accounting

assesment_2.xls

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T-Accounts Setup

Worksheet 1 of 6. Template for requirement 1: Set up appropriate T-accounts for cash, accounts receivable, supplies, inventory, prepaid expenses, equipment, furniture and fixtures, accounts payable, notes payable, contributed capital, sales revenue, cost of goods sold (expense), advertising expense, wage expense, and repair expense. All accounts begin with zero balances.
Learner:
Audrey's Ice Cream Parlor
	Cash				Accounts Receivable				Supplies
								cash	1,000.00
01/04/201x capital	40,000.00	1/4/201x rent	2,000.00
2/4/201x loan cap	11,000.00	2/4/201x sup	1,000.00
		2/4/201x equip	3,000.00
		2/4/201xfitings	8,000.00
					Prepaid Expenses				Equipment
	51,000.00	- 0		1/rent	2,000.00			cash	3,000.00
	51,000.00
	Inventory				Accounts Payable				Notes Payable
2/4/201x supplies	1,000.00					6,000.00	ice & cones2/
	1,000.00	- 0				6,000.00
	1,000.00
	Furniture & Fixtures				Sales Revenue				Cost of Goods Sold
cash	8,000.00							ice& cones	6,000.00
								supplies	1,000.00
						- 0			7,000.00
	Advertising Expense				Wage Expense				Repair Expense
	Contribution Capital
		1/4/201xequity	40,000
		debt	11,000
End of worksheet

T-Accounts

Worksheet 2 of 6. Template for requirement 2: Using columns A through N, record in the T-accounts the effects of each transaction for Audrey's shop in April, referencing each transaction in the accounts with the transaction letter. Show the ending balances in the T-accounts. Note that transactions (h) and (m) require two types of entries, one for sales and one for cost of goods sold. In columns P through S, prepare trial balances for 4/30/12.
Learner:
Audrey's Ice Cream Parlor												Audrey's Ice Cream Parlor
												Trial Balance
												30-Apr-12
	Cash				Accounts Receivable				Supplies				Debit		Credit
(a)	40,000.00	2,000.00	(b)	(h)	750.00	700.00	(k)	(d)	1,000.00			Cash	44,450.00
(e)	11,000.00	1,000.00	(d)									Accounts Receivable	50.00
(h)	4,250.00	11,000.00	(f )		50.00							Supplies	1,000.00
(k)	700.00	600.00	(g)									Inventory	1,600.00
(m)	6,000.00	600.00	(i)									Prepaid Expenses	2,000.00
		2,000.00	(j)									Equipment	3,000.00
		300.00	(l)		Prepaid Expenses				Equipment			Furniture and Fixtures	8,000.00
	61,950.00	17,500.00		(b)	2,000.00			(f)	3,000.00			Accounts Payable			5,400.00
	44,450.00											Notes Payable			11,000.00
												Common Stock			40,000.00
												Sales			11,000.00
	Inventory				Accounts Payable				Notes Payable			Cost of Goods Sold	4,400.00
( c )	6,000.00	2,000.00	(h)	(i)	600.00	6,000.00	(c )			11,000.00	(e)	Advertising	600.00
		2,400.00	(m)									Wages	2,000.00
	6,000.00	4,400.00				5,400.00						Repairs	300.00
	1,600.00
												Totals	67,400.00	=	67,400.00
	Furniture & Fixtures				Sales Revenue				Cost of Goods Sold
(f)	8,000.00					5,000.00	(h)	(h)	2,000.00
						6,000.00	(m)	(m)	2,400.00
						11,000.00			4,400.00
	Advertising Expense				Wage Expense				Repair Expense
(g)	600.00			(j)	2,000.00			(l)	300.00
	Contribution Capital
		40,000.00	(a)
End of worksheet

Income Statement

Worksheet 3 of 6. Template for requirement 3: Prepare the income statement at the end of the month ended April 30, 2012.
Learner:
Audrey's Ice Cream Parlor
Income Statement
For the Month Ended April 30, 2012
Sales		$ 11,000.00
Less: Cost of Goods Sold		4,400.00
Gross Profit		6,600.00
Less: Expenses
Advertising	$ 600.00
Wages	2,000.00
Repairs	300.00	2,900.00
Net Income		$ 3,700.00	33.64%
End of worksheet

Stockholders' Equity

Worksheet 4 of 6. Template for requirement 3: Prepare the statement of stockholders' equity at the end of the month ended April 30, 2012.
Learner:
Audrey's Ice Cream Parlor
Statement of Stockholders' Equity
For the Month Ended April 30, 2012
Contributed Capital:
Balance, April 01	- 0
Add: Issue of Common Stock	40,000.00
Total Contributed Capital	$ 40,000.00
Retained Earnings:
Balance, April 01	$ - 0
Add: Net Income	$ 3,700.00	9.25%
Retained Earnings, April 30	$ 3,700.00
Total Shareholders' Equity	$ 43,700.00
End of worksheet

Balance Sheet

Worksheet 5 of 6. Template for requirement 3: Prepare the balance sheet at the end of the month ended April 30, 2012.
Learner:
Audrey's Ice Cream Parlor
Balance Sheet
April 30, 2012
Assets			Liabilities
Cash	$ 44,450.00		Accounts Payable	$ 5,400.00
			Total Current Liabliites		5,400.00
Accounts Receivable	50.00		Notes Payable	11,000.00
			Total Long-Term liabliites		11,000.00
Supplies	1,000.00		Total Liabilities		16,400.00
Inventory	1,600.00
Prepaid Expenses	2,000.00
Total Current Assets		49,100.00	Stockholders' Equity
Equipment	3,000.00		Shareholders' Equity		43,700.00
Furniture and Fixtures	8,000.00
Total Equipment, Furniture and Fixtures		11,000.00
Total Assets		$ 60,100.00	Total Liabilities and Owner's Equity		$ 60,100.00
Current Ratio =	909.26%
End of worksheet

Req 4 & 5

Worksheet 6 of 6. Template for requirements 4 and 5: Write a short memo to Audrey offering your opinion on the results of operations during the first month of business. Then, using the financial data from the assessment, compute the total asset turnover ratio for 2014 and 2013 and evaluate the results. Also compute the return on invested capital (net income divided by total stockholders' equity). Evaluate whether you should be promoted based on how efficiently you have managed the assets of the business.
Learner:
(4) Memo to Audrey on the results of operations during the first month of business.
The liquidity ratio is too high at 909.26% , the managers need to reduce to a manageable level of 2:1. the business is fairly good having realised a profit in the month, however the interest in the loan obtained by the company may eat up the profit gained during the month or the subseqent months.	Audrey's Ice Cream Parlor
	Account	2014	2013	2012
	Total assets	$93,000	$78,000	$61,000
	Total liabilities	$23,000	$23,000	$16,500
	Total contributed capital plus retained earnings	$70,000	$55,000	$44,500
	Total sales	$100,000	$82,500	$57,250
(5) Compute the total asset turnover ratio and the return on invested capital and evaluate the results. Based on this measure, do you think you should be promoted? Why or why not?	Net income	$15,000	$10,500	$4,500
1.asset turnover=sales/total assets 2. return on capital employed= net operating profit/(total assets- current liabilities) total asset turnover 2012(93.85%),2013(105.77%),2014(107.53%). Return on investment capital employed assume the liabilities are current 2012(32.6%),2013(19.1%),2014(21.43%). one need to be promoted, the sales turnover is increasing yearly. further the asset base of the company is equally incresing given gthe fact that it is a starting company.
		2014	2013
	Average Assets	85500	69500
	Average Capital	62500	49750