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Comprehensive Problemto accompanyComputerized Accounting Using QuickBooks 2015byKathleen Villani and James B. RosaOn January 1, 2017, Jen Beck started up her business, Jen’s Tennis Courts, by purchasing tennis courtsthat she acquired in part by signing a 40,000 mortgage note at 5% interest. At that time, Jen alsopurchased furniture and equipment. Jen began the business by providing tennis court services and tennislesson services for which she charges fees. Eventually Jen began selling tennis merchandise: tennisracquets, tennis clothing, and tennis balls. Jen feels she needs someone to help her with the tennis servicesand sale of the merchandise and has been interviewing potential assistants.Jen recorded all transactions as they occurred each month for the first six months of business using amanual accounting system. Jen did not record month-end accounting activity or prepare financialstatements because she is not familiar with those accounting procedures. Beginning July 1, 2017, Jendecided to convert the accounting records to QuickBooks. You have been retained to set up theaccounting records in QuickBooks; record all monthly accounting activity for the month of July includingmonth-end activity; and print management reports, accounting reports, and the financial statements as ofthe end of July.1.Use the information below to create and set up the company file. You may use either the DetailedStart method or the Express Start method:Company:Tax ID:Address:phone:fax:email:Select your industry:Detailed Start andEasyStep Interview:Express Start:Company organization/type:First month of fiscal year:Save As:Start Date:[Your Name] Jen’s Tennis Courts17-615878932-05 Springfield Blvd.Bayside, NY .netGeneral Product-based BusinessOther/Nonesole proprietorshipJanuary[Your Name] Jen’s Tennis CourtsJuly 1, 20172.If you use the QuickBooks Setup window to enter data, enter the customers (see step 11), vendors(see step 12), and items (see step 9).3.Activate the account numbers, inventory, and sales tax features. For sales tax, use the followinginformation:TYPE:Sales Tax Name:Description:QB2015 Comprehensive ProblemSales Tax ItemNY Sales TaxSales Tax Paradigm Publishing, Inc.Page 1
Tax Rate (%):Sales Tax Agency:8NYS Dept. of Revenue1 Washington AvenueAlbany, NY 12222518-555-1000518-555-2000phone:fax:4.Set up or edit the following payment terms. All other payment terms created by QuickBooks canbe deleted:2/10, Net 30 DaysNet 15 DaysNet 30 Days5.Allow the software to create system default accounts by opening and closing the followingwindows: Create Invoices window; Enter Sales Receipts window; Enter Bills window; Item Listwindow – New Item window – Inventory Part.6.Customize the following accounts in the Chart of Accounts List window (Sales Income isdisplayed only if you used the QuickBooks Setup window to enter data):account created by QuickBooks11000 Accounts Receivable12000 Undeposited Funds12100 Inventory Asset20000 Accounts Payable25500 Sales Tax Payable30000 Opening Balance Equity30800 Owners Draw32000 Owners EquitySales Income (DetailedStart only)50000 Cost of Goods Sold7.40305030Sale of Tennis RacquetsCost of Tennis Racquets SoldDelete account 47900 Sales if it is in the Chart of Accounts List.Note:8.change to1200 Accounts Receivable1250 Undeposited Funds1230 Inventory of Tennis Racquets2010 Accounts Payable2030 Sales Tax Payable3010 Jen Beck, Capital3020 Jen Beck, Drawings3030 Accumulated EarningsIf you used the Detailed Start method, additional accounts may appear. You canuse these accounts and edit them to match the additional accounts you will add instep 8 below, or you can delete the additional accounts. You may need tocomplete the editing of the Item List in step 9 below before you can delete someof the accounts. If the payroll accounts appear, you will not be able to deletethem. You can make them inactive, but it isn’t necessary because you will use thepayroll accounts later in this problem.Use the information below to update the Chart of Accounts List for accounts not already createdand customized:Note:Some of the accounts listed below have already been created and customized.They are listed here again to display the balances. You will need the balances forstep 14 (a) below.QB2015 Comprehensive Problem Paradigm Publishing, Inc.Page 2
63506400645070257050NameCash – OperatingInventory of Tennis ClothesInventory of Tennis BallsPrepaid InsurancePrepaid AdvertisingOffice SuppliesTennis CourtsTennis Courts, Cost(subaccount of 1700)Tennis Courts, Accum. Deprec.(subaccount of 1700)FurnitureFurniture, Cost(subaccount of 1800)Furniture, Accum. Deprec.(subaccount of 1800)EquipmentEquipment, Cost(subaccount of 1900)Equipment, Accum. Deprec.(subaccount of 1900)Mortgage PayableJen Beck, DrawingsTennis Court Fees EarnedTennis Lessons Fees EarnedSale of Tennis RacquetsSale of Tennis ClothesSale of Tennis BallsSales DiscountsCost of Tennis Racquets SoldCost of Tennis Clothes SoldCost of Tennis Balls SoldInventory AdjustmentAccounting ExpenseAdvertising ExpenseBank Service Charges ExpenseDeprec. Exp., Tennis CourtsDeprec. Exp., FurnitureDeprec. Exp., EquipmentInsurance ExpenseOffice Supplies ExpenseTelephone ExpenseUtilities ExpenseInterest Income (Other Income)Interest Expense (Other Expense)QB2015 Comprehensive ProblemDebitCredit 00 Paradigm Publishing, 0984.00Page 3
9.Use the information below to update the Item List. Only inventory parts are taxable. For theinventory part items, be sure to use the date July 1, 2017.Item Name andDescriptionnon-taxable:Tennis Court FeesTennis Lessons Fees Ownertaxable:Tennis RacquetsTennis ClothesTennis Balls10.CostQty onHand 3025100804 50402203025It you used the Detailed Start method and the QuickBooks Setup window to enter data, edit theitems on the Item List:Service Items:Inventory Part Items:Sales Tax Item:Note:11.Rate /SalesPriceedit account numbers and non-taxable (see step 9)edit account numbers and taxable (see step 9)edit name, description, tax rate, tax agency (see step 3)After you edit the Item List, you can delete the Inventory Asset and Cost of GoodsSold accounts in the Chart of Accounts List.Use the information below to update the Customer Center: Be sure to use the date July 1, 2017,for customers with an opening balance.CUSTOMER/COMPANY NAMEOPENINGBALANCEFULLNAMEMainPhoneINVOICE/BILL TOPAYMENTTERMSBayside Youth Group 1,800Diane Rand718-555-454545-45 Bell Blvd.Bayside, NY 11364444 Barrows Ct.Little Neck, NY 11362158 Stone StreetBayside, NY 11364798 Langston StreetGlen Oaks, NY 1100438-02 221st StreetBay Terrace, NY 11360217 Locke Ave.Whitestone, NY 113572/10, Net30 Days2/10, Net30 DaysNet 30 DaysCheung Family718-555-9725Davis Family718-555-4405Grisham Family516-555-3474Lakeland Community Group300Amy James718-555-5200Whitestone Seniors Club180Joe Barley718-555-3333QB2015 Comprehensive Problem Paradigm Publishing, Inc.Page 42/10, Net30 DaysNet 30 DaysNet 30 Days
12.Use the information below to update the Vendor Center: Be sure to use the date July 1, 2017, forvendors with an opening balance.VENDOR/COMPANY NTTERMSCustomerServiceCustomerServiceSuzy Auria718-555-555515 Main StreetFlushing, NY 113541800 Springfield Blvd.Bayside, NY 113641350 Jericho Tpke.Jericho, NY 11753Net 30 DaysCustomerServiceOrdersDept.Dillon Van718-555-1900Net 30 DaysRay Vill Advertising AgencyRay Vill212-555-4000Sporting Goods, Inc.PurchasingDept.PurchasingDept.631-555-2525222 Main StreetFlushing, NY 11354111 Bell Blvd.Bayside, NY 1136475 Hauppauge RoadHauppauge, NY 11788705 Park Ave.New York, NY 1001625 Hauppauge RoadHauppauge, NY 11788100 Broad Hollow Rd.Melville, NY 11747AGI Telephone Co. 130Daly’s Mortgage Corp.General Insurance Co.Jen BeckLocal Power CompanyOffice Supply StoreRacquets, Inc.500Tennis Suits, -7575631-555-1234Net 30 DaysNet 30 DaysNet 30 DaysNet 30 DaysNet 30 DaysNet 30 DaysNet 30 DaysUnited States Treasury13.If you used the QuickBooks Setup window to record customers and vendors, edit each customerand vendor to record the terms of payment. (see step 11 and step 12)14.To complete the New Company Setup, record the following three journal entries on July 1, 2017:a. Enter the opening balances (refer to step 8 above). Use Open Bal as the Entry No.b. Make a journal entry to reverse the Uncategorized Income account, Rev.c. Make a journal entry to reverse the Uncategorized Expenses account, Rev.15.Display and print the following reports for July 1, 2017 – July 1, 2017:a. Journalb. Trial BalanceNote:16.After you reverse the Uncategorized Income and Uncategorized Expense accounts,you can make these accounts Inactive in the Chart of Accounts List.Jen informs you that she has hired an assistant, Dave Saylor, who will begin working on July 1.a. Activate the payroll feature, if necessary, and then customize the payroll system defaultaccounts:account created by QuickBooks24000Payroll Liabilities66000Payroll ExpensesQB2015 Comprehensive Problemchange to2100 Payroll Liabilities6560 Payroll Expenses Paradigm Publishing, Inc.Page 5
b. Create the following new general ledger accounts:Other Current Liability, Subaccount of 2100 Payroll Liabilities:2110Social Sec/Medicare Tax Payable2115FIT Payable2120SIT Payable2125FUTA Payable2130SUI Payable2135SDI PayableExpense, Subaccount of 6560 Payroll Expenses:6565Wages Expense6610Social Sec/Medicare Tax Expense6625FUTA Expense6630SUI Expense6635SDI Expensec. Choose the manual payroll calculations option to activate the Payroll Item List. Then editthe following payroll items on the Payroll Item List:Payroll ItemFederal UnemploymentFederal WithholdingMedicare CompanyMedicare EmployeeSocial Security CompanySocial Security EmployeeFor each payroll item, do the following: accept the name listed choose the United States Treasury as the Agency to which the liability will be paid select the appropriate liability and expense accounts accept all tax rates accept all taxable compensation defaultsd. Add the following to the Payroll Item List:Type:Name:Wage (Hourly Wages)Hourly WagesType:Name:Agency for Liabilities:Identifying number:Taxable compensation:State Tax (State Withholding)NY – WithholdingNYS Dept. of Revenue17-6158789Accept defaultsType:Name:Agency for Liabilities:Identifying number:State Tax (SDI) – State DisabilityNY-Disability Company/NY-Disability EmployeeNYS Dept. of Revenue17-6158789QB2015 Comprehensive Problem Paradigm Publishing, Inc.Page 6
Company rate:Employee rate:Taxable compensation:0%.5%Accept defaultsType:Name:Agency for Liabilities:Identifying number:Company Tax Rate:Taxable compensation:State Tax (SUI) – State UnemploymentNY – Unemployment CompanyNYS Dept. of RevenueER – 1587894.025% each quarterAccept defaultse. Add Dave to the Employee Center:LEGAL NAME:SOCIAL SECURITY NO:DATE OF BIRTH:GENDER:MARITAL STATUS:ADDRESS:Mobile:PAY FREQUENCY:EARNINGS –ITEM NAME:HOURLY/ANNUAL RATE:Federal Filing Status:Allowances:STATE WORKED:Tax:Tax:STATE SUBJECT TO WITHHOLDING:Filing Status:Allowances:17.Dave Saylor137-29-281705/13/1993malesingle1 Marine Way, New Hyde Park, NY 11040516-555-0331BiweeklyHourly Wages10.00single1NYSUI (Company Paid)SDINYSingle1Other Taxes: No (delete all)The following activity occurred during the month of July. Setup or create additional preferencesand files when needed, and record the following transactions in the appropriate windows:Jul 2Jul 2Jul 2Jul 3Jul 3Received a six-month insurance policy renewal from General Insurance Co. for 1,200, paid immediately, Check No. 72. Jen recorded the first six-month policy asInsurance Expense, but you think it is better to record it as Prepaid Insurance onpayment, and then adjust it at the end of each month.Received a six-month advertising renewal from Ray Vill Advertising Agency for 900, paid immediately, Check No. 73. Jen also recorded the previous advertisingas Advertising Expense, but like the insurance policy you will record it as PrepaidAdvertising on payment, and then adjust it at the end of each month.Recommended to the owner, Jen Beck, that she put some of the cash into a MoneyMarket account that will earn interest. Jen agrees. Create the general ledger account1030 Money Market and transfer 7,000 into the account.Purchased 500 of office supplies on account from the Office Supply Store, theirInvoice No. 285, Net 30 Days. Jen previously recorded this type of purchase asSupplies Expense, but you record it in the asset account Office Supplies.Purchased 25 cans of tennis balls from Sporting Goods, Inc., at 2 per can, paidimmediately, Check No. 74.QB2015 Comprehensive Problem Paradigm Publishing, Inc.Page 7
Jul 4Jul 5Jul 5Jul 5Jul 6Jul 9Jul 9Jul 9Jul 9Jul 11Jul 12Jul 12Jul 12Jul 12Jul 13Jul 13Jul 13Jul 13Jul 13Jul 13Jul 13Provided 2 hours of tennis lessons (owner) at 25 each and 2 hours of tennis courtservices at 30 each on account to the Davis Family, Invoice No. 1150, Net 30Days.Sold 4 tennis racquets for 100 each and 4 tennis outfits for 80 each on account tothe Grisham Family, Invoice No. 1151, 2/10, Net 30 Days.Received full payment from Whitestone Seniors Club, their Check No. 1587.Paid in full AGI Telephone Co., Check No. 75.Recorded the cash sales for the week for 15 hours of tennis lessons (owner) at 25each, 32 hours of tennis court services at 30 each, and 15 cans of tennis balls at 4each, Sale No. 551Received the telephone bill from AGI Telephone Co., their Invoice No. 809, 150,Net 30 Days.Received payment in full net of discount from Bayside Youth Group, their CheckNo. 11725. If the Discount and Credits button is not displ
manual accounting system. Jen did not record month-end accounting activity or prepare financial statements because she is not familiar with those accounting procedures. Beginning July 1, 2017, Jen decided to convert the accounting records to QuickBooks. You have been retained to set up the
