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Project 2

Projects are your own work. It is academic dishonesty to work with others on this project. Project 2 in ecampus requires you to record transactions, prepare the financial statements and answer questions based on these transactions. You should record the transactions in the accounting equation below before inputting your answers into ecampus. You will lose points if the account titles are misspelled, so be sure to refer to the Chart of Accounts below.

*Chart of Accounts*
Accounts Payable	Depreciation Expense	Inventory
Accounts Receivable	Dividends	Notes Payable
Accumulated Depreciation	Equipment	Prepaid Insurance
Cash	Insurance Expense	Sales Revenue
Common Stock	Interest Expense	Wages Expense
Cost of Goods Sold	Interest Payable

Assets	Liabilities	Shareholders’ Equity
		Common Stock	Retained Earnings
Balance sheet at May 1	6,500 Cash 1,400 Inventory 2,950 Equipment, net	4,000 Notes Payable 40 Interest Payable	5,000	1,810
Paid $900 cash for three months of insurance coverage that begins May 1.
Purchased $3,000 of tortillas and toppings inventory on account.
Sold 600 sandwiches on account. The sales price was $5 per sandwich and the cost was $2 per sandwich. Record both the sale and the cost of the sale.
Paid for $1,000 of the inventory purchased on account earlier.
Collected $2,500 of its accounts receivables from the sales made on account.
Paid $400 cash at the end of the month to a student who prepared and delivered sandwiches to its customers.
Declared and paid a $100 cash dividend to its shareholder.
Adjusted for insurance used during the month that was paid at the beginning of the month.
Depreciated its equipment by $50 (=($3,000/5 years of usefulness) x 1/12 year.
Recorded $40 (=$4,000 x 12%/year x 1/12 year) for May’s interest owed on the bank loan due June 30.

When completing the balance sheet, do not forget to include the beginning balances.

Pita Pan, Inc.
Income Statement
For the Month Ended May 31
Sales	$[a]
Cost of Goods Sold	$[b]
Gross Profit	$[c]
Wages Expense	$[d]
Insurance Expense	$[e]
Depreciation Expense	$[f]
Operating Income	$[g]
Interest Expense	$[h]
Net Income	$[i]

Pita Pan, Inc.
Statement of Shareholders' Equity
For the Month Ended May 31
Beginning Common Stock	$5,000
Stock Issued	$[a]
Ending Common Stock	$[b]
Beginning Retained Earnings	$1,810
Net Income	$[c]
Dividends	$[d]
Ending Retained Earnings	$[e]
Total Shareholders' Equity	$[f]

Pita Pan, Inc.
Statement of Cash Flows
For the Month Ended May 31
Cash from Operating Activities
Cash Collected from Customers	$[a]
Cash Paid to Vendors for Inventory	$[b]
Cash Paid for Insurance	$[c]
Cash Paid for Wages	$[d]
Total Cash from Operations	$[e]
Cash from Investing Activities	$0
Cash from Financing Activities
Dividends Paid	$[f]
Net Increase (Decrease) in Cash	$[g]
Plus Beginning Cash Balance	$6,500
Ending Cash Balance	$[h]

Pita Pan, Inc.
Balance Sheet (partial)
May 31
Cash	$[a]
Accounts Receivable	$[b]
Inventory	$[c]
Prepaid Insurance	$[d]
Equipment, net	$[e]
Total Assets
Accounts Payable	$[f]
Notes Payable	$[g]
Interest Payable	$[h]
Common Stock
Retained Earnings
Total Liabilities & Shareholder’s Equity

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