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ACC 3100 – Fall 2020

Computer Project – 60 points

An excel file entitled “Computer Project” has been placed on MOODLE for you to download and save.

DeeDee Double Entry, Incorporated creates accounting games and literature to enhance accounting education and financial literacy. Their business has been quite successful since their incorporation in January 1, 2012. DeeDee recently lost their accountant but luckily they have arranged for a fine accounting/finance student from Oakland University to assist in the closing process. They have provided you with the unadjusted trial balance for DeeDee Double Entry Incorporated as of 12/31/13. The previous accountant recorded all original entries involving cash, etc. during the year. However, at year-end the previous accountant would make all necessary adjusting/reclassification journal entries so that the principles of US GAAP were followed. Your task will be to create and record all necessary adjusting, correcting, and reclassification entries so that 2019 financial statements in accordance with US GAAP can be issued. The below information was discovered by reviewing contracts, agreements, correspondence and discussions with management.

Your required tasks are as follows:

1. Read the below information and follow steps #2 through #9

2. On the “Adjusting Journal Entries” worksheet, prepare in journal entry form all adjusting and correcting journal entries based on the following information. All information was provided to you as of 12/31/2019. (Round all numbers to the nearest dollar). Label journal entries a through u.

1. 1. DeeDee does banking at three different financial institutions. The details are as follows:

1. 1. DeeDee properly wrote off uncollectible accounts during the year. Based on an aging schedule, they have determined that $85,000 of Accounts Receivable will not be collectible.

1. 1. On May 1, 2019, DeeDee renewed a 12-month insurance policy for $6,000. All cash was paid at the time the policy was signed and prepaid insurance was increased. All other transactions involving insurance were properly recorded.

1. 1. On November 1, 2019 DeeDee paid ABC Advertising $12,000 for a four-month campaign of advertising services. Equal services are provided each month. All other advertising paid for during the year has been consumed.

1. 1. Because of strong demand and a need for additional inventory, DeeDee needed some temporary additional storage space so on July 1, 2019 they rented a unit for an annual rate of $24,000 and they paid the entire amount up front. The entire amount was expensed on July 1.

1. 1. Per a physical count of office supplies, $6,000 supplies remained at the end of 2019. The balance on the worksheet in the office supplies account represents last years ending balance. During the year, $17,500 of office supplies were purchased and immediately expensed.

1. 1. On July 1, 2019, DeeDee loaned a key supplier, $180,000. A promissory note was signed and issued. The agreed upon interest rate was 4.8% and the key supplier has agreed to pay interest and the note receivable on July 1, 2020. The note was recorded in Notes Receivable and is the only note outstanding. At December 31, 2019, no interest has been accrued.

1. 1. The office building was bought in January 1, 2017 by DeeDee and DeeDee plans to use the building for 40 years with no estimated salvage value. DeeDee depreciates the building on a straight-line basis.

1. DeeDee uses the DDB method to depreciate office equipment. No office equipment was added during 2019. It is estimated that the office equipment has a useful life of 20 years with a salvage value of $4,000. Prior depreciation was correctly calculated based on period of time held.

1. As of 12/31/2019 the Available for Sale Equity Investments have a fair value of $385,000 and the fair value of the Available for Sale Debt Investments have a fair value of $110,000. Due to the market conditions, the company does not plan on selling the assets in 2020, but their intent is to sell at some point in time.

You can ignore the tax effect on unrealized gains and losses. (Hint: Unrealized Gains and Losses – OCI are closed to Accumulated Other Comprehensive Income at the end of the year.)

1. On March 1, 2019, DeeDee purchased the copyrights of some accounting games for $100,000. They believe the useful life will be five years. The company’s amortization policy is that amortization should be calculated based on partial year if an acquisition is made during the year. Internally, DeeDee also developed some new accounting games and capitalized $50,000 of research and development costs in the copyright account.

1. Office salaries and sales salaries for the last week of 2019 of $15,500 and $25,400 remained unpaid at 12/31/19 and have not been accrued. The employer portion of FICA expense is 7.65% and no employee has reached the maximum. DeeDee records payroll tax expenses in salary expense.

1. On April 1, 2019, DeeDee rented a portion of one store to Marketing Majors Inc. The contract was for 18 months and DeeDee required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company.

1. DeeDee Double Entry has a loan outstanding as of 12/31/2019. Interest is paid annually on January 1st. The facts for the loan is:

Coldstar Bank Loan –outstanding all of 2019 with a 6.4% interest rate. Interest is due on January 1st of each year. Principle is due in five years on January 1, 2024. Since interest will not be paid to the Bank until January 1st, DeeDee’s office staff did not accrue any interest.

1. DeeDee uses the FIFO Inventory Method in valuing inventory. The inventory balance of $372,500 was based on a physical count at 12/31/2013. Based on your analysis, you have noted that $4,500 of marketing games that belonged to Marketing Majors Inc. and being held by DeeDee on consignment was included in the physical account at year end. You also note that goods were in transit from a vendor on December 31, 2019 and were not included in ending inventory. The cost of the inventory was $16,800 and the goods were shipped f.o.b. shipping point on December 29, 2019.

p. DeeDee has been authorized to issue 1,000,000 shares of $1 par Common Stock. At the end of 2018, they had issued 50,000 shares for $25. They had properly accounted for this issuance. On January 2, 2019, they issued an additional 30,000 shares of Common Stock for $25 per share. The previous account recorded this transaction as a debit to Cash for $750,000 and a credit to Common Stock $750,000.

q. DeeDee has a straight tax rate of 24%. Income tax expense is Net Income before taxes times 24%. (Hint: Prepare the Income Statement up to Net Income before Taxes and then record this adjusting journal entry.)

1. After the above adjusting entries are entered on the adjustment worksheet, the cells should be linked to the adjustments column of the worksheet. Your adjustment amounts in the worksheet column should be linked to the adjustment sheet so if you change the debit/credit amount in the adjusting entry, the column amount will automatically change. All adjustments should be labeled a – q and be in the order of the information provided.

1. Complete the adjusted columns by the use of a formula. Think about the best way to do this. Your last two columns should never contain constant numbers but will include formulas only. (Maximum points are given for using an ‘if” statement, but the majority of the points are just given for having a proper formula).

1. Prepare a multiple-step income statement on the proper worksheet. Your Income Statement should be in good form (proper titles, etc., use examples from your book) and well formatted. Do your best designating between selling and administrative expenses. Judgement is involved in creating your income statement and there is no one correct answer. You should use formulas in all cells, not constant numbers. (That means, your income statement should be linked to the adjusted numbers on your worksheet.)

1. Prepare a Comprehensive Income Statement on the proper worksheet. DeeDee Double Entry Inc. uses the Second Income Statement Approach. (See Chapter 4)

1. Prepare a Statement of Changes in Stockholder’s Equity. You should use formulas in all cells, not constant numbers. (See class notes for an example)

1. Prepare a Classified Balance Sheet on the proper worksheet as of 12/31/19. Your Statement should be formatted. You should use formulas in all cells, not constant numbers.

1. Prepare closing entries on the proper tab. You may close directly to Retained Earnings (if you wish).

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