Accounting Cycle for Go Go Burger: Unit 6

Background:

You are required to execute previous unit activities related to the accounting cycle for this company, Go Go Burger and incorporate new material up to the end of unit 6.

Background:

Rip Torn is the owner of Go Go Burger.  The company had the following account balances at December 31, 2019 (assume all account balances are normal; i.e. all assets are debit, liabilities are credit, capital is credit):

Cash $80,000

Account Receivable    15,000

 Inventory        25,000

Prepaid Rent    40,000

Equipment    60,000

Delivery Vehicles    80,000

Wages Payable            8,000

Accounts Payable      2,000

Rip Torn, Capital  290,000

During 2020, the following transactions occurred:

 1)  Sales of burgers for cash $500,000; Sales of burgers on account $55,000

 2)  Purchase of ingredients for the burgers and supplies inventory $210,000.  Of these items, $60,000 was charged on account and the rest were paid for in cash.

 3)  During 2020,  inventory valued at $200,000 was used

 4)  During 2020, the company paid $83,000 in wages in total

 5)  During 2020, $45,000 was used for other expenses

 6)  Collected $65,000 on the accounts receivable and paid $57,000 of the accounts payable

 7)  At the end if 2020, the Rip withdrew $20,000 for his own use.

Adjusting Entries:

 8)  Wages owed  to employees at the end of the year were $2,500

 9)  By the end of 2020, half the prepaid rent had been used

10)  The equipment has a useful life of 10 years.  At the date we bought the equipment, we estimated it would have no residual value at the end of the 10 year period Record amortization

11)  The delivery vehicles had a useful life of 5 years.  At the date we bought the delivery vehicles, we estimated they would have $5,000 residual value at the end of the 5 year period.  Record amortization 

Note: the equipment & delivery vehicles were purchased at the end of 2019, therefore no depreciation (amortization) needs to be entered until 2020

Required:

a) Prepare journal entries for all of the transactions 1 – 7 inclusive.  Create any new accounts you need.  Use the number associated with each transaction instead of a date to make the journal entries.

b) Create “T” accounts and post the opening balances, as well as your journal entries from part (a) into them.  Since transaction dates are not provided, postings should refer to transactions by number

c) Prepare a trial balance

d) Prepare the adjusting entries and post them to the “T” accounts.  Since transaction dates are not provided, postings should refer to transactions by number (items 8 to 12)

e) Prepare an adjusted trial balance (after adjusting entries have been made)

f) Prepare a detailed income statement and Statement of Owners’ Equity for 2020

g) Prepare a balance sheet at December 31, 2020

h) Prepare a post closing trial balance at  December 31, 2020