business receivables. The company maintains an inventory ledger, accounts receivable ledger, accounts payable ledger, and fixed asset ledger; however, these ledgers are maintained by the respective detail departments and your responsibility extends to oversight only.
Mr Muld has invited you to join the company as Director of Accounting and Finance at a good wage with full benefits. In addition, to your annual wage, medical benefits, and new office, you will get the free use of one of the companies new Corvette six speed roadsters.
Record the December business transactions on the cash receipt journal.NARRATIVE OF DECEMBER BUSINESS TRANSACTIONS:
Credit terms for all sales on account are 4/10, N30 (Because of week-ends, cash is received or paid a day or two after the discount date, we allow this - if it says "discount taken" then it was taken!!
1. Purchased raw materials from Chris's Electronics Co. on account, $6,250. No discount was offered.
2. Paid $3,600 (check No. 1300) for six months of insurance coverage on the company's buildings. The six month insurance period starts on December 1 - 20% of the premium is for the office building and 80% of the premium is for the manufacturing plant.
3. Made our mortgage payment to Byron State Bank paying $1,000 by issuing check No. 1301 - $300 of this payment is mortgage interest payable for November. (The $300 of interest was accrued at the end of November)
4. Received a check for $3,750 from AC Austin Company in payment of rent for the months of December, January, and February. (We own a building that is rented to AC Co on a three-month lease basis)
3 Sold merchandise (Speed Chips) on account to Ryan's Racing Co, invoice No. 406, in the amount of $7,420 - the normal discount and shipping terms apply. The cost of the merchandise sold was $2,760.
4 Sold merchandise on account to Scott's Speed Co., invoice no. 407, in the amount of $6,543. The cost of the merchandise sold was $2,340.
4 Received a check for $8,160 from Ryan's Racing, in payment of our invoice of November 25 for $8,500, less discount.
5 Issued check No. 1302 in the amount of $9,770 to the payroll account for weekly wages (for the last week of November): office wages totaled $3,670, direct plant wages totaled $4,240, and indirect plant wages totaled $1,860. (These cost were accrued at the end of November.)
5. Overhead was applied to work in process in the amount of $5,480. (Recorded in the General Journal)
5. Work-in-process inventory totaling $13,250 was transferred to finished goods. (Recorded in the General Journal)
5 Material was requisitioned (Req. # 642) from the storeroom as follows: Direct Materials - $5, 809 and Indirect Materials - $2,207. (Recorded in the Material Summary Journal)
5 Sold merchandise on account to Kellie's Super Vettes, invoice no. 408, in the amount of $3,240. The cost of the merchandise sold was $1,190.
5 Received a check for $15,744 from ACM's Go Co. in payment of our invoice of November 26 for $16,400, less discount.
6 Purchased raw materials on account from CS Mfg. Co. for $16,324, terms of 3/10, n30.
8 Issued check No. 1303 for $7,200 to Chris's Auto Systems in payment of its invoice of November 23 (no discount).
8 Received a check from Kellie's Vettes for $13,728 in payment of our invoice of November 30 for $14,300 less discount.
9 Issued check No. 1304 for $642 in payment of office building repairs.
10 Purchased office supplies on account from Bixly Supply in the amount of $2,500, no cash discount was offered.
10 The Board of Directors declared a $14,500 cash dividend to be paid on December 30.
11 Material was requisitioned (Req. #643) from the storeroom as follows: Direct Materals - $6,650 and Indirect Materials - $2,780.
12 Sold merchandise on account to ACM's Go Co. Invoice # 409, in the amount of $2,340 The cost of the merchandise sold was $1,162.
12. Overhead was applied to work in process in the amount of $4,920.
12. Work-in-process inventory totaling $14,675 was transferred to finished goods.
12 Issued check No. 1305 to the payroll account for weekly wages: office wages totaled $3,670, direct plant wages totaled $5,436, and indirect plant wages totaled $2,240.
12 Issued Credit Memorandum No. 203 to Scott's Speed Co. for merchandise returned on Invoice No. 407 of December 4, $343.00. The cost of the merchandise returned was $107.
12 Purchased raw materials on account from Nate's Wire Co. in the amount of $16,400, terms of 3/12, n30.
13 Received a check for $7,123.20 from Ryan's Racing Co. in payment of Invoice No. 406 for $7,420, less discount.
14 Material was requisitioned (Req. #644) from the storeroom as follows: Direct Materals - $2,450 and Indirect Materials - $680.
15. Issued Check No. 1306 for $1,175 to Alpine Golf Course in payment of customer entertainment.
15 Received a check for $5,952 from Scott's Speed Co. in payment of Invoice No. 407 for $6,543, less return of December 12th and less discount.
16 Sold merchandise on account to Ryan's Co., Invoice 410, in the amount of $26,260. The cost of the merchandise sold was $12,150.
16 Received a check for $3,110.40 from Kellie's Vettes in payment of Invoice No. 408 for $3,240, less discount.
18 Sold additional shares of the firm's $1.00 par common stock for $18 per share - cash was received and the additional shares were issued:
4,000 shares sold and issued to Mr. AC Muld
1,000 shares sold and issued to R.S. Muld
500 shares sold and issued to G.S. Muld
18 Sold merchandise on account to Steve's Engineering, Inc., Invoice 411, in the amount of $31,845. The cost of the merchandise sold was $10,642.
18 Issued check 1307 for $850 to The Grand Rapids Press for an advertisement in last Sundays edition.
19 Issued check No. 1308 to the payroll account for weekly wages: office wages totaled $3,900, direct plant wages totaled $6,520, and indirect plant wages totaled $1,360.
19. Overhead was applied to work in process in the amount of $5,010.
19. Work-in-process inventory totaling $12,170 was transferred to finished goods.
20 Material was requisitioned (Req. #645) from the storeroom as follows: Direct Materals - $4,670 and Indirect Materials - $1,100.
22 Received a check for 2,246.40 from ACM's Go Co. in payment of Invoice No. 409 for $2,340, less discount.
23 Issued check 1309 for $15,908 to Nate's Wire Co. for raw material purchased on account on 12/12, less the 3% discount.
23 Sold merchandise on account to ACM's Go Co, Invoice 412, in the amount of $14,486. The cost of the merchandise sold was $4,750.
24 Received a check for $25,209.60 from Ryan's Racing in payment of Invoice No. 410 for $26,260, less discount.
24 Sold merchandise on account to Kellie's Vettes, Invoice 413, in the amount of $19,200. The cost of the merchandise sold was $6,640.
25 Material was requisitioned (Req. #646) from the storeroom as follows: Direct Materials - $6,300 and Indirect Materials - $1,860.
26 Purchased raw materials on account from Tim's Supply Company for $4,280, terms of 2/10, n30.
26 Issued check No. 1310 to the payroll account for weekly wages: office wages totaled $3,900, direct plant wages totaled $7,100, and indirect plant wages totaled $1,400.
26. Overhead was applied to work in process in the amount of $3,240.
27. Work-in-process inventory totaling $14,300 was transferred to finished goods.
27 Issued the following checks: Check No. 1311 - in the amount of $4,600 for legal services.
Check No. 1312 - in the amount of $8,260 for new office furniture
Check No. 1313 - in the amount of $3,600 for electric and natural gas utilities for our facilities (80% plant, 20% office)
28 Wrote off the account of C. Smith Speed Equipment Co. in the amount of $2,370. This account is nineteen months overdue and we just received notice of their court ordered closing!
30 Issued Check No. 1314 to the dividend account for payment of the cash dividend declared on December 10th.