The Health & Fitness Center Practice Problem
Each group will work the project and turn in one printed copy of the formal financial statements and one
CD with the electronic spreadsheet for your group and only your group. Do not copy files between
groups, do not share files between groups. The Practice Problem is worth 30 points: 20 points of your
grade will be a common group grade based on the completeness and accuracy of your group’s work. The
remaining 10 points will be based on the other group members’ assessment of your individual contribution
to the project. Anyone not actively participating in the project will receive a zero on the assignment.
1. Download the transactions for the second month of business for the Fitness Center. Also download the
excel spreadsheet files for your group number and save to your own CD. The balances shown on the
January 31, 2008 Balance Sheet have been entered as the beginning balances in your General Ledger.
Enter transactions for February 1 through 29th as journal entries in the General Journal of the
electronic spreadsheet. Use the format we use in the lectures to write these journal entries.
2. Post from the “General Journal” into the “General Ledger” (using the cell referencing feature of excel
works best). Post the debit or credit in the appropriate account, and make a note in the “notes” column
so that you will be able to track your entries when you make an error (if necessary). The spreadsheet
will automatically compute a balance in the “Unadjusted Balance” cell. Do not enter any negative
numbers. There are enough lines for all necessary entries, so if you run out of space, it means that you
have not done it correctly. Start the entries on the top line of the account’s section (right under the
blue line). You should never get a negative balance. If you do, re-check to see if you posted the entry
correctly to either the debit or credit column. I have protected cells in these sheets so that you
shouldn’t be able to inadvertently mess up the formulae. However, if you post an entry to the Ledger
and later want to remove it…DON’T hit the delete key…simply hit the backspace key to clear the
cell. Hitting delete will cause an error in the formulae and then your trial balance will not balance.
In the “Notes” column include explanations such as “purchased 160 shirts for $11 each” or “sold 50
shirts”. This will make it much easier for you to keep track of how many units of inventory you have
on hand, and how much each unit cost. Use the perpetual inventory method to update your inventory
as discussed in class. The unadjusted balances will post automatically into the Unadjusted Trial
Balance on the “Worksheet” page of the electronic spreadsheet. After you finish with the main
transactions (Feb 1-29th) you need to check the Unadjusted Trial Balance to make sure it balances!
(Refer to check figure.)
3. Enter the adjusting entries in the General Journal in the electronic spreadsheet. (It is titled “General
Journal – Adjusting Entries”.) You are provided with a partial listing of adjusting entries on page 5 of
the transaction packet. These are only the adjusting entries that require additional information – you
will need to go back to the original transactions to determine what other accounts require adjustment
and how much the adjustment should be. Inventory shortfalls get debited to “Loss on Shrinkage.”
You should have a total of eight adjusting entries when you finish (depreciation counts as only one
entry and loss on shrinkage counts as only one entry).
4. Post the adjusting entries into the “General Ledger” using cell referencing. Do not use negative
numbers. Put the entry into the appropriate cell on the line below the “Balance before Adjustment”.
The adjusting entries will automatically post into the “Adjustments” column of the “Worksheet” page
in the electronic spreadsheet. When you are done with your adjustments, make sure that the debits and
credits in the “Adjustments” columns are equal. The adjusting entries will be combined automatically
with the unadjusted balances to provide the final “Adjusted Trial Balance” on the “Worksheet”. The
“Worksheet” page is automated; you will do all of your work on the “General Journal”, “General
Ledger” and the “Financial Statements” pages.
5. Enter the closing entries in the “General Journal”, (titled “Closing Entries”). Post these entries into the
electronic spreadsheet on the line above the “Ending Balance After Closing”.
6. On the “Financial Statements” page, you need to set up a multi-step Income Statement, a Statement of
Stockholders’ Equity, and a classified Balance Sheet. You must use the cell-referencing features
offered by Excel. Do not just type in the amount from the Worksheet page if you want partial credit
for any errors as the cell-referencing feature makes the errors easy to trace to the source.
7. Congratulations! You have completed your practice problem for the Fitness Center!
EASY CELL-REFERENCING INSTRUCTIONS
Position your cursor in the cell where you want a given balance to appear, type an equal sign, and then
change worksheets, position the cursor on the cell that holds the value you want, and press Enter. This
should cause a “relative cell reference” to appear in the original cell. This means, more or less, that you
have copied the cell itself, and not the value – if you change the value in the source cell, it will
automatically change in the destination cell. This automatic updating is what makes electronic
spreadsheets so valuable in the business world for managers, investors, and accountants alike. It also
reduces the potential for error and makes working much more efficient and easier.
Example: To post a debit to the Cash t-account, position your cursor in the debit cell of the “Cash” t-
account in the “General Ledger” and type an equal sign. Click on the tab labeled “General Journal” at the
bottom of the screen to switch back to the journal entry, position the cursor on the debit cell that holds the
value you want, and press “Enter”. The value automatically transfers!