INTERMEDIATE ACCOUNTING

PRACTICE SET

In order to refresh your mind about the principles and practices of bookkeeping and accounting that you learned in Principles of Accounting, as well as to help you start to think about some of the complexities that can be involved, you will complete a practice set. In an attempt to save you some money (and hopefully make the experience more interesting and somewhat realistic), the practice set will not be one of the publishers' printed practice sets which cost about $25 each, but will, instead, be the board game MONOPOLY. It will be used as a model of a small business with each student/player representing a small company. This will give you practice in recording transactions, posting, preparing adjusting entries and financial statements. The class will be divided into groups of four players with each player being his/her own business. Each group of players will obtain a copy of the MONOPOLY game (about $10 for the basic set, if purchased new)

The MONOPOLY game should be played by each group of four using the standard MONOPOLY rules as printed in the rules booklet accompanying the game. Regional and local variations are NOT allowed (for instance, there is no reward for landing on free parking). Please read the instructions before you start so that all are following the same rules. Do not use the rules for a short game.

 You should plan to start playing the game whenever you want following class study of Appendix C. In our case, 24 turns will represent one year and completion of the game. Teams will be assigned in class prior to the starting date. The completed practice set, including all journals, ledgers, worksheets, and financial statements will be due at the start of class on Thursday, October 20. Please do not turn in practice sets late as they will lose major points for failure to meet required deadlines.

 Before starting play, elect one person to be the banker. The banker should count and make a record of the total amount of cash in the bank at the start of the game and report the total in a memo to the teacher. It would be good to have another person in the group act as the internal auditor and verify that the count is correct. At the completion of the game the banker will again count the amount of cash in the bank, have it verified by the internal auditor. The Internal Auditor will report the total in a memo to the teacher. (Make sure you have a memo in with your practice set materials that you turn in that tells me who is the banker and who is the internal auditor in order to receive the points.) Each player will then be given $1,500 in cash from the bank. $1,000 will be considered a long-term loan from the bank with interest at 12% per year. The $500 will be considered a cash investment by the player. This transaction should be the first recorded transaction of the game for each player.

 Each player will properly record their transactions in appropriate journals. You are required to use special journals (Sales, Purchases, Cash Receipts, Cash Disbursements and General Journal, as appropriate). You will use pencil and paper journals and ledgers that you set-up NOT computerized versions. Journal entries should be numbered rather than dated, with double rolls using the same number. Full explanations should be provided for all transactions recorded in the general journal. Be careful to record all of your transactions. Passing GO is considered an earned revenue called "PASS GO REVENUE". Most transactions will occur during your own turn, however, collecting rent and some of the actions directed by cards will occur during another players turn and should be recorded under your previous roll number. Chance and Community Chest cards have been changed to other business type transactions. For instance, Get Out Of Jail Free will be considered a prepaid fine and cost you $50. See the attached list for specific changes. The Board price of properties will be considered the fair market value for trades or sales. (Used to determine gain or loss.) A chart of accounts is attached. Make sure that you follow correct accounting procedures and post special journals appropriately (mostly ONLY column totals).

 The basic rules of the game have been modified somewhat for our purposes.

 You must get out of jail on your second attempt. If doubles are not thrown or you do not have a Get Out Of Jail Free card, then you must pay $50 on this turn to get out of jail.

 You may purchase houses, but not hotels, for any land owned. In other words you do not have to have a monopoly (own all of one group of property) to add houses. However, in order to put hotels on the property, you must own all of the property group. If all of the houses or hotels are sold, the bank will make additional houses and hotels available by using coins (a penny is a house and a nickel is a hotel).

Utility expense on houses and hotels owned is 1% of the cost of the houses and hotels and must be paid to the bank each time you pass GO.

You may own a particular piece of land for a maximum of 10 turns. On the 11th turn of ownership, you must sell it and any related houses and hotels. You can sell back to the bank at the board value or at auction at a higher price to any of the other players. Don't forget that you will need to record depreciation to date of sale! Do not forget to record gain or loss.

Players who go bankrupt will receive a government bailout and must borrow money from the bank in $1,000 increments at 24% per year to finish the game.

The player with the highest combined total asset and net income value in each group will receive a bonus of 10 points. The banker will receive a bonus of 5 points and the internal auditor will get a bonus of 2 points. The game should be continued for 24 complete turns at which time each player, individually, should complete the following:

1. Finish recording all transactions and post to the general ledger

 2. Prepare the trial balance on a worksheet

 3. Reconcile your cash on hand with the balance in your general ledger cash account. Any discrepancy is probably due to the failure to record a transaction during the game. If the amounts do not agree, attempt to discover the cause of the discrepancy by comparing notes with the other players. If the discrepancy can not be explained, adjust the cash balance to agree with the cash on hand by recording an adjusting entry on the worksheet.

 4. Complete the worksheet with the following adjustments:

A. Depreciation - assume that all houses have a life of 72 turns and hotels have a life of 108 turns. Depreciation is recorded on a straight-line basis.

B. PASS GO REVENUE is accrued based on the final location on the board. Accrue $50 for each full side of the board that you have completely passed.

C. Accrue interest payable on all debt. 24 turns is one year.

D. Accrue utilities expense payable based on 1% of the cost of the houses and/or hotels that you have passed since you last paid utility exense.

E. Accrue property taxes payable based on 2% of the total cost of the property that you own for the portion of the year that you have owned it.

F. Accrue income taxes equal to 10% of your income before income taxes.

 5. Prepare, in good form, an income statement and a classified balance sheet.

 6. Record and post adjusting entries.

 7. Record and post closing entries.

 8. Prepare a post-closing trial balance.

9. When you turn in your packet, have it in the following order (first to last) - Cash Receipts Journal, Cash Disbursements Journal, General Journal, General Ledger, Worksheet, Income Statement, Balance Sheet, and Post Closing Trial Balance.

CHART OF ACCOUNTS

 NOTE => YOU CAN ADD ACCOUNTS AS NEEDED

COMMUNITY CHEST CHARD CHANGES

CHANCE CARD CHANGES

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