case assignments ch 1 - 4
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Problem 1 - 5
Trans. Cash +Accounts
Receivable +Prepaid
Rent + Equipment +Office
Supplies =AccountsPayable +
1 25,000 2 (500) 500 3 8,000 8,000 4 (500) 500 5 (750) 6 (3,000) 7 2,000 8,000 8 (5,000) (5,000) 9 (100)
10 1,000 17,250 + 8,000 + 500 + 8,000 + 400 = 4,000 +
34,150 = 34,150
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Owner'sEquity Description
25,000 Initial investment Prepaid Rent Equipment Office Supplies
(750) Advertisement Expense Net Sales(3,000) Salaries Expense Cost of Sales10,000 Revenue from Sales Gross Margin
Partial Payment for Equipment (100) Office Supplies Expense Operating Expenses:
(1,000) Miscellaneous Expense Advertisement Expense30,150 Salaries Expense
Office Supplies ExpenseMiscellaneous Expense
Total Operating Expenses
Total Operating Income
Net Income before TaxProvision for Income TaxNet Income
Statement of Retained Earnings
Retained Earnings at beginning of yearAdd: Net IncomeDeduct: DividendsRetained Earnings at EOY
Bon Voyage Travel
Income Statement For June end of month
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10,000 Current Assets:- Cash 17,250
10,000 Accounts Receivable 8,000 Prepaid Rent 500 Office Supplies 400
750 Total Current Assets 26,150 3,000
100 Fixed Assets:1,000 Equipment 8,000
4,850 Total Assets 34,150
5,150 Current Liabilities:
5,150 Accounts Payable 4,000 -
5,150 Owner's Equity 30,150
Total Liabilities and Owner's Equity 34,150
- 5,150
- 5,150
Bon Voyage Travel
Balance Sheet For June end of month
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Case 3-3: California Dispensers, Inc.
Transaction Analysis
Trans. Cash + Equipment +Parts
Inventory + Patent =AccountsPayable +
InterestPayable
1 80,000 120,000 2 (2,500) 3 (85,000) 85,000 4 (25,000) 5 (212,100) 212,100 6 30,000 30,000
500 7 (145,000) 8 (62,000)
9 (63,000) 10 (197,000) 11 598,500 1213 (8,500) 14 (20,000) 1516 (5,000) 17 22,500 18 (500) (500)
(30,000) (30,000) 78,400 + 76,500 + 15,100 + 100,000 = 22,500 + -
270,000 = 270,000
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ANSWERS:
1. Use it to assess the profitability of the company, and ultimately to decide if they would want to proceed
to reduce projected costs in operations, or increase sales target to stay profitable.
2. Transaction Table
3. Income statement
4. EOY Balance sheet
5. Yes, because in the end the company is still profitable. The initial investment was 200,000 with projectewill increase by XX% just after the 1st year of operation alone with minimal debt. Given that they incurred
that their profit will be significantly higher on the succeeding years of operation.
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+Owner'sEquity Description200,000 Investment on Patent and Capital
(2,500) Incorporation Cost to Expense (based on no. 12)Equipment Purchase
(25,000) Product Redesign Cost to Expense (based on no. 12)Component Parts PurchaseShort Term Bank Loan
(500) Interest Payable from Bank Loan(145,000) Payroll Expense (based on 18)
(62,000) Manufacturing Expense
(63,000) Selling, General and Administrative Expense(197,000) Component Parts Inventory Expense, End. Bal. $15,100598,500 Sales in cash
Incorporation and product redesign to be expensed (8,500) Equipment Depreciation
(20,000) Patent Expense (120,000 over 6 years)No Inventory of Partial or Completed Dispenser
(5,000) Cash Dividends(22,500) Income tax expense
Interest expense Accounts payable (excl. Income tax) paid in cash
+ 247,500
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with the investment. It can also support decision
profit of 47,500. The value of the companyincorporation and development expenses during the first year, it can be projected cons
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Net Sales 598,500 Cost of Sales 197,000 Gross Margin 401,500
Operating Expenses:
Product Redesign Expense 25,000 Selling, General and Admin Expense 63,000 Manufacturing Expense 62,000 Incorporation Expense 2,500 Payroll Expense 145,000
Total Operating Expenses 297,500
Total Operating Income 104,000
Other Expenses:Interest Expense 500 Patent Expense 20,000 Depreciation Expense 8,500
Total Other Expenses 29,000
Net Income before Tax 75,000 Provision for Income Tax 22,500 Net Income 52,500
Statement of Retained Earnings:
Retained Earnings at beginning of year - Add: Net Income 52,500 Deduct: Dividends 5,000 Retained Earnings at EOY 47,500
California Dispensers, Inc.Income Statement
For the year ended December 31, XXXX
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Current Assets:Cash 78,400 Parts Inventory 15,100 Total Current Assets 93,500
Fixed Assets:Equipment 85,000 Less: Acc.Depreciation 8,500 Total Fixed Assets 76,500
Other Assets:Intangible Assets (Patent) 100,000
Total Assets 270,000
Current Liabilities:Accounts Payable 22,500 Total Liabilities 22,500
Owner's Equity:Paid-in Capital 200,000 Retained earnings 47,500 Total Owner's Equity 247,500
Total Liabilities and Owner's Equity 270,000
California Dispensers, Inc.Balance Sheet
For the year ended Dec 31, XXXX
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Reporting Period: March 31
Trans. Cash +Accounts
Receivable +Merchandise
Inventory + Supplies + Cash Register +
1 10,000
2 1,000 3 (3,300) 3,300 4 (250) 250 5 (100) 100 6 (150) 7 (2,000)
5,200 - 3,300 100 250
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Description
Loan from Cousin with Interest Interest ExpenseInvestment Merchandise Inventory Cash Register Deposit SuppliesPrepaid AdvertisingComputer & Software
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March 1 - June 30 Transactions
Trans. Cash +Accounts
Receivable +Merchandise
Inventory + Supplies + Cash Register +Prepaid
Rent +1 10,000
2 1,000 3 (3,300) 3,300 4 (250) 250 5 (100) 100 6 (1,200) 1,200 7 (150) 8 (2,000) 9 (1,800)
1 7,400
320 2 (1,510)
3 (1,800) 4 (2,900) 2,900
(2,100) 5 (80) 678
9 3,390 + 320 + 4,100 + 20 + 250 + 1,200
Accounts Debit CreditCash 3,390.00Account Receivable 320.00Merchandise 4,100.00Supplies 20.00Cash Register 250.00Prepaid Rent 1,200.00
Ribbons n' Bows, Inc.Trial Balance
April 1 to June 30
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Computer and Software 1,750.00Sewing Machine 1,740.00Accounts Payable 15,290.00Investment 1,000.00Interest Payable 600.00Sales 7,720.00
Salaries expense 6,800.00Rent expense 1,800.00Merchandise expense 2,100.00supplies expense 80.00Advertisement expense 150.00Depreciation expense 310.00Interest Expense 600.00
24610 24610
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PrepaidAdvertisement +
Computer &Software +
SewingMachine =
AccountsPayable +
InterestPayable + Owner's Equity
10,000
600 (600) 1,000
150 2,000
1,800
7,400
320 (1,510)
90 (90) (1,800)
(2,100) (80)
5,200 (5,200) (150) (150)
(60) (60)
(250) (250) - + 1,750 + 1,740 = 15,290 + 600 + (3,120) 12,770 = 12,770
Receipts:Investment 11,000 Sales 7,400.00Total Receipts 18,400.00
Payments:Merchandise Purchase 6,200.00Cash Register Deposit 250.00
Ribbons n' Bows, Inc.Cash Flow Statement
April 1 to June 30
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Supplies Purchase 100.00Prepaid Rent 1,200.00Prepaid Advertising 150.00Computer and Software 2,000.00Sewing Machine Purchase 1,800.00Salaries expense 1,510.00
Rent expense 1,800.00Total Payments 15,010.00
Increase: 3,390.00
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DescriptionLoan from Cousin with Interest
Interest ExpenseInvestment Merchandise Inventory Purchase Net SalesCash Register Deposit Cost of SalesSupplies Purchase Gross MarginPrepaid Rent Prepaid Advertising Operating Expenses:Computer & Software Purchase Salaries ExpenseSewing Machine Purchase Rent Expense
Supplies ExpenseSales cash Advertisement ExpenseSales accounts receivable Total Operating ExpensesSalaries ExpenseSalary Expense Payable Total Operating IncomeRent ExpenseMerchandise Inventory Purchase Other Expenses:Merchandise Expense (COGS) Interest ExpenseSupplies Expense Depreciation Expense (Sewing, Computer)Salaries Expense Payable Total Other Expenses Advertisement ExpenseDepreciation Sewing Machine Net Income before Tax
Depreciation Computer Provision for Income TaxNet Income
Statement of Retained Earnings:
Retained Earnings at beginning of yearAdd: Net IncomeDeduct: DividendsRetained Earnings at EOY
Ribbons n' Bows, InIncome Statement
April 1 to June 30
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7,720 2,100 Current Assets:
5,620 Cash 3,390 Accounts Receivable 320 Merchandise Inventory 4,100
1,510 Supplies 20 1,800 Total Current Assets
80 150 Fixed Assets:
3,540 Cash Register 250 Prepaid Rent 1,200
2,080 Computer & Software 2,000 Sewing Machine 1,800 Less: Depreciation (Sewing, Computer) 310
600 Total Fixed Assets310
910 Total Assets
1,170
Current Liabilities:1,170 Accounts Payable 15,290 Interest Payable 600 Total Liabilities
- Owner's Equity:1,170 Paid-in Capital (4,290)
- Retained Earnings 1,170 1,170 Total Owner's Equity
Total Liabilities and Owner's Equity
c. Ribbons n' Bows, Inc.Balance Sheet
April 1 to June 30
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7,830
4,940
12,770
15,890
(3,120)
12,770
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