September 2023 Date Description of Event 1 January 2 2007 Employees are paid bi monthly on the first

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Date Description of Event 1 January 2 2007 Employees are paid bi monthly on the first 2023

Date Description of Event 1 January 2, 2007 Employees are paid bi-monthly on the first day of the month for work performed during the last half of the previous month (because of the New Year’s holiday, this month they are paid on the 2nd), and on the 16th for work done during the first half of the current month. Total wages paid on this date were $20,400. (Ignore payroll taxes for this assignment.) 2 Cottonwood signed and paid for an annual advertising agreement with the PRCA for banner ads on the PRCA website. Cottonwood’s advertisements will be posted to the website starting in March 2007 and run until February 28, 2008. The contract cost is $7,200 plus any art and setup charges, which will be billed as they occur. 3 January 3, 2007 Cottonwood’s office manager picked up office supplies from Office Max on her way into work. She checked the orders against Cottonwood’s purchase order and stocked the supplies in the supply cabinet. The Office Max invoice totaled $362 and payment terms are net the 15th of the month. 4 Cottonwood received a check for $12,620 from one of their customers as payment for a previous order. 5 Cottonwood received a shipment of event merchandise from the Rodeo Outfitters Company. This merchandise was ordered on December 20th and was delivered by Viking Freight. Rodeo Outfitters paid Viking for the shipping charge of $882. Cottonwood is to pay Rodeo Outfitters $92,000 based on terms of 2/10 net 30. 6 Cottonwood received their new product catalogs ordered from a local print shop. The print shop billed Cottonwood $6,000 for 5,000 catalogs with payment terms of net 10. Cottonwood considers catalogs as advertising and expenses the catalogs at the end of the month based on how many catalogs are sent out during the month. 7 January 4, 2007 Cottonwood received an order from the FFA rodeo in LaJunta Colorado, (LJ FFA), for $19,820 in event merchandise. The Cottonwood customer service representative confirmed that the LJ FFA Rodeo’s account was paid current and they had sufficient credit available to cover the new sale. The order was then sent tothe warehouse where it was picked and prepared for shipping. The merchandise was shipped via UPS at a cost of $170, which was paid by Cottonwood. Cost of the merchandise shipped was $12,584. Terms of the sale are net 30. 8 January 5, 2007 Cottonwood placed a purchase order with the Lazy J Ranchers Emporium for $76,000 in resale merchandise. Payment terms to Lazy J Ranchers are net 30 upon receipt of goods. 9 Cottonwood paid an outstanding vendor invoice of $16,050. 10 Cottonwood paid the December telephone bill to AT&T in the amount of $428. Expenses are usually accrued at the end of the month as “other accrued expenses payable”. 11 January 8, 2007 Cottonwood hired an additional employee for the warehouse. She starts work today. As with all of the other employees, this employee will be paid bi-monthly at a rate of $2,400 per month. 12 Cottonwood received an order from the Del Norte County Rodeo in Trinity, CA for $18,000 of resale merchandise. This is a new rodeo with no credit history. Cottonwood has requested payment in full prior to the delivery of goods. The cost of the goods ordered is $10,440. 13 One of Cottonwood’s sales reps sold event merchandise to the Dust Bowl Rodeo in Kansas for a total sales amount of $126,000. Terms of the sale are net 15 and will be paid by electronic funds transfer (EFT). The order information was sent to the warehouse where the merchandise was picked and packaged for shipment. The order was picked up by CWX Freightlines and shipping costs of $685 were paid by Cottonwood at the time of shipment. Cost of the merchandise shipped was $80,600. 14 Cottonwood received customer checks totaling $28,400 for payment on outstanding accounts. 15 January 9, 2007 Cottonwood paid the December’s Pacific Gas & Electric (PG&E) bill in the amount of $2,110 using their bank’s automated billin the amount of $2,110 using their bank’s automated bill payment system. 16 A wire transfer in the amount of $18,000 is received from the Del Norte County Rodeo for payment of the order placed on January 8th. The goods are picked, packaged and shipped via UPS. Cottonwood has an account with UPS and will pay the shipping costs of $112 for this order. UPS’ payment terms are net 7 days. 17 Alamo Conference Center in Texas placed an order via email. Cottonwood’s sales rep wrote up the order, checked their credit and sent the order information to the warehouse for shipping. The sale amount was $102,240, which included $80,100 in resale merchandise and $22,140 in event merchandise. The cost of the resale merchandise was $51,264 and the cost of the event merchandise was $11,513. The goods were shipped that day. Cottonwood paid the shipping expense of $1,502. Payment terms for the order are net 15. 18 January 10, 2007 Cottonwood’s warehouse received the January 5th order from Lazy J Ranchers Emporium. The inventory was counted and placed on the shelves. Proof of receipt and the vendor’s invoice was sent to accounting. Lazy J paid the shipping of $1,190. 19 January 11, 2007 Cottonwood placed a purchase order with a local vendor for the new industrial shelving for the warehouse that was approved in Cottonwood’s budget. The total price for the shelving is $24,000 plus 7.25% sales tax. Installation costs are quoted at $1,200. Vendor payment terms are net 10. 20 The Bozeman Convention Center, (BCC), in Montana contacted Cottonwood with an order for $21,000 in resale merchandise. Cost of the merchandise was $13,440. BCC has never purchased from Cottonwood before, but has already submitted the appropriate paperwork to Cottonwood’s credit department. 21 January 12, 2007 Cottonwood’s credit department approved BCC for up to $15,000 credit at terms of net 15. BCC has been asked to send payment of $6,000 so that their order can be shipped. 22 Cottonwood paid Office Max for the supplies picked up on January 3rd. 23 Cottonwood paid for their printed catalogs received January 3rd. ©SAP AG 2007 / SAP University Alliances 9 ©SAP AG 2007 / SAP University Alliances 24 Cottonwood paid the invoice for the shipment from Rodeo Outfitters received on January 3rd and took the 2% discount because of early payment. 25 January 15, 2007 After extensive collection effort including having a collection agency contact the party, Cottonwood was notified today that the Fly-by-Knight Rodeo has gone out of business. They owed Cottonwood $3,500 on account. Cottonwood now deems that debt as being uncollectible and removes it from their books. 26 Employees submitted their time statements for hours worked from January 1 – 15th. 27 January 16, 2007 BCC (see January 11 & 12) sent payment of $6,000 to Cottonwood via electronic funds transfer, (EFT). Cottonwood’s warehouse picked and packed BCC’s order and shipped it to Bozeman via CWX. Freight costs of $430 were paid by Cottonwood at the time of shipment. 28 Cottonwood paid $21,000 to employees for wages earned during the first half of January. 29 The industrial shelving was delivered and installed in Cottonwood’s warehouse (see January 11th). The vendor’s invoice, which matched Cottonwood’s purchase order, was hand-delivered to accounts payable. Cottonwood paid the shipping of $320. The vendor’s contractor completed installation that day. 30 Cottonwood paid UPS for the shipment to Del Norte County Rodeo on January 9th. 31 January 17, 2007 Cottonwood received customer checks totaling $9,980 for payment on outstanding accounts. 32 The owners of Cottonwood were talking to the owner of the warehouses that they lease. They are good friends. The conversation centered around wise investment of the excess cash that Cottonwood presently has. The owner of the warehouses stated that he wishes to diversify his investments, especially with the flat real estate market. He suggested that Cottonwood purchase the warehouses. He said that he would give Cottonwood a good deal. Cottonwood decided to buy only one of the warehouses and continue to lease the other one. The price is to be $360,000 with a down payment of 20%. The original owner will carry a mortgage for the remainder with an interest rate of 7.5%. Title is to transfer on March 15, 2007. Today Cottonwood sent earnest money of $10,000 to the owner of the warehouse. 33 January 18, 2007 Cottonwood placed a purchase order with the Buckaroo Outfitters for $52,000 in resale merchandise. Payment terms to Buckaroo are net 30. 34 January 19, 2007 The Red Bluff Rodeo called in an order for $4,800 in event merchandise. The order information was given to the warehouse, where the merchandise was picked and set on the delivery dock for RB Rodeo to pick up. Cost of the merchandise was $2,496. Terms of the sale were cash on delivery, (COD). Later in the day, Red Bluff Rodeo picked up and paid for their order, (including sales tax). 35 January 22, 2007 Cottonwood received payment from Dust Bowl Rodeo for theirorder from January 8th. 36 The FFA Rodeo in LaJunta Colorado (January 4th) returned $4,000 in event merchandise as excess merchandise. The merchandise was inspected and restocked. FFA is given a credit to their account for the returned merchandise. The credit is for the $4,000 minus a 10% restocking fee. The cost of the goods is $2,085. FFA LaJunta paid the return shipping of $62. 37 Cottonwood applied for credit with a new supplier, Howdy Partner U.S.A. A credit application was faxed to HP’s headquarters in San Antonio, TX. Cottonwood is anticipating an order with HP for $12,000 in resale merchandise. 38 January 23, 2007 Cottonwood’s bank notified them that an EFT in the amount of $102,240 from Alamo Conference Center had been deposited into their account. 39 Cottonwood received their order from Buckaroo Outfitters from January 18th. Buckaroo Outfitters paid the shipping charge of $105. The inventory was counted and placed on the shelves. Proof of receipt and the vendor’s invoice was sent to accounting. 40 January 24, 2007 The Boise Stampede called in an order for $98,726 in merchandise. $57,224 is for resale merchandise and $41,502 is for event merchandise. The cost of the resale merchandise is $36,623 and the cost of the event merchandise is $21,580. Boise Stampede has not yet established credit with Cottonwood. They are told that they must either supply the needed information to establish credit or pay cash before the goods can be delivered. 41 January 25, 2007 Cottonwood placed a purchase order with Rocking-5R Ranch Supplies for $38,000 in events merchandise. Cottonwood’s payment terms are 2% 10 net 30. 42 Cottonwood received a check from BCC (see January 12th) for $15,000. 43 January 29, 2007 Cottonwood has made arrangements with their two primary suppliers, Rodeo Outfitters and Lazy J for them to drop ship orders in the future. That means that the orders will be placed with the supplier and shipped directly from them. This reduces Cottonwood’s inventory carrying cost by reducing the need for inventory and frees up some cash for other purposes. The primary concern about this arrangement was that Cottonwood prides itself on almost always shipping the goods the same day as the order. Both suppliers have assured Cottonwood that they can also do same day shipment. 44 January 31, 2007 Cottonwood paid rent of $5,000 for the coming month’s lease of the warehouses. 45 Cottonwood pays sales tax once a year in January for the preceding 12 months. They do not make any sales tax deposits during the year. Cottonwood paid sales tax of $4,178 for 2006sales taxes collected. 46 Cottonwood purchased their warehouse and office equipment on December 1, 2004 for $162,000. At the time they signed a seven-year note payable from the bank for $90,000. Over the seven years, payments of $1,589, which includes both principle and interest, are to be made at the end of each month. The annual interest rate on the loan is 12% calculated on the outstanding balance. The calculation of interest is based on each month having 30 days. Cottonwood transferred funds in the amount of $1,589 from their checking account to pay the loan amount due. (Hint: It is probably best to create an amortization schedule to handle this entry.) 47 Cottonwood paid the full amount due on the industrial shelving (see January 11th & 16th). 48 The employees submitted their time statements for January 16th through 31st. The calculated payroll is $21,600. 49 The owners and managers of Cottonwood choose a vendor from several responses to the RFP sent out in early December to supply them with their new shrink-wrap equipment. The supplier will make some minor adjustments to their standard equipment to meet Cottonwood’s needs. Cottonwood owners sign the contract, which specifies a total equipment cost of $239,000 including customization, installation, initial training, and a two-year warranty. Delivery and installation is tentatively scheduled for May 1, 2007. A down-payment of $59,750 is due February 28th. Adjustment information as of January 31, 2007 not already given in the original transaction(s): 1. Rodeo supply sales is a relatively new industry, so bad debt average has not yet been established for the industry. Based on prior experience, Cottonwood estimates that approximately 1/2% of the net credit sales (gross credit sales minus returns of credit sales) for the month will become bad debt. Cottonwood writes off bad debts as they occur and recognizes bad debt expense based on anticipated bad debts as an adjusting entry each month. 2. As a control measure, physical inventories are taken on a periodic basis alternating between the resale merchandise inventory and the event merchandise inventory. Physical inventory of the event merchandise inventory was taken at the end of January. It was determined that thecost of the event merchandise on hand was $144,860. 3. Cottonwood counted the supplies on hand after the close of business on the last day of the month and determined the cost of the unused supplies to be $450. 4. Warehouse and office equipment was placed in service on January 1, 2005 and is expected to last 15 years and has no salvage value. The industrial shelving is expected to have a life of 10 years and a salvage value of $5,000. Cottonwood depreciates fixed assets on a straight-line basis and those assets acquired in the first half of the month for the entire month, while fixed assets placed in service during the last half of the month are not depreciated until the second month. Depreciation is rounded to the nearest dollar and assets are depreciated on a monthly basis (i.e. number of days in the month is not of consequence). 5. On February 2, Cottonwood received a $2,251 bill from PG&E for utilities consumed during January and the January AT&T bill in the amount of $412. 6. Liability insurance for the 2007 fiscal year was paid at the end of November 2006. Liability insurance is assumed to be utilized uniformly monthly over the one-year policy period. 7. 500 product catalogs were sent out in the month of January.

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