Document No. 1
Transactions List
December 16-31, 2009
Complete each of the following transactions in accordance with the seven-step process on pages 11-12
of the Instructions, Flowcharts and Ledgers Book. Remember the importance of the systems flowcharts
on pages 18-24 for details as to (a) documents to prepare, (b) approvals and other internal control
procedures, (c) accounting entries, and (d) filing. Also, remember from the requirements that some of
the following events require the preparation or modification of systems documents and some do not.
You are to perform the roles of Ray Kramer, Nancy Ford and Jim Adams.

Hints are provided in boxed areas like this.
December
Yes
16
Received validated deposit receipt (Doc. No. 11) from the bank for $7,931.96 for deposit
made December 15.
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Yes
16
Follow flowchart on page 21. No recording occurs at this time.
Cash receipts prelist is Doc. No. 9.
File Doc. No. 9 and Doc. No. 11 in the Temporary file tab.
Ordered the following inventory on account from Velocity Sporting Goods, using
purchase order No. 328 (Doc. No. 16).
Units
120
50
60
75
Vendor address:
Freight carrier:
Freight charges:
Allowances:
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A
Description
Basketball pole pad
Basketball bag
Portable inflation pump
Trainer’s first aid kit
1285 Colgrove Ave., Pierre, SD 57501
Interstate Motor Freight
Collect (i.e., paid by Waren Sports Supply)
None
Follow flowchart on page 22.
Use purchase order No. 325 (Doc. No. 16) as a guide.
Use the price list (Doc. No. 3).
No receiving or recording occurs at this point for this transaction.
Tear document apart and file following the flowchart guidance.
December
Yes
16
Borrowed $70,000 from First American Bank and Trust by issuing a two-year note
payable (Doc. No. 14) with a stated annual interest rate of 7%. Check No. 545 (Doc. No.
8) for $70,000 was received from the bank and deposited. Reviewed the terms and
conditions of the note and signed it (Ray Kramer) as the borrower.
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Yes
19
Restrictively endorse means to write the following on the back of the check:
“For deposit only. Waren Sports Supply.”
See flowchart, page 21, for recording and depositing.
Detach the bottom portion of the check and file in the Shipping/Banking file tab.
File the note in the Shipping/Banking file tab.
Received customer purchase order No. 38607 (Doc. No. 4) in the mail from University
of Southern Iowa, approved their credit and shipped the goods. All goods ordered were
shipped, except that only 50 shoulder pad sets were available for shipment.
Carrier & number:
Freight charges:
Route:
Truck & driver:
Freight rate:
Shipment:
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Yes
20
See flowchart, pages 18 and 19; follow all steps carefully.
You will use several documents and record an entry in the sales journal and the
accounts receivable subsidiary ledger for this transaction.
For guidance in preparing the bill of lading, see pages 35-36 of the Reference
book.
Received sales return request No. R8034 (Doc. No. 12) in the mail from Eastern
Wisconsin University (EWU). The request was approved and the acknowledgment copy
mailed to EWU.

A
Allied Trucking; Carrier number 2154
FOB destination; Billed to shipper, after delivery of goods (i.e.,
paid by Waren)
Express
Truck 2961XZ, Linda Arensmeier
$15.00 per 100 lbs.
3 cartons/goal and rim sets @ 26 lbs./carton
6 cartons/backboards @ 125 lbs./carton
5 cartons/shoulder pad sets @ 40 lbs./carton
4 cartons/football helmets @ 24 lbs./carton
Follow the flowchart steps on page 20.
December
No
20
Increased employee wage rates, and employees changed their federal income tax
withholding amounts, both effective December 16. There were no changes in filing status
or withholding allowances.
Ray Kramer
Jim Adams
Nancy Ford

Yes
22
Received merchandise from Velocity Sporting Goods as listed on purchase order No.
328. All merchandise listed on the purchase order was delivered in good condition and in
the quantities ordered, except that only 70 basketball pole pads (Item No. BB-019) were
received. The goods were placed immediately in the inventory warehouse.

No
22
Received legal notification from Benson, Rosenbrook and Martinson, P.C., attorneys at
law, that Stevenson College will be unable to pay any of its outstanding debts to its
suppliers. Write off the account as a bad debt.
23
23
Remember that Waren Sports Supply uses the “Allowance” method rather than
“Direct write-off” for accounting for bad debts.
Received all goods that Waren had authorized Eastern Wisconsin University (EWU) to
return on EWU’s return request No. R8034 for credit against their account balance.
Process and record the sales return now.
Received check No. 49326 (Doc. No. 8) for $10,000 from Eastern Wisconsin University
in partial payment of the remaining amount (after sales return) on charge invoice No.
729, and deposited the check.

A
Remember to follow the flowchart on page 22. You can’t record a purchase yet
because the invoice hasn’t been received.
Received check No. 28564 (Doc. No. 8) from Branch College for payment in full for
charge invoice No. 730, and deposited the check.

Yes
Interstate Motor Freight
No. 26425 (Doc. No. 19), received with shipment
22

Yes
Withholding Amt.
$466.71
$365.06
$136.90
No accounting entries are necessary, but you must update the pay rate history
information in the Employee Earnings Subsidiary Ledger.
Freight carrier:
Freight bill:
Yes
New Wage Rate
$3,600.00 semimonthly
$22.00 per hour
$18.00 per hour
Do not finalize a deposit slip until you determine whether there are other cash
receipts on the same day.
December
Yes
23
Received vendor invoice No. 34719 (Doc. No. 18) from Velocity Sporting Goods for
goods ordered December 16 and received December 22.
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Yes
23
Issued check (Doc. No. 20) to Interstate Freight for the amount of the freight bill (Doc.
No. 19) for the Velocity Sporting Goods shipment received December 22.

Yes
23
Follow the flowchart steps on page 22.
Upon receiving the invoice, you can now record the purchase using the date on
which Waren incurred the liability for the goods, December 22.
Follow the flowchart steps on page 23.
Received check No. 18418 (Doc. No. 8) for $10,240 and customer purchase order No.
P79328 (Doc. No. 4) in the mail from Wright University for a cash sale. All goods
ordered were shipped and the cash sale was processed and recorded.
Carrier & number:
Freight charges:
Route:
Truck & driver:
Freight rate:
Shipment:

Interstate Motor Freight; Carrier number 62XY404
Collect (i.e., paid by Wright University)
Direct
Truck 64, Dale Hoch
$15.00 per 100 lbs.
5 cartons/basketballs @ 23 lbs./carton
4 cartons/hip, tail, arm pad sets @ 36 lbs./carton
2 cartons/footballs @ 16 lbs./carton
Start with the flowchart on page 21.
Yes
26
Received office supplies from Chicago Office Supply as listed on purchase order No.
327 (Doc. No. 16), a copy of which is being held in accounting. Chicago Office Supply’s
vendor invoice No. 2378 (Doc. No. 18) was received with the goods. All supplies ordered
were received in good condition and taken directly to the office, but the invoice was not
paid.
Yes
29
Issued check (Doc. No. 20) to Velocity Sporting Goods for payment in full of their
invoice No. 34719 for goods received December 22.
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Yes
31
Received payroll time cards (Doc. No. 21) from Ford and Adams for the time period
ended December 31 and prepared the payroll for all three employees, including
paychecks.
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A
Consider the credit terms before making the payment.
Paychecks are considered “Mailed/Given to Outsiders.”
Timecards are filed in the “Accounting” file tab.
December
Yes
31
Received the laptop computers ordered on Waren’s purchase order No. 325 (Doc. No.
16) and vendor’s invoice No. 2423 (Doc. No. 18) from Chicago Office Supply. The
computers were received in new and undamaged condition and taken directly to the
office. The estimated useful life is 5 years with no salvage value.
Yes
31
Received vendor invoice No. 72654 (Doc. No. 18) from University Athletic News for
advertisements Waren ran during the Christmas season and immediately issued a check
(Doc. No. 20) for payment in full.

Purchase orders are not issued for services that Waren purchases.
MONTH-END PROCEDURES – After you have recorded all the transactions, go to page 12 of the
Instructions, Flowcharts and Ledgers Book and complete all the month-end procedures. An additional
month-end requirement for this project is:
Yes
Monthly Statement:
Prepare a monthly statement (Doc. No. 15) for East Wisconsin
University.
YEAR-END PROCEDURES – After completing all the month-end procedures, go to page 13 of the
Instructions, Flowcharts and Ledgers Book and complete all the year-end procedures. Additional
information for the year-end is:
No
Ending Inventory:
A physical inventory was taken 1/1/10, before business began for
the new year. Merchandise on hand cost $191,717.00 .
No
Bad Debt Expense:
The expense for bad debts is estimated at the end of the year as
one-quarter of one percent (0.0025) of net sales.
Marketable Securities:
At December 31, 2009, the market value of marketable securities
held by Waren approximated the cost of the securities.
No
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The project is now complete. Good Work! Review your materials to make
certain everything is finalized. Complete the filing of documents, records, and
working papers using the file tabs and the envelope in which the Aid is
packaged. File all materials as indicated in the flowcharts.
A
Document No. 3
PRICE LISTS
CURRENT AS OF DECEMBER 1, 2009
VELOCITY SPORTING GOODS
Item No.
Description
Baseball items:
BA-054
BA-158
BA-199
BA-281
BA-445
BA-507
BA-667
BA-694
BA-807
BA-859
Premium aluminum bat
Baseballs – 12 game balls
Fielding glove
60 lb. dry line marker
Catcher’s mask
Baseball equipment bag
Ball bucket with seat – set of 3
Batting gloves – 1 pair
Pitching machine
Set of bases
Basketball items:
BB-008
BB-019
BB-113
BB-267
BB-358
BB-399
BB-431
BB-538
BB-688
BB-926
Football items:
FB-027
FB-091
FB-225
FB-344
FB-513
FB-573
FB-650
FB-812
FB-874
FB-952
Cost
Selling Price
$ 139.00
42.00
46.00
65.00
48.00
27.00
23.00
24.00
164.00
111.00
$ 210.00
63.00
66.00
93.00
66.00
38.00
31.00
34.00
235.00
170.00
Basketball
Basketball pole pad
Scoreboard and timer
Goal and rim set
Backboard
Basketball net
Whistle and lanyard – set of 6
Basketball bag
Portable inflation pump
Trainer’s first aid kit
25.00
94.00
258.00
95.00
83.00
10.00
25.00
26.00
69.00
30.00
35.00
135.00
400.00
136.00
106.00
13.00
36.00
41.00
100.00
39.00
Shoulder pad set
Hip, tail, arm pad set
Football helmet
Football
Portable storage locker
Kicking tees – set of 6
Football post pad
Collapsible cones – set of 8
Sideline repair kit
Portable hand warmer
89.00
39.00
55.00
21.00
135.00
16.00
96.00
27.00
83.00
26.00
126.00
58.00
87.00
29.00
206.00
24.00
144.00
39.00
116.00
36.00
CHICAGO OFFICE SUPPLY
Item No.
Description
4126
4733
5433
8404
5302
6211
8843
2342
6277
7234
Laser printer toner cartridge
Copier paper – box
Rewritable CDs – box of 10
Diskettes – box of 30
Invoice forms – 100
Legal pad – box of 5
Time cards – box of 50
Black ink pens – box of 12
Pencils – box of 24
4-column paper pad – box of 10
12302
12489
15321
Laptop computer
Facsimile machine with scanner
High-speed copier
Cost
$
46.50
19.50
12.50
11.50
6.00
3.95
6.90
4.50
2.25
15.50
$ 2,150.00
195.00
6,950.00
Approved By
Ray Kramer
Sales and Cash Receipts VI.
File documents in the appropriate file tab in the envelope in accordance with the
flowchart description. See pages 5 and 6 of this book for additional filing guidance.
vii.
Proceed to the next transaction. Repeat this process until you have completed all
transactions on the transactions list (Document No. 1), except month-end and yearend procedures.
WAREN'S MONTH-END PROCEDURES
Following are the procedures performed at the end of each month by Waren's employees after
all transactions are recorded in the journals and subsidiary ledgers . You are to assume the roles of
Ray Kramer, Nancy Ford, and Jim Adams and perform each of these month-end procedures for
December. The only materials needed are this list of seven month-end procedures, all journals and
ledgers, and four items from the loose document set: blank monthly statement (Doc. No. 15), bank
reconciliation for November (Doc. No. 22), December bank statement (Doc. No. 23), and the list
of items clearing with the bank statement (Doc. No. 24). Set all other documents and records
temporarily aside.
12
1.
Jim Adams foots and crossfoots each of the five special journals (sales, cash receipts,
purchases, cash disbursements, and payroll).
2.
Jim Adams posts the column totals and individual transactions in "Other" columns to the
appropriate general ledger account and updates each general ledger account balance. He
places a posting reference check mark [ ./] under each column total in the journals and
by each of the individual transactions in the "Other" columns to show that the numbers
have been posted.
3.
Ray Kramer prepares a bank reconciliation on a separate working paper (not provided).
After receiving the bank statement (Doc. No. 23) and list of items clearing with the bank
statement (Doc. No. 24) from the bank, he performs the following procedures:
a.
Foots that month's cash receipts and cash disbursements journals and places his
initials beside the cash column total in each journal.
b.
Compares each entry in the cash receipts prelist (Doc. No.9) to the cash receipts
journal for name, date, and amount, and puts a check mark [ ./] by each entry
in the prelist.
c.
Prepares a bank reconciliation using the procedures outlined in the Systems
Understanding Aid Reference book on pages 61-63. You can also use November's
bank reconciliation (Doc. No. 22) as a model. Deposits in transit and outstanding
checks at November 30 are listed there.
d.
Adjusts the cash general ledger account using the general journal, regardless of
materiality, for all reconciling items requiring an adjustment.
e.
Attaches together and files the bank reconciliation, bank statement, list of items
clearing with bank statement, and the cash receipts prelist in the file labeled
"Shipping/Banking. "
4.
Jim Adams calculates and records the unemployment taxes paid by employers, and
Waren's portion of the F.I.C.A. payroll tax. These payroll taxes are calculated at the end
of the month on gross payroll and recorded in the general journal. The taxes are paid the
following month.
Unemployment taxes are imposed on the first $7,000 of wages paid to covered employees
in 2009. Thus, a review of the employee earnings subsidiary ledger on pages 40 and 41
of this book indicates that only one of Waren's employees remains subject to this tax (i.e.,
has not yet exceeded the wage base maximum). The same wage base maximum is used in
the project for both federal and state unemployment taxes to simplifY the calculations.
The state unemployment tax (SUT A) rate is 2.7 percent. Because employers are allowed
credits against the federal unemployment tax (FUT A) rate for participation in state
unemployment programs, the net FUTA rate is 0.8 percent.
5.
Jim Adams posts transactions from the general journal to the general ledger (and
subsidiary if applicable), places a posting reference check mark [ ./] in the general
journal post reference column for each item posted, and updates each general ledger
balance.
6.
Nancy Ford foots the balances of each subsidiary for the accounts receivable, accounts
payable, employee earnings, and fixed assets subsidiaries, and compares the total to the
appropriate general ledger control account (GIL accounts 10200,20100,40500, 10800,
and 10900, respectively). She initials each general ledger control account to indicate that
she has made the comparison.
7.
Jim Adams prepares a monthly statement (Doc. No. 15) for each customer with a balance.
He includes information about each unpaid invoice including its aging status. Aging totals
and the total amount due are shown at the bottom. He completes the remittance advice
(attached to the monthly statement) in a similar fashion except that no aging is included.
Ray Kramer reviews each statement and initials it before it is mailed to the customer. In
this project, you are to prepare a December monthly statement for only one customer and
file it in the "Mailed to Outsiders" file tab. The name ofthe selected customer is stated in
the transactions list (Doc. No.1) provided with your loose document set in this package.
After completing all seven month-end procedures for December, continue to the next section and
perform Waren's year-end procedures.
WAREN'S YEAR-END PROCEDURES
East Wisconsin
University (A/R)
Below are the procedures followed at the end of each year by Waren Sports Supply's employees.
You are to assume the roles of Ray Kramer, Nancy Ford, and Jim Adams and perform each of these
year-end procedures for 2009. The only materials needed are Waren's list of year-end procedures,
general journal, ledgers, year-end worksheet (Doc. No. 25), and post-closing trial balance (Doc. No.
26). All other items can be permanently filed in the envelope. All December month-end procedures
must be completed before the year-end procedures are done.
1.
Jim Adams prepares an unadjusted trial balance as of December 31 using the year-end
worksheet (Doc. No. 25) provided in your loose document set. Be sure to include the
December month-end general journal transactions in the 12-31-09 unadjusted trial balance.
13
2.
Jim Adams prepares year-end adjusting entries and posts each entry to the worksheet.
Below are the normal adjusting entries. Refer to your Systems Understanding Aid
Reference book for further help in preparing appropriate adjusting entries.
Hint:
3.
14
Be sure to number each adjusting entry on the year-end worksheet to
make it easier to complete year-end procedure 7 later.
a.
Monthly Adjustments. You should already have recorded and posted payroll
F.I.C.A. and unemployment taxes, and the bank service charge as part of December
month-end procedures.
b.
Depreciation Expense. Depreciation expense is calculated once annually at the end
of each year and recorded in the general journal as of December 31. The
depreciation methods, estimated lives, and salvage values are documented in the
fixed asset subsidiary ledger. Depreciation in the year of sale or acquisition is
calculated following a half-year convention, which means that six months of
depreciation is taken regardless of the amount of time the assets were actually owned
during these years.
c.
Interest Expense. Interest on loans is paid annually on the anniversary of the note.
Interest accruals are calculated using a 365-day year with the day after the note was
made counting as the first day.
d.
Bad Debt Expense. Bad debt expense is estimated once annually at the end of each
year as a percent of net sales and is recorded as of December 31 in the general
journal. The percentage estimate for 2009 is stated in the transactions list
(Document No.1). Waren uses the allowance method for recording the estimate of
bad debts.
e.
Ending Inventory. A physical inventory is taken on New Year's Day before
business begins for the new year. The December 31, 2009 ending inventory as
counted and priced by Waren's employees is stated in the transactions list
(Document No.1). For an illustration of procedures used to record cost of goods
sold and adjust the inventory balance for the year-end physical count, see page 75
of the Systems Understanding Aid Reference book.
f.
Federal Income Tax Expense. The adjusting entry for federal income tax expense
must be saved until last, after the pre-tax net income has been calculated from the
worksheet. This entry will be done later, as year-end procedure 4. The 2009
corporate income tax rates are provided there.
Jim Adams completes the year-end worksheet through the income statement and balance
sheet columns. See page 18 of the Reference book for an example of a completed yearend worksheet.
4.
Jim Adams calculates federal income tax expense from the income statement column on
the year-end worksheet, enters it in the adjustments column of the worksheet, and extends
the expense and liability amounts to their respective income statement and balance sheet
columns. Corporate income tax rates are subject to change annua]]y, but for 2009, assume
they are 15 percent of the first $50,000 of net income, plus 25 percent of the next $25,000
plus 36 percent of all income over $75,000.
5.
Jim Adams prepares financial statements in good form: statement of income and retained
earnings, comparative balance sheet, and statement of cash flows (indirect method). He
uses the formats suggested in the Systems Understanding Aid Reference book.
6.
Nancy Ford prepares three supplementary trial balances as of December 31, which will
serve as valuable information for management and the external auditors: an aged trial
balance of accounts receivable, a trial balance of accounts payable, and a trial balance of
fixed assets. (See pages 45, 46, 59, and 60 of the Systems Understanding Aid Reference
book for information to help you prepare these trial balances.) She reconciles each of
these trial balances to the general ledger. She indicates that she has performed the
reconciliations by putting her initials to the right of the total on each trial balance.
7.
Jim Adams posts the adjusting entries from the general journal to the general ledger . Next,
he prepares and records the appropriate closing entries in the general journal and posts
them to the general ledger (See pages 22-23 of the Systems Understanding Aid Reference
book for guidance). Finally, he prepares a post-closing trial balance (Doc. No. 26).
Kramer compares the account balances on the post-closing trial balance to the year-end
worksheet and initials the trial balance on the bottom right corner to document his
control procedure.
\
WRAPPING UP
©
©
©
The project is now complete. Good Work!! Review your materials to make certain
everything is fmalized. Complete the filing of documents, records, and working papers
using the file tabs and the envelope in which the Aid is packaged. File all materials as
indicated in\ the flowcharts.
15