Quickbooks Pro Comprehensive Problem

Comprehensive Problem to AccompanyPage 1

Computerized Accounting using QuickBooks 2012

Comprehensive Problem

to accompany

Computerized Accounting Using QuickBooks 2012

by

Kathleen Villani and James B. Rosa

On January 1, 2013, Jen Beck started up her business of Jen’s Tennis Courts by purchasing tennis courts that she acquired in part by signing a $40,000 mortgage note at 5% interest. At that time, Jen also purchased furniture and equipment. Jen began the business by providing tennis court services and tennis lesson services for which she charges fees. Eventually Jen began selling tennis merchandise: tennis racquets, tennis clothing, and tennis balls. Jen feels she needs someone to help her with the tennis services and 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 a 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, 2013, Jen decided to convert the accounting records to QuickBooks. You have been retained to set up the accounting records in QuickBooks; record all monthly accounting activity for the month including month-end activity; and print management reports, accounting reports, and the financial statements as of the end of July.

1.Use the information below to create and set up the company file. You may use either the Advanced Setup method or the Express Start method:

Company:[Your Name] Jen’s Tennis Courts

Tax ID:17-6158789

Address:32-05 Springfield Blvd.

Bayside, NY 11364

phone: 718-555-5360

fax: 718-555-5370

email:

Select your industry:General Product-based Business (if using the Advanced Setup method and the EasyStep Interview window) or

Other/None (if using the Express Start method)

Company organization:sole proprietorship

First month of fiscal year:January

Save As:[Your Name] Jen’s Tennis Courts

Start Date: July 1, 2013

2.If you are using the QuickBooks Setup window to enter data, enter the customers (see step 12), vendors (see step 13), and items (see step 10).

3.Activate the account numbers, inventory, and sales tax features. For sales tax, use the following information:

Type:Sales Tax Item

Tax Name:NY Sales Tax

Description:Sales Tax

Tax Rate (%):8

Sales Tax Agency:NYS Dept. of Revenue

1 Washington Avenue

Albany, NY 12222

phone: 518-555-1000

fax: 518-555-2000

4.Disable the Payroll feature.

5.Set up or edit the following payment terms. All other payment terms created by QuickBooks can be deleted:

2/10, Net 30 Days

Net 15 Days

Net 30 Days

6.Allow the software to create system default accounts by opening and closing the following windows: Create Invoices window; Enter Sales Receipts window; Enter Bills window.

Only if you are using the Express Start method, also open the Item List window then open the New Item window and select Inventory Part.

7.Customize the following accounts in the Chart of Accounts List window (Sales Income is displayed only if you used the QuickBooks Setup window to enter data):

account created by QuickBookschange to

11000 Accounts Receivable1200Accounts Receivable

12000Undeposited Funds1250Undeposited Funds

12100Inventory Asset1230Inventory of Tennis Racquets

20000Accounts Payable2010Accounts Payable

25500Sales Tax Payable2030Sales Tax Payable

30000Opening Balance Equity3010Jen Beck, Capital

30800Owners Draw3020Jen Beck, Drawings

32000Owners Equity3030Accumulated Earnings

Sales Income4030Sale of Tennis Racquets

50000Cost of Goods Sold5030Cost of Tennis Racquets Sold

8.Delete account 47900 Sales if it is in the Chart of Accounts List.

Note: If you used the Advanced Setup method, additional accounts may appear. You can use these accounts and edit them to match the additional accounts you will add in step 9 below, or you can delete the additional accounts. You may need to complete the editing of the Item List in step11 below before you can delete some of the accounts. If the payroll accounts appear, you will not be able to delete them. You can make them inactive, but it isn’t necessary because you will use the payroll accounts later in this problem.

9.Use the information below to update the Chart of Accounts List for accounts not already created and 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 for step 15 below.

10.Use the information below to update the Item List. Only inventory parts are taxable. For the inventory part items, be sure to use the date July 1, 2013.

11.It you used the Advanced Setup method and the QuickBooks Setup window to enter data, edit the items on the Item List:

Service Items:edit account numbers and non-taxable (see step 10)

Inventory Part Items:edit account numbers, taxable, reorder point (see step 10)

Sales Tax Item:edit name, description, tax rate, tax agency (see step 3)

12.Use the information below to update the Customer Center:

13.Use the information below to update the Vendor Center:

continues…

14.If you used the QuickBooks Setup window to record customers and vendors, edit each customer and vendor to record the terms of payment. (see step 12 and step 13)

15.To complete the New Company Setup, record the following three journal entries on July 1, 2013:

a.Enter the opening balances (refer to step 9 above). Use Open Bal as the Entry No.

b.Make a journal entry to reverse the Uncategorized Income account, Open Adj 1.

c.Make a journal entry to reverse the Uncategorized Expenses account, Open Adj 2.

16.Display and print the following reports for July 1, 2013 – July 1, 2013:

a.Journal

b.Trial Balance

Note:After you reverse the Uncategorized Income and Uncategorized Expense accounts, you can make these accounts Inactive in the Chart of Accounts List.

17.Jen informs you that she has hired an assistant, Dave Saylor, who will begin working on July 1.

a.Activate the payroll feature, and then customize the payroll system default accounts:

account created by QuickBooks change to

24000Payroll Liabilities2100Payroll Liabilities

66000Payroll Expenses6560Payroll Expenses

b.Create the following new general ledger accounts:

Other Current Liability, Subaccount of 2100 Payroll Liabilities:

2110Social Sec/Medicare Tax Payable

2115FIT Payable

2120SIT Payable

2125FUTA Payable

2130SUI Payable

2135SDI Payable

Expense, Subaccount of 6560 Payroll Expenses:

6565Wages Expense

6610Social Sec/Medicare Tax Expense

6625FUTA Expense

6630SUI Expense

6635SDI Expense

c.Choose the manual payroll calculations option to activate the Payroll Item List. Then edit the following payroll items on the Payroll Item List:

Payroll Item

Federal Unemployment

Federal Withholding

Medicare Company.

Medicare Employee

Social Security Company

Social Security Employee

For 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 defaults

d.Add the following to the Payroll Item List:

Type:Wage (Hourly Wages)

Name:Hourly Wages

Type:State Tax (State Withholding)

Name:NY – Withholding

Agency for Liabilities:NYS Dept. of Revenue

Identifying number:17-6158789

Taxable compensation:Accept defaults

Type:State Tax (SDI) – State Disability

Name:NY – Disability Company / NY- Disability Employee

Agency for Liabilities:NYS Dept. of Revenue

Identifying number:17-6158789

Company rate:0%

Employee rate:.5%

Taxable compensation:Accept defaults

Type: State Tax (SUI) – State Unemployment

Name:NY – Unemployment Company

Agency for Liabilities:NYS Dept. of Revenue

Identifying number:ER- 158789

Company Tax Rate:4.025% each quarter

Taxable compensation:Accept defaults

e.Add Dave to the Employee Center:

Name:Dave Saylor

SS Number:137-29-2817

Birth:May 13, 1993

Address:1 Marine Way, New Hyde Park, NY 11040

Cellular:516-555-0331

Item Name:Hourly WagesHourly/Annual Rate: $10.00

Pay Frequency:biweekly

Federal Filing Status:single

Allowances:1

State Worked:NY

Tax:SUI (Company Paid)

Tax:SDI

State Subject to Withholding:NY

Filing Status:Single

Allowances:1

18.The following activity occurred during the month of July. Setup or create additional preferences and files when needed, and record the following transactions in the appropriate windows:

Jul 2Received 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 as Insurance Expense, but you think it is better to record it as Prepaid Insurance on payment, and then adjust it at the end of each month.

Jul 2Received a six-month advertising renewal from Ray Vill Advertising Agency for $900, paid immediately, Check No. 73. Jen also recorded the previous advertising as Advertising Expense, but like the insurance policy you will record it as Prepaid Advertising on payment, and then adjust it at the end of each month.

Jul 2Recommended to the owner, Jen Beck, that she put some of the cash into a Money Market account that will earn interest. Jen agrees. Create the general ledger account 1030 Money Market and transfer $7,000 into the account.

Jul 3Purchased $500 of office supplies on account from the Office Supply Store, their Invoice No. 285, Net 30 Days. Jen previously recorded this type of purchase as Supplies Expense, but you record it in the asset account Office Supplies.

Jul 3Purchased 25 cans of tennis balls from Sporting Goods, Inc., at $2 per can, paid immediately, Check No. 74.

Jul 4Provided 2 hours of tennis lessons (owner) at $25 each and 2 hours of tennis court services at $30 each on account to the Davis Family, Invoice No. 1150, Net 30 Days.

Jul 5Sold 4 tennis racquets for $100 each and 4 tennis outfits for $80 each on account to the Grisham Family, Invoice No. 1151, 2/10, Net 30 Days.

Jul 5Received full payment from Whitestone Seniors Club, their Check No. 1587.

Jul 5Paid in full AGI, Check No. 75.

Jul 6Recorded the cash sales for the week for 15 hours of tennis lessons (owner) at $25 each, 32 hours of tennis court services at $30 each, and 15 cans of tennis balls at $4 each, Sale No. 551

Jul 9Received the telephone bill from AGI, their Invoice No. 809, $150, Net 30 Days.

Jul 9Received payment in full net of discount from Bayside Youth Group, their Check No. 11725.

Jul 9Paid in full Racquets, Inc., Check No. 76.

Jul 9Paid in full Tennis Suits, Inc., Check No. 77.

Jul 11Provided 2 hours of tennis lessons (owner) at $25 each and 2 hours of tennis court services at $30 each on account to the Davis Family, Invoice No. 1152, Net 30 Days.

Jul 12Received full payment from Lakeland Community Group, their Check No. 6952.

Jul 12Purchased 7 tennis racquets at $50 each on account from Racquets, Inc., their Invoice No. TR71213.

Jul 12Purchased 5 tennis outfits at $40 each on account from Tennis Suits, Inc., their Invoice No. TO1478.

Jul 12Received full payment net of discount from the Grisham Family for Invoice No. 1151, their Check No. 708.

Jul 13Received a credit memo for 2 tennis racquets at $50 each returned on account to Racquets Inc., Invoice No. CM-TR71213.

Jul 13Provided 10 hours of tennis court services at $30 each on account to the Lakeland Community Group, Invoice No. 1153, Net 30 Days.

Jul 13Provided 6 hours of tennis court services at $30 each on account to the Whitestone Seniors Club, Invoice No. 1154, Net 30 Days.

Jul 13Sold 10 tennis racquets at $100 each and 10 tennis outfits at $80 each on account to Bayside Youth Group, Invoice No. 1155, terms 2/10, Net 30 Days.

Jul 13Recorded the cash sales for the week for 14 hours of tennis lessons (owner) at $25 each, 37 hours of tennis court services at $30 each, 15 cans of tennis balls at $4 each, and 4 tennis racquets at $100 each, Sale No. 552.

Jul 13Created account 1020 Cash – Payroll account. Transferred $1,800 from the Cash – Operating account to the Cash – Payroll account.

Jul 13Created the paycheck for Dave Saylor for his first two weeks working at Jen’s Tennis Courts, pay period ending July 13, 2013. Recorded the following paycheck details (if you receive messages about additional taxes, click X and Yes to close each message):

Pay Period:July 13, 2013

Hours Worked:80

Company Taxes:

Social Security Company: 49.60

Medicare Company: 11.60

Federal Unemployment: 6.40

NY – Disability Company: 0

NY – Unemployment: 32.20

Employee Taxes:

Federal Withholding: 52.00

Social Security Employee: 49.60

Medicare Employee: 11.60

NY Withholding: 40.00

NY Disability – Employee: 1.20

Check No. 101

Jul 13Deposited the cash receipts for the first half of the month of July.

Jul 13The owner, Jen Beck, withdrew $2,000 cash for personal use. Check No. 78. Memorize the transaction for payments every two weeks. Next payment is July 27, 2013.

Jul 15Purchased 25 cans of tennis balls at $2 each from Sporting Goods Inc, their Invoice No. tb815, paid immediately, Check No. 79.

Jul 15Received full payment from the Davis Family for Invoice No. 1150 and Invoice No. 1152, their Check No. 555.

Jul 15Jen was awarded the contract to provide tennis lessons to the Springfield Gardens Teen Club. There will be three levels: beginner, intermediate, and advanced. They will be provided 30 hours a week in lessons. Jen will provide 10 hours of lessons and Dave will provide 20 hours of lessons. You decide to use time-tracking for this contract.

a.Enable the time-tracking feature.

b.Add the New Customer:

Customer Name:Springfield Gardens Teen Club

Address:150 Westgate St.

Springfield Gardens, NY 11413

Contact:Erica Baynes

Phone:718-555-1140

Terms:Net 30 Days

c.Add the following three jobs to Springfield Gardens Teen Club:

Job Name:Beginner Level

Intermediate Level

Advanced Level

Job Info:(for all three jobs)

Job Status:Awarded

Start Date:07/15/13

Projected End:07/26/13

Job Description:To provide tennis instructions based on level.

d.On the Item List, add a New Item:

Type:Service

Item Name/Number:Tennis Lessons Fees – Assistant

Description:: Tennis Lessons Fees – Assistant

Rate:$20 per hour

Tax Code:Non-Taxable Sales

Account:4020 Tennis Lessons Fees Earned

Jul 18Provided 2 hours tennis lessons (owner) at $25 each and 2 hours tennis court service at $30 each on account to the Davis Family, Invoice No. 1156, Net 30 Days.

Jul 18Received full payment from Whitestone Seniors Club for Invoice No. 1154, their Check No. 1597.

Jul 19Received the utilities bill from Local Power Company and paid it immediately, Check No. 80, $200

Jul 20Recorded the cash sales for the week for 16 hours of tennis lessons (owner) at $25 each, 39 hours of tennis court services at $30 each, 15 cans of tennis balls at $4 each, 2 tennis racquets at $100 each, and 2 tennis outfits at $80 each, Sale No. 553.

Jul 20Recorded the tennis lessons hours on the weekly timesheet for the Springfield Gardens Teen Club for the first week as follows:

For Jen Beck (owner):

For Dave Saylor (assistant):

Jul 22Received full payment net of discount from Bayside Youth Group, Invoice No. 1155, their Check No. 11775.

Jul 22Purchased five tennis racquets at $50 each on account from Racquets, Inc., their Invoice No. TR72213.

Jul 25Provided 2 hours of tennis lessons (owner) at $25 each and 2 hours of tennis court services at $30 each on account to the Davis Family, Invoice No. 1157, Net 30 Days.

Jul 25Received full payment from Lakeland Community Group, Invoice No. 1153, their Check No. 6965.

Jul 27Provided 10 hours of tennis court services at $30 each on account to the Lakeland Community Group, Invoice No. 1158, Net 30 Days.