(Solved) CASE STUDY Journal Entries in an ERP This assignment reviews basic accounting entries for a series of transactions, emphasizes the integration of

I need help with the 7 adjusting journal entries at the end of the assignment

CASE STUDY Journal Entries in an ERP
This assignment reviews basic accounting entries for a series of
transactions, emphasizes the integration of journals to the financial Product
SAP ERP GBI
Release 6.04 MOTIVATION
PREREQUISITES
statements,
and introduces students to these
journal entries in SAP ERP Level
Undergraduate
Graduate
Beginner
Focus
Accounting Entries in
Manual and Automated
Systems
Integration of Accounting
Journals
Authors
Jim Menschen
Nancy Jones
Contributors
Patti Brown Version
1.0 This assignment is a review
of general financial
accounting principles and
procedures. In the first part
of the assignment, you will
create general journal
entries for a series of
transactions in Excel. For
the last part of the
assignment you will enter
your “manual” journal
entries into the SAP ERP
system. The SAP system
will then be used to produce
a set of financial statements
(balance sheet and income
statement).
Primary learning objectives
are: Review the concepts
of the beginning
financial accounting
course Review the
accounting cycle Work with a manual
accounting
information system
Secondary learning
objective: Before you use this case
study, you should be familiar
with navigation in the SAP
system.
You should also be familiar
with Excel or other
spreadsheet programs.
Prior completion of the
sample problem provided with
this assignment is also
recommended.
.
NOTES
This case study uses the
Global Bike Inc. (GBI) data
set, which has exclusively
been created for SAP UA
global curricula. © SAP AG CASE STUDY © SAP AG Review basic Excel
skills Page 2 CASE STUDY Assignment Overview
This assignment is a review of general financial accounting principles and procedures. In this
assignment you will create general journal entries for a series of transactions. You will also show the
impact of these transactions as a Pivot Table and create a trial balance and adjusted trial balance. You
will then close out the income statement accounts as you would at year-end. For the last part of the
assignment you will explore how your journal entries might be created in an automated system by
entering your “manual” journal entries into the SAP ERP system. The SAP system will then be used
to produce a set of financial statements (balance sheet and income statement). Global Bike Inc. (GBI)
We will be working with a company called Global Bike Inc., (GBI). You may have seen GBI in other
classes if you have completed other SAP assignments. Information regarding GBI follows.
Company History
Global Bike Inc. has a pragmatic design philosophy that comes from its deep roots in both the offroad trail racing and long-distance road racing sports. Nearly 20 years ago, its founders designed
their first bikes out of necessity—they had races to win and the bikes that were available at the time
did not perform to their extremely high standards. So, they took matters into their own hands and
built legendary bikes that would outlast and outperform the competition. From these humble origins,
Global Bike Incorporated was born and continues to deliver innovative high-performance bicycles to
the world’s most demanding riders.
This heritage of entrepreneurial spirit and quest for design perfection is still the cornerstone of GBI’s
corporate philosophy. GBI produces bikes for the most demanding competitors—whether the
competition is on pavement or dirt, for money, fame or just bragging rights.
John Davis earned his racing scars in the mountain racing circuit in America, where he won numerous
downhill and cross-country championships. Early on, John realized that the mass-produced bicycles
available were inadequate in many ways for the type of racing he was doing. So, John stripped four
of his old bikes down to the bare metal and rebuilt them into a single “Frankenstein” bike that he rode
to win the national championship. Once news of his Frankenstein bike got out, John’s friends and
even his competitors began asking him to build them a Frankenstein bike too. While recovering from
an injury in 1990, John started producing the first series of Frankenstein bikes in his garage—each
one custom-built from cannibalized parts from other bikes. As more and more orders came in, John
successfully expanded Frankenstein Bikes from his garage operations into a full-blown manufacturing
facility in Dallas and began producing custom trail bikes, which he sold through a network of
specialized bike dealers throughout the country.
At nearly the same time, halfway around the world in Heidelberg, Germany, Peter Schwarz was
studying engineering and competing in regional touring races on weekends. In between his races and
studies, Peter worked at a bike shop in Heidelberg, fixing student bikes and tuning the touring bikes
that he and his friends rode for competitions. As Peter’s reputation as a fierce competitor and
mechanical wizard grew, he also began to design and build road bikes based on an ultra-light
composite frame that he had created for one of his engineering courses. Peter’s innovative use of
© SAP AG Page 3 CASE STUDY
carbon composite materials allowed him to build a frame that was significantly stronger and one tenth
the weight of competing frames. As a student, Peter did not have a great deal of financial resources,
so he partnered with a local company that manufactured his frame designs as a contract manufacturer.
Soon, racers all over Europe were using Peter’s frames and he started Heidelberg Composites to
market and design frames, which a contract manufacturer on a larger scale would fabricate.
Heidelberg Composites sold its frames to specialized bike stores throughout Europe and directly to
racing teams, eventually becoming the leader in lightweight touring frames in Europe.
Through a twist of fate, Peter and John met each other in 2000 and immediately recognized their
mutual passion for performance and complimentary business models. Each had been looking for a
partner in another racing field and each had been looking for a partner in a different market. They
quickly realized that a merger between their two companies would be extremely synergistic and that
the combination of their product lines and regional distribution channels would generate a great deal
of efficiencies.
So, in 2001, Heidelberg Composites and Frankenstein Bikes merged to form Global Bike
Incorporated. Today, John and Peter share the responsibilities for managing GBI’s growing
organization as co-CEO. John is responsible for sales, marketing, service & support, IT, finance and
human resources groups and Peter is responsible for research, design, procurement and manufacturing
groups from an organizational reporting perspective. GBI is a world-class bicycle company serving the professional and “prosumer” cyclists for touring
and off-road racing. GBI’s riders demand the highest level of quality, toughness and performance
from their bikes and accessories.
Product Development
Product development is the most critical element of GBI’s past and future growth. GBI has invested
heavily in this area, focusing on innovation, quality, safety and speed to market. GBI has an extensive
innovation network to source ideas from riders, dealers and professionals to continuously improve the
performance, reliability and quality of its bicycles.
In the touring bike category, GBI’s handcrafted bicycles have won numerous design awards and are
sold in over 10 countries. GBI’s signature composite frames are world-renowned for their strength,
low weight and easy maintenance. GBI bikes are consistently ridden in the Tour de France and other
major international road races. GBI produces two models of their signature road bikes, a deluxe and
professional model. The key difference between the two models is the type of wheels used,
aluminum for the basic model and carbon composite for the professional model. © SAP AG Page 4 CASE STUDY GBI’s off-road are also recognized as incredibly tough and easy to maintain. GBI trail bikes are the
preferred choice of world champion off-road racers and have become synonymous with performance
and strength in one of the most grueling sports in the world. GBI produces two types of off-road bike,
a men’s and women’s model. The basic difference between the two models is the smaller size and
ergonomic shaping of the women’s frame.
GBI also sells an accessories product line comprised of helmets, t-shirts and other riding accessories.
GBI partners with only the highest quality suppliers of accessories that will help enhance riders’
performance and comfort while riding GBI bikes. The accessories list is shown here as trading goods. Information System
When the company first started, a manual accounting system was put in place. However, the
company has decided that it needs to computerize its accounting process to be more efficient. In
addition, in order to expand their sales to additional wholesale markets, Global Bike, Inc. (GBI) must
have EDI (electronic data interchange) capabilities by July 1. A project team has been established to
meet this deadline and the computerization of the accounting system is the first step in
implementation of the company’s new information system and their link to global partners. GBI uses
a perpetual inventory system to account for both product line inventories, bicycles and accessories, as
well as raw materials and work-in-process.
Consultants have configured the new computer system and it is ready to use. The books of the
company were closed on December 31st to prepare for the transition to the new system. The account
balances are now ready to be transferred to the new computer system. GBI will run parallel systems
during January; that is, they will record transactions in both the manual system and their new
computerized system to make sure the new system is set up properly. This is a standard business
practice that reduces the risks associated with implementing new systems.
Chart of Accounts for Global Bike, Inc.
The chart of accounts is a means of organizing general ledger accounts for grouping or sorting and to
generate financial statements. Generally a unique numeric code (although alphanumeric can also be
used) is given to an account based on its type. A block of code may be set aside for specific types of
accounts. For instance, in the case of GBI, account numbers 100000 through 109999 are reserved for
“cash” or liquid asset accounts. The entire set of codes and blocks of code is called the chart of
accounts. Global Bike’s chart of accounts follows: © SAP AG Page 5 CASE STUDY G/L
Account
100000
110100
110150
110200
200600
200900
200910
200920
200930
210000
211000
212000
215000
216000
220000
220110
220210
220310
220400
220500
220600
220700
300100
300200
300300
300400
300500
300600
300700
300800
310000
320000
321000
322000
329000
329100
330010
600000
610000
620000
630000
640000
650000
650100
700000
720000
720100
© SAP AG G/L Acct Long Text
Bank Account
Accounts Receivable (Direct Posting Account)
Allowance for Bad Debts
Interest Receivable
Inventory-Operating Supplies
Inventory-Raw Materials (Direct Post)
Inventory-Finished Goods (Direct Post)
Inventory-Trading Goods (Direct Post)
Inventory-Semi-finished Goods (Direct Post)
Prepaid Insurance
Prepaid Supplies
Prepaid Advertising
Prepaid Rent
Deposits on Purchases
Notes Receivable
Land (Direct Post)
Production Machinery, Equip & Fixtures (Dir.Post)
Accumulated Depreciation-Machinery (Direct Post)
Office Furniture
Accumulated Depreciation-Office Furniture
Office Equipment and Computers
Accumulated Depreciation - Office Equipment
Payables-Income Taxes
Accounts Payable (Direct Posting Account)
Payables-Interest
Payables-Short-Term Notes
Payables-Long-Term Notes
Payables-Commissions
Payables-Salaries and Wages
Accrued Expenses
Goods Receipt / Invoice Receipt Account
Accrued Tax – Output
Accrued Tax- Input
Unearned Revenues
Common Stock
Additional Paid-in-Capital
Retained Earnings (Direct Post)
Sales Revenue
Sales Discount
Miscellaneous Revenue
Revenue Deductions
Gain or Loss on Sale of Assets
Customer Service Revenue
Customer Service Revenue Settlement
Labor
Raw Material Consumption Expense
Finished Product Consumption Expense
Page 6 CASE STUDY
720200
720300
740000
740100
740200
740300
740400
740500
740600
740700
740800
740900
741000
741200
741300
741400
741500
741600
741700
741800
741900
742000
742100
760000
760100
770000
780000 © SAP AG Trading Good Consumption Expense
Semi-Finished Consumption Expense
Supplies Expense
Telephone and Internet Expense
Legal and Professional Expense
Rent Expense
Insurance Expense
Payroll Expense-Office
Payroll Expense-Administrative
Sales Expense
Tax Expense - Property
Tax Expense- Income
Miscellaneous Expense
Bad Debt Expense
Information Technology Expense Account
Production Order Variance Expense Account
Utilities (electricity & phone) Expense
Manufacturing Output settlement
Manufacturing Output Settlement Variance
Depreciation Expense
Advertising Expense
Vendor Discounts Missed
Shipping Expense
Purchase Price Difference
Production Variance
Research and Development
Cost of Goods Sold Page 7 CASE STUDY Detailed Assignment Requirements
The next few pages show the balances in GBI accounts as of December 31st and then the descriptions
of events occurring during January for which you are to make general journal entries in a manual
accounting system. Your manual accounting system needs to include a general journal, Pivot Tables
(that acts as a General Ledger), and a trial balance, all of which will be generated in Excel, (see the
sample problem for the format).
After you have created your entries in your manual system, you will enter all the data into the SAP
ERP system. When you enter your data into the SAP system the resulting financial information from
the manual system and the SAP system should match exactly.
Assignment Steps
1. 2.
3.
4.
5. Record the daily transactions if appropriate, (some events may not involve journal entries),
as general journal entries into Excel. Summarize the effects of the journal entries in a
Pivot Table summary. Link the Pivot Table into your Excel worksheet as a trial balance.
You should create links between your spreadsheets to expedite this process and minimize
the risk of an error in data entry. Looking over the answer to the sample problem may be
helpful in reviewing your Excel skills.
The next step is to record the adjusting entries into the general journal and then summarize
them into a Pivot Table and then the trial balance.
Record closing entries in your trial balance as if this were a year-end close. (Do not enter
the closing entries in your General Journal).
Prepare the SAP ERP system for data entry.
Now use the SAP ERP system to make all above entries using the general ledger system in
SAP. This should be done in a series of steps as follows:
i. Examine the GLXX chart of accounts where XX is your assigned SAP student login
ID#. (Whenever you see XX in the instructions, substitute your SAP login ID#.)
ii. Record beginning account balances in the SAP general ledger. This should be done as
one composite journal entry (the first journal entry). Use January 1, as the journal
entry date for the beginning account balances. Be sure to compare this to your Excel
spreadsheet to make sure the entries are correct.
iii. Display the trial balance (you should compare this to your manual entries). If the trial
balance does not match your manual entries, research the errors and make necessary
corrections.
iv. Record the daily transactions for January in the SAP general ledger (do each journal
entry as a separate entry, not as one giant composite entry, be sure to use appropriate
dates – this allows for a good audit trail).
v. Display the trial balance (you should compare this to your manual entries).
vi. Record the adjusting entries.
vii. Display the trial balance (you should compare this to your manual entries).
viii.
Simulate closing the books as of January 31 using the SAP utility. (Do not enter
closing entries into the general ledger. These entries would be done automatically
through the SAP month-end closing function.)
Instructions for using the SAP ERP system start on page 13 of this document. © SAP AG Page 8 CASE STUDY
Account Balances as of December 31st 100000
110100
110150
200600
200900
200910
200920
210000
212000
220110
220210
220310
300200
300700
300800
320000
329000
329100
330010 © SAP AG Bank Account
Accounts Receivable (Direct Posting Account)
Allowance for Bad Debts
Inventory-Operating Supplies
Inventory-Raw Materials (Direct Post)
Inventory-Finished Goods (Direct Post)
Inventory-Trading Goods (Direct Post)
Prepaid Insurance
Prepaid Advertising
Land (Direct Post)
Production Machinery, Equip & Fixtures (Dir.Post)
Accumulated Depreciation-Machinery (Direct Post)
Accounts Payable (Direct Posting Account)
Payables-Salaries and Wages
Accrued Expenses
Accrued Tax – Output
Common Stock
Additional Paid-in-Capital
Retained Earnings (Direct Posting) Debit Balance
$277,518
92,670 Credit Balance 2,500
8,832
52,000
281,298
66,474
5,000
1,100
528,000
915,000
408,000
48,000
94,313
1,200
3,000
1,000,000
52,870
618,009 Page 9 CASE STUDY
Events During January
Event
1 Date
January 3 Description of Event
Employees are paid monthly on the first business day of the month
for work done in the previous month. (Ignore payroll taxes for this
assignment.) Accounting wrote and distributed the paychecks. 2 GBI received $60,000 in safety product inventory and $40,000 in
raw materials from Dallas Bike Basics. This inventory was ordered
on December 28. The payment terms for the invoice total of
$100,000 are net 10 days. GBI paid the CWX shipping company
$1500 with a manual check for the shipment of the goods. The bill
of lading showed that the safety product inventory arrived in 6
boxes with a total weight of 50 lbs. and the raw materials came on
a pallet and weighed 60 lbs. 3 Windy City Bikes in Chicago, IL ordered $22,500 of bicycle
accessories from GBI. The cost of the accessories (to GBI) is
$15,000. The goods were shipped to Windy City immediately via
UPS using Windy City’s UPS shipping number. The terms of
payment for Windy City’s order are 3/10 net 30 days. 4 January 7 GBI received payment of $24,000 from Northwest Bikes in Seattle,
WA for the balance due on their account. 5 January 10 GBI’s account on the utility company website is updated at the end
of each month when the meter is read. GBI uses this data to
accrue the expenses at the end of each month (in this case on
December 31st.) This allows recognition of the expense in the
correct period. Expenses are usually accrued at the end of the
month as “Accrued Expenses”. GBI paid the December utility bill
via the company’s automatic electronic bill pay program. 6 7 January 11 8 © SAP AG GBI’s advertisement in the English language edition of Italian
Cycling Journal was published today. This ad was prepaid at the
end of July for six months of advertising, August through January,
(Five months of advertising have already been used.)
The office manager in San Diego ordered $400 of office
(operating) supplies from Staples. While on the way back from a
delivery, one of the warehouse staff picked up the Staples order
and brought it to GBI’s office. GBI has an account with Staples
and payment terms are net 10. Operating supplies expense is
figured at the end of the month determined by the amount of
supplies used during the month.
GBI ordered $75000 in raw materials from Space Bike Composites
in Houston, TX. Terms of payment to Space Bikes are net 30. Page 10 CASE STUDY
9 10 January 12 11 January 13 12 January 17 13 14 15 16 January 18 17 January 19 18 19 January 24 © SAP AG GBI received payment from Windy City Bikes for their order from
January 3. Windy City paid the invoice amount less the discount
for paying within 10 days.
GBI paid for the inventory order (via bank transfer) that they
received from Dallas Bike Basics back on January 3.
In order to better track inventory, GBI ordered a bar-coding and
tracking system which will be installed and tested by Computer
Specialists, Inc. (CSI). The system will allow employees to track
inventory using mobile devices and special software which will link
into their new computerized accounting system. The barcode
system costs $6,000 (including sales tax) and CSI will charge GBI
$1,300 for the installation and tests. GBI paid a deposit of $2,000
on the system and the remainder is due and payable when the
system is installed. GBI will classify the bar-coding system as
“Production Machinery, Equipment and Fixtures”.
GBI paid an invoice from Lightbulb Accessory Kits for ordered
goods that were received on December 20. The amount of the
invoice from Lightbulb is $15,890 due net 30.
The city of Denver will be hosting a decathlon at the end of
February. The event is expected to create demand for high quality
bikes. Rocky Mountain Bikes in Denver, CO placed an order with
GBI for $128,000 worth of bicycles to be delivered immediately.
Rocky Mountain will pay the shipping. The bikes cost GBI $78000.
GBI shipped the order immediately so that Rocky Mountain can
start promoting the bikes. Because Rocky Mountain is a good
customer, GBI is giving them special terms of net 45 days on this
order.
GBI received raw materials inventory ordered from Space Bike
Composites January 11. Shipping charges of $600 were included
in the invoice from Space Bike.
GBI received notice that Bunky’s Bicycle Emporium had declared
section 13 bankruptcy which meant GBI would not be able to
collect the $3,350 that Bunky’s owed them.
GBI received a $90,000 funds transfer from Silicon Valley Bikes in
Palo Alto for the balance due on their account.
GBI paid Staples for the office supplies they received January 11.
SoCal Bikes in Irvine, CA placed an order for $2,750 in bicycle
helmets for a special event in February. The merchandise cost GBI
$1,300. SoCal sent a truck to the GBI distribution center in San
Diego, CA and picked up the merchandise directly from GBI’s
warehouse. Terms of payment are net 30. (Don’t forget to charge
sales tax of 8.25% for this order.)
Beantown Bikes in Boston, MA placed an order with GBI for
$27,000 in bicycles. The cost of the bicycles is $17,000. Beantown
Bikes is a new customer. Its buyers saw GBI’s booth at a trade
Page 11 CASE STUDY 20 January 25 21 January 26 22 January 27 23
24 25 January 31 26
27 28 show. Because Beantown is a new customer, they must either wait
until their credit can be approved or pay for the order before GBI
will ship the bikes to them.
GBI has been offered the opportunity to advertise in the Bicycle
Times online magazine for a reduced price if they pay for three
months in advance. In light of the upcoming Tour de France, the
advertising is a great opportunity for GBI to get additional
recognition. The advertising will start in February. GBI wrote a
check for $9,000 for three months of advertising.
GBI received notification from their bank that Beantown Binkes had
transferred funds into their account for their prior order, so GBI’s
warehouse personnel shipped Beantown’s order. Beantown will be
responsible for paying Fed-X $400 for shipping the order.
The county approved GBI’s building plans for their new
warehouse. Estimated building costs are $1,100,000 which will be
funded via a mortgage from Bank of America. GBI plans to break
ground on the new building April 18th of this year.
GBI sent a $28,000 check to Night Rider Aluminum Products for an
order of bicycle parts GBI received December 30th.
Big Apple Bikes in New York City is expanding to another location
in New York and needs to stock the new location. GBI received a
phone order from Big Apple for $230,000 in bicycles and $108,500
in bicycle accessories and safety gear at special discount prices.
The cost of the bicycles in this order is $170000 and the cost of the
accessories is $65,000. Big Apple will have a contract trucking
company pick up the order when it is ready. The order is sent to
GBI’s warehouse for picking and packing, which may take a couple
days. Payment terms to Big Apple for this order are net 30.
GBI pays sales tax once a quarter via the state’s electronic filing
and payment system. GBI filed its return and paid its sales tax for
the quarter ending December 31.
GBI paid February’s rent of $4,000 for the office and warehouse
space in San Diego.
CSI installed and tested the new barcode system. The warehouse
manager approved the installation and commented that she thinks
it works great. GBI wrote a check to CSI for the balance owed and
gave it to the installer.
Big Apple’s truck arrived at GBI’s warehouse and picked up the
order from January 27th. Adjustment information as of January 31, not already given in the original
transaction(s):
1. Based on prior experience, GBI estimates that approximately 2 % of the accounts
receivable balance will become bad debt. GBI writes off bad debts as they occur and
© SAP AG Page 12 CASE STUDY
recognizes bad debt expense based on analyzing accounts receivable as an adjusti...

 


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