Project #80713 - Adjusting Entries

P3-4 Analyzing the Effects of Transactions Using T-Accounts, Preparing an Income Statement, and Evaluating the Net Profit Margin Ratio as a Manager LO3-4, 3-5, 3-6    
                           
Kaylee James, a connoisseur of fine chocolate, opened Kaylee’s Sweets in Collegetown on February 1, 2014. The shop specializes in a selection of gourmet chocolate     
candies and a line of gourmet ice cream. You have been hired as manager. Your duties include maintaining the store’s financial records. The following         
transactions occurred in February 2014, the first month of operations.                  
                           
a. Received four shareholders’ contributions totaling $30,200 cash to form the corporation; issued 400 shares of $.10 par value common stock.        
b. Paid three months' rent for the store at $1,750 per month (recorded as prepaid expenses).              
c. Purchased and received candy for $6,000 on account, due in 60 days.                  
d. Purchased supplies for $1,560 cash.                    
e. Negotiated and signed a two-year $11,000 loan at the bank.                  
f. Used the money from (e) to purchase a computer for $2,750 (for recordkeeping and inventory tracking); used the balance for furniture and fixtures for the store.    
g. Placed a grand opening advertisement in the local paper for $400 cash; the ad ran in the current month.              
h. Made sales on Valentine's Day totaling $3,500; $2,675 was in cash and the rest on accounts receivable. The cost of the candy sold was $1,600.        
i. Made a $550 payment on accounts payable.                  
j. Incurred and paid employee wages of $1,300.                  
k. Collected accounts receivable of $600 from customers.                  
l. Made a repair to one of the display cases for $400 cash.                  
m. Made cash sales of $1,200 during the rest of the month. The cost of the candy sold was $600.              
                           
Required:                        
1 & 2. Record in the T-accounts the effects of each transaction for Kaylee’s Sweets in February, referencing each transaction in the accounts with the transaction     
  letter. Show the ending balances in the T-accounts. An example amount has been posted to the Cash T-Account from transaction (l).        
                           
Cash   Accounts Receivable          
Beg. bal.         Beg. bal.                
    400 (l)                    
                           
          End. bal.                
                   
                 
                 
                 
End. bal.                
                 
Supplies   Inventory          
Beg. bal.         Beg. bal.                
                           
                           
                           
End. bal.         End. bal.                
                           
Prepaid Expenses   Equipment          
Beg. bal.         Beg. bal.                
                           
                           
End. bal.         End. bal.                
                           
Furniture and Fixtures   Accounts Payable          
Beg. bal.         Beg. bal.                
                           
                           
End. bal.         End. bal.                
                           
Notes Payable   Common Stock          
Beg. bal.         Beg. bal.                
                           
                           
End. bal.         End. bal.                
                           
Additional Paid-in Capital   Sales Revenue          
Beg. bal.         Beg. bal.                
                           
                           
                           
End. bal.         End. bal.                
                           
Cost of Goods Sold   Repair Expense          
Beg. bal.         Beg. bal.                
                           
                           
          End. bal.                
End. bal.                  
                 
Advertising Expense   Wage Expense          
Beg. bal.         Beg. bal.                
                           
                           
End. bal.         End. bal.                
                           
Required:                        
3 Prepare an income statement at the end of the month ended February 28, 2014.                
                           
        KAYLEE’S SWEETS                
        Income Statement (unadjusted)                
        For the Month Ended February 28, 2014                
        Revenues:                  
                           
                           
        Expenses:                  
                           
                           
                           
                           
                           
                           
        Total cost and expenses 0                
        Net income $400                
                           
Required:                        
5 After three years in business, you are being evaluated for a promotion. One measure is how effectively you managed the sales and expenses of the business.     
    The following data are available:                      
                           
           2016*        2015         2014            
          Total assets $ 88,000   $ 58,500   $ 52,500              
          Total liabilities 49,500   22,000   18,500              
          Total stockholders’ equity 38,500   36,500   34,000              
          Net sale revenue 93,500   82,500   55,000              
          Net income 22,000   11,000   4,400              
                           
        * At the end of 2016, Kaylee decided to open a second store, requiring loans and inventory         
        purchases prior to the store’s opening in early 2017.              
                           
                           
5-a. Calculate the net profit margin ratio for each year. (Round your answers to 1 decimal place.)              
                           
    Net Profit Margin Ratio                    
  2016   %                    
  2015   %                    
  2014   %                    
                           
5-b. Do you think you should be promoted?                    
                           
 
 
  YES  
 
                       
                         
 
 
  NO  
 
                       
 

 

 

 

 

 

 

 

P4-7 Recording Adjusting and Closing Entries and Preparing a Balance Sheet and Income Statement Including Earnings per Share LO4-1, 4-2, 4-4  
               
Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant   
prepared the following unadjusted trial balance as of the end of the annual accounting period, December 31, 2014:      
               
  Account Titles  Debit  Credit        
    Cash  $     42,000          
    Accounts receivable         11,600          
    Supplies               900          
    Prepaid insurance               800          
    Service trucks         19,000          
    Accumulated depreciation    $      9,200        
    Other assets           8,300          
    Accounts payable   3000        
    Wages payable            
    Income taxes payable            
    Note payable (3 years; 10% interest due each December 31)   17000        
    Common stock (5,000 shares outstanding)   400        
    Additional paid-in capital   19000        
    Retained earnings   6000        
    Service revenue   61360        
    Remaining expenses (not detailed; excludes income tax)         33,360          
    Income tax expense            
               
       Totals  $  115,960  $ 115,960        
               
Data not yet recorded at December 31, 2014, included:            
               
a. The supplies count on December 31, 2014, reflected $300 remaining supplies on hand to be used in 2015.    
b. Insurance expired during 2014, $800.            
c. Depreciation expense for 2014, $3,700.            
d. Wages earned by employees not yet paid on December 31, 2014, $640.        
e. Income tax expense, $5,540.            
               
Required:              
1 Record the 2014 adjusting entries. (If no entry is required for a transaction/event,       
  select "No journal entry required" in the first account field.)          
               
Transaction General Journal Debit Credit        
a.              
               
               
               
               
b.              
               
               
               
               
c.              
               
               
               
               
d.              
               
               
               
               
e.              
               
               
               
               
               
Required:              
2-a. Prepare an income statement that includes the effects of the preceding five transactions.       
  (Round "Earnings per share" to 2 decimal places.)            
               
  TUNSTALL, INC.          
  Income Statement          
  For the Year Ended December 31, 2014          
  Operating revenue:            
               
               
  Operating expenses:            
               
               
               
               
               
               
               
  Total expenses                  -            
               
               
               
  Net income $16,720          
  Earnings per share            
               
Required:              
2-b. Prepare a classified balance sheet that includes the effects of the preceding five transactions.      
   (Amounts to be deducted should be indicated by a minus sign.)          
               
        TUNSTALL, INC.
        Balance Sheet
        At December 31, 2014
 
 
   
 
    Assets Liabilities and Stockholders’ Equity
      Current assets:   Current liabilities:  
               
               
               
               
               
        Total current assets                   -   Total current liabilities                   -  
               
               
            Total liabilities                   -  
            Stockholders' equity:
               
               
               
               
            Total stockholders' equity                   -  
        Total assets  $               -   Total liabilities and stockholders' equity  $               -  
               
Required:              
3 Record the 2014 closing entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
               
Transaction General Journal Debit Credit        
1              
               
               
               
               
               
               
               
               
               
               
                     

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Due By (Pacific Time) 09/24/2015 12:00 am
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