Granite Bay Jet Ski,
Incorporated
Level II
5th Edition
Adjusting Entries and Closing
Entries for the Quarter Ended
June 30
and the
Final Project Evaluation
Page 1
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
ADJUSTING ENTRIES FOR THE QUARTER
Using a copy of the June 30 Unadjusted Trial Balance (printed after the bank reconciliation
entries) and the information and financial data shown below, record the adjusting entries for
Granite Bay Jet Ski, Inc. Be sure to select the Adjusting JE button to journalize the adjusting
entries. Adjusting entries must NOT be entered using the daily entries (Daily JE) procedure.
Corrections to adjusting entries must also be entered using the adjusting entries selection. Where
necessary, round all calculations to the nearest cent. ALL ENTRIES MUST BE RECORDED
AS OF JUNE 30, THE END OF THE SECOND QUARTER!
A. The unexpired insurance balance is $3,780.
B. The ending store and shop supplies inventory is $2,135.
C. A total of $985 worth of advertising copy, paid for in advance and correctly charged to the
Advertising Expense account, will be received early next quarter.
D. All of the prepaid property tax is an expense for the quarter.
E. Wages accrued total 8.5 hours worked at $11.30 per hour.
F. Storage Fees Earned for the quarter total $10,450.
G. Straight-line depreciation of store equipment and fixtures totals $2,250 for the quarter. The
new store equipment acquired June 26 will not be depreciated this quarter.
H. Depreciation of shop equipment is $460 per month. The new shop equipment acquired
during the final week of June will not be depreciated for the second quarter.
Page 2
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
I.
Granite Bay Jet Ski, Inc., has three trucks. The new truck acquired on June 21 will not be
depreciated this quarter. An old truck used only for short distance heavy hauling is fully
depreciated. The third truck was acquired at a cost of $25,500, has a salvage value of $7,500,
is depreciated on a miles driven basis (units of production depreciation), and has an
estimated service life of 120,000 miles. The truck was driven 2,240 miles during the quarter.
J.
Accrue the interest on the short-term notes receivable. Calculate the interest to the nearest
cent. Use the 360-day banker's year for all interest computations and record a single
adjusting entry for the short-term interest.
Note Receivable: $10,000, 8.5%, 60-day note, dated June 22
K. Additional income taxes expense for the period total $2,640.
L. Credit Card Expense (3.0%) on the outstanding balance of the Accounts Receivable, Credit
Card Companies account balance has not been recorded. This accrual entry will decrease the
Accounts Receivable, Credit Card Companies account.
M. The balance sheet (computer aging) method is used to estimate the balance of the Allowance
for Doubtful Accounts account for the end of each quarter. The program has analyzed all
accounts receivable and calculated the estimated balance of the account to be $2,190.50.
In the past, Granite Bay Jet Ski, Incorporated, has experienced small shortages (shrinkage) in
merchandise inventory when the perpetual inventory total maintained on the computerized
accounting system was compared to the actual physical inventory count taken at the end of the
accounting period. When this shrinkage occurred, the Cost of Goods Sold account was debited and
the Merchandise Inventory account was credited for the total value of the inventory shortage. The
entry was followed by an update of the specific merchandise items where the quantities reported
were not correct. At the end of the current quarter the physical count of merchandise on hand
matches the perpetual inventory for each item in stock. As a result of the satisfactory inventory
control system that is in place, no losses have occurred and no adjusting entry for inventory
shrinkage is required this quarter.
Page 3
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
When all of the adjusting entries have been correctly entered, PRINT THE ADJUSTED
TRIAL BALANCE! The correct balance will be $754,525.73.
You are now ready to complete the final evaluation of the Granite Bay Jet Ski, Inc.,
operations. To gather the necessary information to complete the final evaluation questions,
PRINT ALL of the documents listed in instructions 1-9.
1.
Click on Journals/Ledgers/Statements, select Financial Statements, then select Income
Statement. Print the Income Statement.
2.
Click on Journals/Ledgers/Statements, select Financial Statements, then select Retained
Earnings. Print the Retained Earnings Statement.
3.
Click on Journals/Ledgers/Statements, select Financial Statements, then select Balance
sheet. Print the Balance Sheet.
THE CORRECT NET INCOME FOR GRANITE BAY JET SKI, INCORPORATED, IS
BETWEEN $46,900.00 AND $47,000.00
4.
Print the Schedule of Accounts Receivable.
5.
Print all customer accounts.
6.
Print the Schedule of Accounts Payable.
7.
Print all vendor accounts
8.
Print the Inventory Analysis.
9.
Print the following inventory stock cards:
A1100 A900T AL800 AU150 KW001
KW003
Page 4
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
RECORD THE CLOSING ENTRIES FOR GRANITE BAY JET SKI
The closing entry process in the Granite Bay Jet Ski, Inc., accounting system is an automatic
function. When initiated, the program will close all of the temporary accounts. Continue with
instructions 10, 11, and 12.
10. Click on Data Entry. Click on Close JE. The program will automatically record
(journalize) and post the closing entries to the General Ledger. When the closing is
completed answer OK.
11. Print the Post-Closing Trial Balance.
12. Print the following General Ledger accounts:
101
105
115
201
305
401
411
602
Cash
Accounts Receivable
Merchandise Inventory
Accounts Payable
Retained Earnings
Watercraft and Accessory Sales
Service Fees Earned
Store and Shop Supplies Expense
Exit the Granite Bay Jet Ski, Inc., accounting program. Using all of your printed documents,
carefully answer the Final Evaluation questions. The questions and several of the end-of-thequarter documents may be collected by your instructor.
Error Correction After Closing the Books
If, after closing the books, you discover an error or wish to print a corrected copy of any of the
financial statements, you may return to the Adjusted Trial Balance totals. Click on Support, select
Restore to Adjusted Balances. The accounts will be returned to their pre-closing balances.
Daily or adjusting entries can then be corrected using the Daily JE or Adjusting JE option. NEW
COPIES OF ALL CORRECTED DOCUMENTS MUST BE PRINTED. Again, close the
General Ledger (Close JE) and print a Post-Closing Trial Balance. Then exit the program.
Page 5
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
FINAL EVALUATION
GRANITE BAY JET SKI II
NAME_______________________________________
CLASS DAY AND TIME__________DATE________
1. What is the net realizable value of the Accounts Receivable?
$_____________
2. On the June 30, Balance Sheet, what is the "net worth" or "net assets"
of the business?
$_____________
3. What is the book value of Shop Equipment?
$_____________
4. What is the current ratio for Granite Bay Jet Ski, Incorporated?
A. 10.56
B. 11.01
C. 11.41
D. 11.91
E. None of the above
_____________
5. What is the acid test (quick) ratio of the business?
A. 4.56
B. 5.01
C. 5.08
D. 5.13
E. None of the above
_____________
6. Does Granite Bay Jet Ski have enough cash on hand to meet current
debt? Answer Y for Yes or N for No.
_____________
7. Identify by customer number, the customer who has the smallest
outstanding balance on June 30?
_____________
8. Does any customer currently have a balance that is past due? Granite
Bay Jet Ski, Incorporated, extends net 30 terms to all customers.
Answer Y for Yes or N for No.
_____________
9. Examine the Royal Bar Jetters account. On or before what date
should the balance of invoice G3971 be received?
A. June 16
B. July 17
C. July 18
D. July 19
E. None of the above
_____________
Page 6
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
FINAL PROJECT EVALUATION GRANITE BAY JET SKI II
10. What was the balance owed to Andregg Supply before the return of
$38.90 worth of supplies on June 23?
$_____________
11. If paid on time, identify by invoice number the invoice that must be
paid no later than July 3.
_____________
12. If the Kawasaki USA account is not paid in full within the discount
period for the single outstanding invoice, what will be the total
amount of the discount lost?
$_____________
13. The single unit of inventory item AL800, that was sold for cash on
June 16, was listed on what sales invoice? (Identify by number.)
_____________
14. What is the FIFO inventory value of the AL800 trailers in stock?
$_____________
15. How many KW001 units were sold during June?
_____________
16. How many KW001 units were returned during June?
_____________
17. How many Granite Bay T-shirts are in stock?
_____________
18. How many A1100 Jet Ski STX-15F units were purchased during
June?
_____________
19. How many individual inventory items are now out of stock?
A. 0
B. 2
C. 3
D. 5
E. None of the above
20. If the transportation-in costs had been reduced to zero through more
successful negotiation of merchandise contracts, what would be the
new Gross Profit on Sales?
_____________
21. Total Cost of Goods Sold is what percent of Net Sales?
A. 73.69%
B. 74.15%
C. 75.86%
D. 76.45%
E. None of the above
$_____________
_____________
Page 7
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
FINAL PROJECT EVALUATION GRANITE BAY JET SKI II
22. Gross Profit from Sales is what percent of Net Sales?
A. 25.09%
B. 26.31%
C. 27.54%
D. 28.55%
E. None of the above
_____________
23. Income From Operations is what percent of Total Net Revenues (Net
Sales and Total Fees Earned)?
A. 8.89%
B. 11.67%
C. 14.70%
D. 17.65%
E. None of the above
_____________%
24. Sales Return and Allowances is what percent of Watercraft and
Accessory Sales?
A. Less than .5%
B. .5%
C. .74%
D. 2.00%
E. None of the above
_____________
25. Last quarter the Total Selling Expenses were 7.75% of Total Net
Sales and Fees Earned. Has this quarter, ending June 30, 2008, been
an improvement over last quarter? Answer Y for Yes or N for No.
_____________
26. Compared to June 2 merchandise inventory of $187,164.42, the June
30 merchandise inventory has decreased by what percent?
A. 5.17%
B. 6.99%
C. 7.28%
D. 8.46%
E. None of the above
_____________
27. If the total for Service Fees Earned and Storage Fees Earned could be
increased by 25% with only a $450 increase in Salaries and Wages
Expense, and a $150 increase in Advertising Expense, what would be
the new total for Income From Operations?
$_____________
Page 8
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
FINAL PROJECT EVALUATION GRANITE BAY JET SKI II
28. A 1% increase in Net Sales and Fees Earned combined with a 1%
decrease in Total Operating Expenses, would result in an increase to
Income From Operations to what amount?
$_____________
29. If $800 of Delivery Expense charges were found to be recorded in the
Transportation In account, the Cost of Goods Sold and Gross Profit
would change by $800. If this error was corrected, what would be the
balance of the Net Income?
$_____________
30. If an audit determined that due to "shrinkage" the ending inventory
was overstated by $1,500, the reported Net Income of the business
would be:
A. Understated
B. Overstated
C. Unchanged
D. None of the above
_____________
31. If "shrinkage" of $1,000 was reported after the inventory was
officially counted on June 30, 2008, the Merchandise Inventory
account would be credited for the $1,000. The missing inventory
item/s would be accounted for in the entry and the perpetual inventory
system would be brought up-to-date. In the journal entry, what
account would be debited for the shrinkage?
A. Cash
B. Cost of Goods Sold
C. Income Summary
D. Merchandise Inventory
E. None of the above
_____________
32. If the ending inventory is understated, the Income from Operations
will be:
A. Overstated
B. Understated
C. Unchanged
D. None of the above
_____________
Page 9
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013
FINAL PROJECT EVALUATION GRANITE BAY JET SKI II
33. After closing the books, what is the balance of Dividends Declared?
A. $2,400
B. $400
C. $0
D. None of the above
_____________
34. What must be the last account listed on the Granite Bay Jet Ski, Inc.,
Post-Closing Trial Balance?
A. Income Summary
B. Common Stock
C. Dividends Declared
D. Merchandise Inventory
E. None of the above
_____________
35. After closing, what is the balance of the Income Summary account?
A. $225,000.00
B. $467,907.03
C. $439,390.14
D. $46,965.29
E. None of the above
_____________
Page 10
Granite Bay Jet Ski, Inc., Level II – Module 5
5th Edition, Copyright © 2010 PKL Software, Incorporated. All rights reserved.
Last Revised: February 16, 2013