plash House Equipment is a small store in St. Catharines, Florida, that sells water sport equipment to families and sporting groups in the neighborhood. The business was registered over two years ago. Splash House Equipment is a sole proprietorship, owned by Ms. Lee Romana, which sells kayaks, paddle boards, wetsuits, and fishing equipment for use on the lake nearby. Its largest client is a growing private school, which buys equipment from the business each year for its water sports programs and events. As some of its items are relatively expensive, Splash House Equipment allows customers to either pay up front or pay within 30 days of purchasing the goods. If they pay within 10 days, they’re entitled to a 2 percent discount on the sale price. Splash House has just started a new digital marketing campaign, encouraging more people to take up kayaking and purchase kayaks, especially the new Kayak 1000s, the best on the market. Splash House owns one truck, which enables it to provide delivery service if needed. Delivery is included in the cost to the customer. In addition, it’s a good source of free advertising for the company. The owner knows that she needs to get the accounts up to date, to make sure that the company stays profitable and to help determine whether it can afford to hire additional employees full time to help meet the needs of the business. The previous bookkeeper has been helping to keep the books up to date since the beginning of the year, but now the task is up to you. The accounts are up to date as of the end of June 30, and everything you’ll need is in this book. The company uses Sage accounting software, but—to hone your skills and enable you to demonstrate your proficiency with the recording methodology—you’ll be completing this assignment manually* Project goal 1. Schedule of Sales 2. Schedule of Accounts Receivable 3. Schedule of Accounts Payable 4. Schedule of Merchandise Inventory Income Statement 6. Balance Sheet (7) journal entry and general ledger; Account # Name Debit Credit 1060 Florida Island Bank 49,000.00 1100 Accounts Receivable 26,463.00 1500 Merchandise Inventory 55,033.00 1520 Store Supplies 550.00 1530 Office Supplies 385.00 1540 Prepaid Insurance 1,350.00 1550 Prepaid Rent 6,600.00 1730 Plant & Machinery 2,000.00 1740 Plant & Machinery Accum. Dep. 200.00 1760 Motor Vehicles 20,000.00 1770 Motor Vehicles Accum. Dep. 1,500.00 2000 Accounts Payable 7,926.00 2001 TIC Bank Loan Payable 9,500.00 2170 Salaries Payable 15,000.00 2180 Salaries Tax Payable 1,342.70 2200 Federal Income Tax Payable 2210 Social Security Payable 2220 Medicare Payable 2230 State Tax Payable 2240 City Tax Payable 2250 FUTA 2260 SUTA 2300 Sales Tax 5,168.56 2310 Sales Tax on Purchase 3490 L. Romana Capital 120,743.74 3510 L. Romana Drawing 4000 Sales 4100 Sales Returns 4200 Sales Discounts 5000 Cost of Goods Sold 5100 Purchases 5120 Purchase Returns 5130 Purchase Discounts 5200 Store Supplies Expense 5400 Salaries Expense 5410 Salary Tax Expense 5495 Maintenance Expense 5496 Office Expense 6050 Advertising Expense 6200 Bank Fees/Interest Expense 6500 Insurance Expense 6700 Office Supplies Expense 6750 Rent Expense 6850 Travel/Meal Expense 6900 Utiliites Expense 6920 Plant & Machinery Dep. Expense 6930 Motor Vehicles Dep. Expense 6950 Vehicle Expense Total 161,381.00 161,381.00 SCHEDULE OF ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE Accounts Receivable Splash House is trying to keep track of everyone’s payments in cash and payments on receivables. In St. Catharines, it generally doesn’t have any trouble with uncollectible accounts, but sometimes it does have to prompt people for their payments. The accounts receivable ledger on June 30 is as follows. All amounts include sales tax. All sales terms are 2/10, n/30. Summary Accounts Receivable Customer Amount Due Date of Sale Dodge Lodge $2,023 June 1 Manyak Kayak Group $3,079 June 15 Fay Family Recreation Center $4,056 June 17 Namur Prince Scuba Club $5,135 June 20 Pierce Family Sporting Group $4,007 June 22 Aqua Vadis Sporting Group $2,078 June 23 St. Catharines Private School $6,085 June 27 Total $26,463 Splash House Equipment prefers to keep up to date on its payments. Generally, the company is diligent about recording payables, as doing so helps it make sound decisions on further purchases of stock. The accounts payable schedule on June 30 is as follows. All amounts include sales tax. All supplier payable terms are 2/10, n/30. Summary Accounts Payable Company Amount Due Date of Purchase Kayak Warehouse $4,500 June 27 Reelin in the Years Fishing Co. $500 June 27 Cousteau Underwater Inc. $1,000 June 28 The Boarding Skool $1,200 June 29 Odds and Rods Fishing Supplies $726 June 30 Total $7,926 Schedule of Merchandise Inventory Items Splash House Equipment has a warehouse at the back of the store that holds all their inventory items prior to sale. Each quarter, Splash House conducts a physical count of the inventory to make sure that all data is accurate. As of June 30, the company had the following merchandise schedule. Item Quantity Unit Value Sale Price Total Kayak 500 45 475 800 21,375 Paddle Board 29 247 425 7,163 Safety Kit 92 30 40 2,760 Wetsuit 67 220 400 14,740 Fishing Rod 23 125 163 2,875 Masks/Flippers/Snorkel Sets 10 12 16 120 Kayak 1000 10 600 950 6,000 Total $55,033 Splash House Equipment Income Statement Splash House Equipment has been completing its financials each month. It produced the following income statement report on June 30, 202X. Splash House Equipment Abridged Income Statement June 1, 202X-June 30, 202X 4000-Gross Sales $82,697 Expenses and COGS 5000-Cost of Goods Sold 46,957 5200-Store Supplies Expense 240 5400-Salaries Expense 15,000 5495-Maintenance Expense 112 5496-Office Expense 225 6050-Advertising Expense 3,572 6200-Bank Fees/Interest Expense 100 6500-Insurance Expense 225 6700-Office Supplies Expense 250 6750-Rent Expense 3,150 6850-Travel/Meal Expense 340 6900-Utilities Expense 526 6950-Vehicle Expense 12,000 Total Expenses $82,697 Net Profit $0 Splash House purchases: Splash House purchases various water sport items from suppliers and then sells them to consumers. For this project, you’ll focus on three items: Fishing rod, Safety kit, and Paddleboard. Splash House must keep track of how many of each of these items are coming and going from stock. To do this, it sets up “sub-ledger accounts” for each of these items. However, these are not balance-sheet accounts; rather, they function as stock cards—revealing how many of each item is in stock and at what unit value. Suppose that the company purchases the following: 10 fishing rods at $125, 10 safety kits at $30, and 10 paddleboards at $247. Further suppose, for simplicity’s sake, that these are purchased from one supplier, The Water Works. The invoice from the supplier (The Water Works) will list the items, their respective unit value, and the total amount purchased, which comes to $4,020. Now, besides eventually paying, Splash House must credit Accounts Payable for the total amount owed, which is $4,020. It must also debit Inventory for the amount of the goods acquired, which is $4,020. Splash House will sell the various items purchased to its customers at a profit; as such, the amount charged to the customer for any item will differ from the unit value recorded in the item’s subledger. Let’s leave the FIFO method aside for the time being and presuppose that Splash House sells 5 fishing rods at $150 each and 5 safety kits at $35. In this case two distinct recording operations must take place: (1) recording the sale and (2) recording the change in inventory. Recording the sale entails the use of three accounts. First is a debit to Accounts Receivable for the amount charged to the customer plus sales tax. In this case, the AR will be debited for $925 + $56 (6% sales tax rounded), totaling $981. The Sales account will be credited for $925, and the sales tax on Sales account will be credited for $56. In addition, a customer subledger account will be created, and the $1,045 entered into that customer account so that Splash House can keep track of that specific receivable. However, as with the Account Payable subledgers discussed previously, the customer account is not a balance sheet account. Splash House must now adjust its inventory as a result of the sale; therefore, it will reduce the Fishing Rods subledger by 5 rods at $125.00 and reduce the Safety Kit subledger by 5 kits at $30.00 for a total of $775. This $775.00 must now be credited to Inventory—to reduce it—and debited to Cost of Goods Sold, which will bring gross sales of $925 to net sales (925 – 775 = $150.00). Taxes In the United States, whenever a business provides a good or service, it must charge an added value amount, which is then owed to the government. In the case of Splash House—a company based in Florida—6% is levied whenever the company makes a sale, representing the amount owed to the government. This is a liability of the company—satisfied when the amount is remitted to the government at a designated period. Florida sales tax is paid to the Florida Department of Revenue on or before the 19th of the month after the sales occurred. SPLASH HOUSE EQUIPMENT TRANSACTIONS: JULY 2 THROUGH JULY 31 07/01: Pay June salaries: Check #82 07/02: Sale of 3 paddleboards to Dodge Lodge plus 6% Sales Tax. Terms are 2/10, n/30. 07/02: Purchased 5 wet suits and 5 Mask/Flipper/Snorkel sets from Cousteau Underwater Inc. The wet suits cost $220 each and the MFS sets cost $12 each. Terms are 2/10, n/30. Took delivery today. 07/03: Issued check #83 to Kayak Warehouse for amount owed as of 06/27. Take discount on full amount. 07/03: Sale of 2 Kayak 500s to Pierce Family Sporting Group plus Sales Tax. Terms are 2/10, n/30. 07/04: Fay Family Recreation Center returned two safety kits purchased in June because the kits were incomplete. Splash House agreed to reduce the Center’s June 17 receivable accordingly. You memo yourself to adjust all accounts affected by this return. 07/05: Returned the two defective Safety Kits to Reelin in the Years Fishing Co. Reelin in the Years agreed to deduct the return from the June 27 account payable. You memo yourself to adjust all accounts affected by this return. 07/05: Issued check #84 to Reelin in the Years to pay amount owed on June 27 account payable. Take discount on full amount of account payable. 07/05: Sale of 1 Kayak 1000 to St.Catharines Private School. Terms are 2/10, n/30, plus sales tax. 07/06: Received check from Manyak Kayak Group to settle account receivable from June 15. 07/06: Received check from Dodge Lodge as payment of its receivable as of June 1. 07/07: Received $5,000 check from Namur Prince Scuba Club in partial payment of its June 20 account receivable. 07/07: Issued checks #85 and #86 respectively to Cousteau Underwater Inc. and The Boarding Skool in payment of account balances as of June 28 for Cousteau Underwater Inc. and June 29 for The Boarding Skool. Take discount on full amount. 07/08: Sale to Namur Prince Scuba Club consisting of two wetsuits—sale price $400 each, plus Sales Tax. Terms are 2/10, n/30. 07/08: Received electric bill from St. Catharines Electrical Power Co. The amount is $150 due on 07/18. 07/09: Sale of 10 MFS Sets to Aqua Vadis Sporting Group $16.00 each plus Sales Tax. Terms are 2/10, n/30. 07/10: Sale of 10 Kayak 500s to Manyak Kayak Group plus Sales Tax. Terms are 2/10, n/30. 07/10: Received bill from Ultrasonic Gasoline Inc. for gasoline purchased for truck in June. $200.00, due on July 27. 07/10: Check #87: Paid June 30 balance owing to Odds and Rods Fishing Supplies. 07/11: Purchased 10 fishing rods at $125.00 each from Odds and Rods Fishing Supplies and took delivery today. Terms are 2/10, n/30. 07/11: Sale of one Kayak1000 to the Dodge Lodge plus Sales Tax. Terms are 2/10, n/30. 07/12: Sale of 5 fishing rods to Pierce Family Sporting Group plus Sales Tax. Terms are: 2/10, n/30. 07/12: Sale of 5 paddleboards to St. Catharines Private School plus Sales Tax. 07/13: Sale of 20 wet suits to Namur Prince Scuba Club plus Sales Tax. Terms are 2/10; n/30. 07/13: Issued check #88 to pay electric bill from July 8. 07/13: Sale of 10 Kayak 500s to Fay Family Recreation Center, plus Sales Tax. 07/14: Sale of 20 Kayak 500s to St. Catharines Private School plus Sales Tax. Terms are 2/10, n/30. 07/15: Issued check #89 to pay Odds and Rods Fishing Supplies for purchase of July 11. Compute any discount available on purchase price alone. 07/15: Sale of 5 Kayak 1000s to Manyak Kayak Group plus Sales Tax. Terms are 2/10; n/30. 07/15: Ms. Romana just advised that the company truck had been in the Swifty Muffler Shop and that the bill for the new muffler is $379. She asks you to issue her a check #90 so that she can pay for the repairs. 07/15: Received check from St. Catharines Private School—full payment from July 5 sale. 07/16: Received two checks from Namur Prince Scuba Club. One check is for amount still owing on June 20 receivable; the other is in payment of sale made on July 8. 07/17: Received check from Aqua Vadis Sporting Group in payment of its July 9 receivable. 07/18: Received check from Manyak Kayak Group in payment of its July 10 receivable. 07/18: Ms. Romana has been trying to interest the Knot Yacht Club in some of Splash House’s items and has taken the president and treasurer out to dinner at Captain Steamliner’s restaurant. The bill was $250, which she paid on her company credit card. She asks you to note this transaction on your books 07/20: Based upon the loan schedule, record the payment of principal and interest for the month of July. Hint: Consult the trial balance and make separate entries to record payment of the principal and payment of the interest. 07/22: Received payment from Dodge Lodge for receivable of July 11. 07/22: Received payment from Pierce Family Sporting Group and St. Catharines Private School in payment of their July 12 receivables. 07/23: Received payment from Fay Family Recreation Center for July 13 receivable. 07/24: Received payment from St. Catharines Private School for receivable of July 14. 07/25: Issued check #91 to pay Ultrasonic Gasoline Inc. for bill due July 27. 07/31: Record the following end of month adjustments to be paid next month: Salary, store supplies, office supplies, rent, insurance, plant & machinery depreciation, motor vehicles depreciation.