Credit will be awarded based on the students’ ability to prepare flawless financial statements for the month ended January 31, 2015

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Credit will be awarded based on the students’ ability to prepare flawless financial statements for the month ended January 31, 2015. Supporting information is required as follows: Journalize the following transactions, post to T-accounts, balance the T-accounts, Prepare a trial balance, journalize adjusting entries, prepare adjusted trial balance, journalize closing entries, and finally prepare Income Statement, Statement of Retained Earnings, Balance Sheet,and Statement of Cash Flows. Please use the following Chart of accounts.

 

101

Cash

230

Interest Payable

106

Accounts Receivable

301

Common Stock

126

Inventory

350

Retained Earnings

128

Prepaid Insurance

405

Sales Revenue

131

Prepaid Rent

406

Sales Discounts and Allowance

135

Prepaid Advertising

501

Cost of Goods Sold

163

Office Equipment

520

Utility Expense

164

Mixing Barrels

525

Wage Expense

165

Factory Equipment

530

Interest Expense

190

Accumulated Depreciation

535

Rent expense

201

Accounts Payable

545

Insurance Expense

215

Notes Payable

560

Depreciation Expense

220

Line of Credit

565

Advertising Expense

 

Additional information:

·         Grandpa’s Cough Inc. (GCI) sells a uniquely flavored cough syrup either wholesale or through its own storefront.

·         Cases contain 24 bottles. Each bottle costs the company $2 to make and the company sells bottles for $4.5. Each case is sold for $90 the cost to ship is paid for by the customer. Customers pay at the last minute of their terms unless otherwise noted.

·         Gene has a revolving line of credit with a local bank, if the cash balance drops below $15,000 then Gene will draw money against the line of credit in $5,000 increments, until the balance is above $25,000. Simple interest rate on the line is 3.4%.Interest accruesdaily and paid at the end of each month.

·         The company maintains inventory at $72,000, and will purchase materials every time the inventory drops below that amount in $4,000 increments, vendor pays shipping. Terms are N/15. Gene pays all bills at the last minute.

·         All depreciation is straight-line with no residual value.

o   Office equipment is expected to last 5 years

o   Factory Equipment is expected to last 4 years

o   Mixing barrels are expected to last 10 years.

·         Round all answers to the nearest dollar


 

Grandpa's Cough Inc.

Balance Sheet

As of December 31, 2014

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

 

 

 

 $      20,000

 

 

Accounts Receivable

 

 

         10,000

 

 

Inventory

 

 

 

 

         50,000

 

 

Prepaid Insurance

 

 

 

              375

 

 

Prepaid Rent

 

 

 

           1,400

 

Total Current Assets

 

 

 

 $      81,775

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

 

 

 

 

Office Equipment

 

 

 

 $        3,500

 

 

Mixing Barrels

 

 

 

           4,500

 

 

Factory Equipment

 

 

 

         15,000

 

 

Less: Accumulated Depreciation

 

       (19,860)

 

Total Fixed Assets

 

 

 

 $        3,140

Total Assets

 

 

 

 

 $      84,915

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts Payable

 

 

 

 $      25,000

 

 

Current Portion of Long Term Debt

 

           1,600

 

Total Current Liabilities

 

 

 $      26,600

 

 

 

 

 

 

 

 

 

Long Term Debt

 

 

 

 

 

 

Notes Payable

 

 

 

         16,000

 

Total Long Term Debt

 

 

 

         16,000

 

Total Liabilities

 

 

 

 $      42,600

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Retained Earnings

 

 

 

 $      28,210

 

 

Common Stock

 

 

 

         14,105

 

Total Stockholders' Equity

 

 

         42,315

Total Liabilities and Stockholders' Equity

 

 $      84,915

 

 

 

 

 

 

 

 

 


·          

Date

Transaction

January 1, 2015

Gene Autry invested $25,000 Cash and office equipment worth $6,000 in return for common stock of Grandpa’s Cough Inc.

1

Purchased Mixing Barrels worth $3,000 and Other Factory Equipment worth $600 on credit, N/30

1

Purchased Inventory on credit for $72,000with terms N/15

1

Paid Vendor $15,000 for prior month purchases

2

Paid $4,500 for annual premium on insurance coverage starts at the end of the month.

3

During the grand opening of the store GCI sold 256 Bottles of Cough Syrup.

4

A wholesale customer ordered 100 cases, GCI shipped the order and billed the customer 2/5 N/10

5

Received payment from customer from prior month sale $5,000.

6

Sold 300 Bottles of Cough Syrup through the store.

7

Received half the payment for sale of goods on January 4

10

Paid $4,200 for three months’ rent for store front starting on January 1, 2015.

13

Sold 400 Bottles of Cough Syrup through the store

15

Shipped order for another wholesale customer 500 cases N/10

15

Received and paid Utility Bill for $500

18

Shipped order of 300 Cases to a wholesale customer N/10

20

Sold 625 Bottles of Cough Syrup through the store

25

Shipped order to wholesale customer 1,000 cases 2/10 N/30

26

Paid for mixing barrels and equipment purchased on January 1

27

Sold 1,000 bottles of Cough Syrup through the store

30

Paid wages under the table to employees of $15,000

31

Paid $2,000 for 12 month advertising campaign through local radio stations

 

 


 

Additional information:

Prior Period Prepaid Rent was for the factory as of December 31, 2013 the balance had two months remaining.

 

Prior Period Prepaid Insurance was for an annual policy that expires at the end of January.

 

The Note was borrowed on December 31, 2014 and holds interest of 3%. Interest is accrued at the end of the month. The first principle payment is due in the month of March.

 

 

 

 

 

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