ACCOUNTS CASE STUDY 3-3

DISPENSERS OF CALIFORNIA,Inc.

PREPARED BY:

ANKIT AGRAWAL

VINAY SHARMA

CASE STUDY: DISPENSERS OF CALIFORNIA, INC.

Peter Hynes created new improved model of commercial paint spray.

His friends offered to invest capital of $2,00,000.

The incorporation cost being $ 2,500 Equipment costs $85,000 Labor & development cost $25,000 Component part purchases $2,12,100 Short term loan $30,000 with repayment

$500 interest at end of year.

Manufacturing payroll costs $1,45,000 Other Mfg. costs $62,000 Selling & admin. expenses cost $63,000 Inventory costs $15,100 Sales in cash $5,98,500 Depreciation cost$8,500 Cash dividends $5,000 Income tax expenses $22,500

INCOME STATEMENT FOR THE YEAR ENDING 31ST MARCH 2010

PARTICULARS AMT. ($) TOTAL

SALES 5,98,500

Cost of goods soldPURCHASES $2,12,100(-)CLOSING STOCK $ 15,100GROSS PROFIT ON SALES

1,97,0004,01,500

4,01,500

(-) OPERATING EXPENSES

INCORPORATION COST 2,500

MFG. PAYROLL 1,45,000

OTHER MFG.EXPENSES 62,000

SELLING &ADMIN.COST 63,000

LABOR & DEVELOPMENT/REDISIGN COST

25,000

PATENTSTOTAL EXPENSES

20,0003,17,500

(3,17500)

Profit before Int,Dep. &Tax 84,000

INTEREST 500

DEPRECIATIONTAX

8,500 22,500

(31,500)

Profit after Tax 52,500

BALANCE SHEET FOR THE YEAR ENDED 31ST MARCH ,2010

LIABILITIES AMT ($)

ASSETS AMT($)

OWNER’S FUND EQUIPMENT 85,000Less: Dep. 8,500

76,500

SH.CAPITAL HYNES- $ 1,20,000 OTHERS- $ 80,000

2,00,000

Inventory 15,100

Retained earningsNet income $

52,500(-) dividend $ 5,000

47,500

Patent 20,000

Income tax payable 22,500

Cash 1,74,800

Bank 30,000

SHORT TERM LOAN 30,000

(16400)

TOTAL 3,00,000

TOTAL 3,00,000

JOURNAL ENTRIES FOR DISPENSERS OF CLIFORNIA ,INC

CASH A/C DR. 2,00,000

TO, CAPITAL A/C 2,00,000(BEING CAPITAL INTRODUCED TO START A NEW CORPORATION)

PRELIMINARY EXPENSES A/C DR. 2500

TO, CASH A/C 2500

(BEING INCORPORATION COST USED)

EQUIPMENTS A/C DR. 85000

TO,CASH A/C 85000(BEING EQUIPMENT PURCHASED )

WAGES A/C DR. 25,000

TO,CASH A/C 25,000(BEING WAGES PAID TO LABOUR)

PURCHASE A/C DR. 2,12,100

TO, CASH A/C 2,12,100(BEING COMPONENT PART PURCHASED)

BANK A/C DR. 30,000

TO,LOAN A/C 30,000(BEING SHORT TERM LOAN TAKEN FROM BANK)

SALARIES A/C DR. 1,45,000

TO,CASH A/C 1,45,000 (BEING MANF. PAYOLL PAID)

MANUFACTURING COST A/C DR. 62,000

TO, CASH A/C 62,000(BEING OTHER MFG. COST INCURRED)

SELLING EXPENSES A/C DR. 63,000

TO, CASH A/C 63,000(BEING SELLING AND ADMIN.COST INCURRED )

MISCELLANEOUS EXPENSES A/C DR.15,100

TO,CASH A/C 15,100(BEING ENDING COMPONENTS COSTS INCURRED)

CASH A/C DR. 5,98,500

TO, SALES A/C 5,98,500(BEING CASH RECEIVED ON SALES)

DEPRECIATION A/C DR. 8,500

TO, CASH A/C 8,500 (BEING DEP. CHARGED)

DIVIDEND A/C DR. 5,000

TO, CASH A/C 5,000 (BEING DIVIDEND PAID)

INTEREST A/C DR. 500

TO, CASH A/C 500(BEING CASH PAID FOR INTEREST)

LEDGER ACCOUNTS CASH A/CParticulars Amt($) Particulars Amt($)

To, Capital A/c 2,00,000 By,Prel. expenses 2,500

To, Sales 5,98,500 By, Equipment 85,000

By, Wages 25,000

By, Purchase 2,12,100

By, Salary 1,45,000

By,Mfg. Cost 62,000

By, Selling expenses

63,000

By,Misc. Expenses 15,100

By, Depreciation 8,500

ByDividend 5,000

By, Interest 500