Complete the financial statements using the proposed parallel classification scheme of the financial statements.

Project for accounting
Paper, Order, or Assignment Requirements

For month ending January 31, 2014

ONE MONTH OF TRANSACTIONS– A Manual Accounting System
YourName Boating Distributors, a wholesale-retail boating distributor is incorporated in the State of New Jersey, with an authorized capitalization of 400,000 shares of $5.00 par value common stock (1,000 shares outstanding as of January 1). The company’s accounting system includes a General journal, General ledger, Accounts receivable subsidiary ledger, and Accounts payable subsidiary ledger

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The transactions and accounting records in this set have been selected to give the student an understanding of the interrelationships in an accounting system. While almost all companies employ computerized accounting systems, this set is initially structured around a manual system with only one journal to permit maximum student learning.

The company recognizes one month’s depreciation in the month that an asset is purchased or sold. Also, it is assumed that the company closes its books monthly.

The post-closing trial balance of YourName Boating Distributors as of December 31 (which was the year- end) was as follows:
Debits Credits

Cash ………………………………………………………………….. $25,100
Accounts Receivable ………………………………………………… 35,000
Allowance for Doubtful Accounts …………………………………… $ 400
Merchandise Inventory ………………………………………………. 76,000
Investments (available-for-sale)……………………………………….. 11,500
Office and Store Supplies ……………………….…………………. 1,800
Prepaid Insurance ……………………………………………………. 600
Prepaid Rent …………………………………………………………. 3,000
Office Equipment ……………………………………………………. 20,000
Accumulated Depreciation—Office Equipment …………………….. 4,000
Warehouse Storage Equipment ………………….…………………… 35,000
Accumulated Depreciation—Warehouse Equipment ………………… 8,000
Accounts Payable ……………………………………………………. 19,000
Interest Payable ……………………………………………………… 100
Employees’ Federal Income Taxes (withhold) Payable …………………………. 700
FICA Taxes Payable …………………………………………………. 400
Short-term Notes Payable (Galindo City Bank, 60-day, 12 percent,
Dated (December 1) ………………………………………… 10,000
Common Stock (par $5.00) …………………………………………… 5,000
Additional Paid in Capital……………………………………………… 40,000
Accumulated Other Comprehensive Income ………………………….. 1,500
Retained Earnings ……………………………………………………… 118,900

Totals ………………………………………………………….. $208,000 $208,000

CHART OF ACCOUNTS YOURNAME BOATING
2014

Account Number Account Name
101 Cash
102 Accounts Receivable
103 Allowance for Doubtful Accounts
109 Investments–Available for Sale Securities Short-term Assets
110 Merchandise Inventory
119 Office and Store Supplies
120 Prepaid Insurance
121 Prepaid Rent
122 Office Equipment
123 Accumulated Depreciation—Office Equipment
124 Warehouse Equipment Long-term Assets
125 Accumulated Depreciation—Warehouse Equipment
170 Building
171 Accumulated Depreciation–Building
201 Accounts Payable
203 Interest Payable
209 Salaries Payable
219 Employees’ Federal Income Taxes (withheld) Payable
225 FICA Taxes Payable Short-term Liabilities
240 Short-term Notes Payable
250 Dividends Payable
251 Income Taxes Payable (Corporation)
280 Bonds Payable
281 Discount or Premium on Bonds Payable Long-term Liabilities
301 Common Stock
302 Additional Paid-In Capital
340 Accumulated Other Comprehensive Income
350 Retained Earnings Equity Accounts
390 Treasury Stock
413 Sales
414 Sales Returns and Allowances
415 Sales Discounts
510 Cost of Goods Sold
612 Depreciation Expense—Office Equipment
613 Depreciation Expense—Warehouse Equipment
614 Depreciation Expense–Building
615 Office Salaries Expense
616 Sales Salaries Expense
617 Payroll Tax Expense
618 Interest Expense Income Statement
619 Insurance Expense
620 Rent Expense
651 Office and Store Supplies Expense
655 Advertising Expense
656 Bad Debts Expense
657 Repairs Expense, Office
658 Utilities Expense
659 Income Tax Expense
701 Realized Gains or Losses on Sale of Assets
703 Investment Income Nonoperational
801 Unrealized Gains/Losses–Available-For-Sale Securities Other comprehensive
Income

1You may not need all these accounts, or you may have to add an account.

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
Balances as of December 31

Glassboro SeaWorld $ 1,000
Paige Connery Best Buys 0
Buena by the Shore 13,500
Evan Hughes Price Boats 10,000
Parth Patel’s Boats 10,500
$ 35,000

ACCOUNTS PAYABLE SUBSIDIARY LEDGER
Balances as of December 31

Jonathan Horvat Boat Suppliers 10,500
Szumowski’s’s Boats 5,000
Emily Falk’s Boats 0
Mathew Hamilton’sDistributors 3,500
Brena Wayland’s Boats 0
$19,000

INVENTORY as of December 31 ($76,000)

Kawasaki Ultra 250X Yamaha Waverunner FX Cruisers Snyder Craft 21
Nov. 1 $3,000 Oct. 1 $3,950 Oct.14 $16,000
Nov 18 $3,200 Nov 20 3,950
$6,200 Nov. 30 4,100
$12,000

Nanticoke Flyer Seahawk Miscellaneous Boat Supplies1
Aug 1 $1,950 No 15 $24,000 Various $13,800
Nov 3 $2,050
$4,000

1Cost will be given for each transaction associated with miscellaneous boat supplies.

TRANSACTIONS FOR THE MONTH OF JANUARY—Note that we will ignore Sales Tax for this project. Normally, one would have to provide an explanation for each general journal entry. However, since we are recording all entries in the general journal, explanations will not be necessary.

Jan 2 Issued a bond, face value $100,000, to Daniel Scheri’s Investment Company for $91,000 cash. Terms of the bond is 5 years and the stated interest rate is 9.6%. Interest and amortization will be recorded as an adjusting entry the end of the month.(See page 789 of text).

2 Issued 6,000 shares of common stock for $50,000. Remember that common stock is always recorded at par value.)

3 Sold a Yamaha Waverunner for $8,000 on account to Buena by the Shore,). Issued Invoice No. 719. (Note that we are using FIFO for inventory)

(Note that when making a sale using a perpetual inventory system, you always need two entries, one recognizing the sale, and one reducing inventory.)
Cash or/and Accounts Receivable XX
Sales XX
Cost of Goods Sold XX
Merchandise Inventory XX
3 Purchased a Snyder Craft for $16,800 on account from Szumowski’s’s Boats, Invoice No. 630, terms 3/10, n/60. Note that since we are using a perpetual inventory system, all purchases and sales need an entry in the account Merchandise Inventory.

4 Purchased various boat merchandise of $3,000 from Szumowski’s’s Boats on Account, Invoice No. 631, terms 3/10, n/60.

4 Issued Check No. 292 to Szumowski’s’s Boats in full settlement of our December account balance –Invoice No. 580, terms n/30.

4 Issued credit memorandum No. 75 to Parth Patel’s Boats for $1,000 for miscellaneous merchandise previously purchased. Our cost and value is 500. (Reverse the entry listed above on the 2nd but use Sales Returns and Allowance instead of the account Sales and the numbers given in this entry.)

4 Issued Check No. 293 to Copier Repair Co. for copier repairs, $500.

5 Received payment in full from Parth Patel’s Boats on sale made in December. (Do not forget the credit memorandum on the 4th.)

5 Sold a Seahawk to Evan Hughes Boats, for $36,000. We received $10,000 as a down payment. Issued Invoice No. 720.

5 Returned defective merchandise from the December 3rd purchase to Szumowski’s’s Boats and received a $500 credit memorandum. (Credit Merchandise Inventory—Boat Supplies)

6 Sold all the old warehouse storage equipment for $22,000. The warehouse equipment has a five-year life and a salvage value of $4,000. Assume the company uses the straight-line method to depreciate Warehouse Equipment. (Step 1—Bring the depreciation up to date by depreciating the warehouse for one month. Step 2—Remove the asset and accumulated depreciation and debit cash. Step 3—Plug to a realized gain or loss account– 701.)

7 Sold boat merchandise on account to Paige Connery Best Buys for $900, our cost $450. Invoice no. 720.

8 Issued Check No. 294 to Amanda Muetter’s Contractors to purchase a Building for $150,000. Straight-line method will be used over 20 years without any salvage value. At this time, you only will need to make the entry for the purchase of the building. (Note, that a month’s depreciation will have to be recorded as an adjusting entry at the end of the period.)

10 Issued Check No. 295 to the Internal Revenue Service in payment of FICA taxes accrued as of December 30 (FICA Taxes Payable— look at beginning trial balance for amount.)

10 Issued Check No. 296 to the Internal Revenue Service in payment of federal income taxes withheld as of December 30. (Employees’ Federal Income Taxes Payable—look at beginning trial balance for amount.)
.
10 Issued Check No. 297 to Kyj and Cheatem Investment Company for $3,000 of
equity marketable securities to hold excess cash. (This should be debited
to Investments–Available for Sale Securities –Account number 109.)

11 Issued Check No. 298 to Mathew Hamilton’s Distributors in full settlement of the December 30 purchase, Invoice No. 1002, terms n/20.

11 Issued Check No. 299 to Szumowski’s’s Boats in full settlement of our account for the two purchases early this month. (Recall the credit memorandum on the 5th.) (Note that when paying suppliers within a discount period, one must credit Merchandise Inventory.)

15 Check No. 300 voided. (No entry needed.)

15 Sold boat supplies on account to Parth Patel’s Boats , for $1,800 (Cost $900). Issued Invoice No. 721.

18 Received a check from Parth Patel’s Boats for balance of account.

19 Received full payment from Buena by the Shore on all the sales. To encourage prompt payment, we offered Buena a 2% cash discount.

20 Purchased on account from Brena Wayland’s Boats, two Yamaha Waverunners at $4,600 each (Total equals $9,200), Invoice No. 5900, terms n/30.

22 Sold a Yamaha Waverunner to Glassboro SeaWorld for $9,000) we received $5,000 as a down payment. Issued Invoice No. 722.

22 We are in a dispute with Paige Connery Best Buys about invoice number 720 on the 7th of this month. Since she has left the country for South America, it has been decided to write this account off using the allowance method. (Do not debit Bad Debt Expense.)

23 Issued Check No. 303 to Angelo Minniti’s Supply Co. for store and office supplies, $1,200.

23 One of the owners, Jenna-Rose Fraser , is unhappy with the direction the Corporation is going. YourName Corporation purchased her 200 shares of commons stock for $50 a share. Debit Treasury Stock.

24 Declared a $3.00 per share cash dividend. (Debit Retained Earnings and remember, one does not pay dividends on treasury stock.)

27 Sold a Yamaha Waverunner on account for $8,000 to Buena By Shore on account.

28 Purchased boat supplies on account from Mathew Hamilton’sDistributors , $1,500, Invoice No. 670, terms 2/10, n/60.

28 Purchased a Naticoke Flyer for $3,500 from Jonathan Horvat’ Boat Suppliers on account.

29 Sold boat merchandise on account to, Glassboro SeaWorld for $3,500 (Cost $1,800).

30 Issued Check No. 304 to the Galindo’s City Bank for the maturity value of the note payable. See beginning trial balance for terms of the note. (Interest was accrued on the note through December 31 in the account Interest Payable.)

30 Issued Check No. 305 to Pitman Electric Co. for December service, $550.

30 Issued Check No. 306 to the Rowan Whit for the month’s advertising, $400.

30 Issued Check No. 307 to Wenonah Telephone Co., $450.

30 Received partial payment of $10,000 from Evan Hughes Boats.

30 The payroll record for January is as follows:
debit credit
Sales Salaries Expense ………………………….. $4,500
Office Salaries Expense …………………………. 2,500
Total 7,000
Federal income taxes withheld ………………….. $1,400
FICA taxes withheld ……………………………. 500
Net Pay (Salaries payable) ……………… 5,100
Total 7,000

31 Record the employer’s FICA tax of $500 on the January payroll. (Debit Payroll Tax Expense and credit FICA Taxes Payable.)

31 Issued Checks Nos. 309-311 for the January Payroll. (Assume this is
one check.)

31 Issued Check No. 312 to pay the shareholders for the cash dividends declared on the 24th.

31 Total cash boat-supply sales for the month ended January 31 were $15,000 (Cost $6,500). To save time, we are recording this entry only one time. Normally this entry would be made every day the business is open.

31 Received cash dividends of $450 from investments (Credit Investment Income Account 703)

After completion of the journal entries, you may work in a team of two or three students. (I
highly recommend this for Finance majors.) Please submit only one copy for each team with each
team member as part of the name of the company . You may also use QuickBooks or any other
accounting program you are familiar with once you complete the journal entries manually.

There will be questions on the midterm, first quiz, and final that relate
directly to this practice set.

Assignment I—U.S. GAAP

2) Post to the general ledger. Take a trial balance of the general ledger and enter it on the worksheet. Prepare a schedule of accounts receivable and a schedule of accounts payable as of January 31. You must use Excel when doing the spreadsheet.

3) ADJUSTING ENTRIES
Complete the excel spreadsheet by using the following supplementary data. All of the account titles you will need in preparing the adjusting entries have already been included in the work-sheet in their proper numerical sequence.

a) Store and office supplies on hand as of January 31 are $1,600.

b) Insurance expense expired during the month was $200.

c) The balance in the Prepaid Rent account is for a 2-month period ending February 28. The company will be moving to new facilities by the end of February.

d) The Building will be depreciated over 20 years, using straight-line depreciation with no salvage value. The Office Equipment has an estimated life of five years with no salvage value.

e) Interest and amortization should be accrued on the bonds payable.
Note: the discount on bonds payable is amortized on the straight-
line method for the month of January.

f) YourName estimates that in the future approximately 3.0 percent of total accounts receivable will be uncollectible.Use the balance sheet method and adjust to this number.

g) The marketable securities have a market value of $15,400 as of Dec.
31 (Use accounts 801 and 109 for the unrealized gain/loss). Unrealized Gains/Losses is part of Owners’ Equity and is included as a part of Other Comprehensive Income and Accumulated Other Comprehensive Income in the Equity section of the balance sheet.

h) The corporate tax rate is 30%. Note that when computing income
tax for the corporation Unrealized Gains are not taxable.

4) Financial Statements due March 8th.
Prepare the following statements listed below and submit them in this order. Since you only have information about the post-closing trial balance, you can only do one month’s worth of financial statements.

1. Statement of Net Income—See below for EPS information.

2. Statement of Comprehensive Income (This can be completed in one of two ways. Thus, it may not be the third item.)

3. Statement of Financial Position (Balance Sheet) (FOR THIS SHOW CALCULATIONS)

4. Statement of Changes of Owners’ Equity—Note that the Statement of Retained Earnings is part of the Statement of Changes of owners’ Equity. (FOR THIS SHOW CALCULATIONS)

5. Minimum of one page of Footnotes and Disclosures.

Footnotes (Minimum of one page single spaced except between individual footnotes.) See appendix 5B to book’s companion website for examples. Also search the net, and USE YOUR IMAGINATION!

6. One page devoted for ratios. (Show work.) For ratios e and f please use the beginning and ending month balances. Normally, one would use the beginning and ending of the year balances.

a. Working Capital (See page 209 for formulas)
b. Current Ratio
c. Acid-test Ratio
d. Profit Margin on Sales (FOR THESE SHOW CALCULATIONS)
e. Receivables Turnover Ratio1
f. Inventory Turnover Ratio1

If you are completing these statements as part of a group, please list your name as one of the CPAs on the title page.

You do not have to divide operating expenses into selling expenses and administrative expenses on the income statement and may use schedules to keep the statements simple. Please use a multiple-step income statement format for the income statement (See notes) and a classified balance sheet.

When computing earnings per share, take into consideration the entries on 1st and the 29th; however, you do not have to do a weighted average. To keep the computation simple, just use the number of shares outstanding the last day of the month.

All financial statements must be completed using a spreadsheet word processor.

5) Journalize and post all adjusting and closing entries. (USE EXCEL)

Assignment II—IFRS Requiremen: (NO NEED FOR THIS TO BE DONE)

Describe how IFRS financial statements would be different for YourName boating if she used IFRS. Please make a list of these differences.

Assume the following information for preparing the financial statements using Proposed International Financial Reporting Standards.

1. The fair value of the building has increased to $175,000
2. The fair value of the office equipment is $17,000.
3. Because of the economy, the fair value of the inventory is $3,000 less than the cost.

Complete the financial statements using the proposed parallel classification scheme of the financial statements. You do not have to include footnotes since you already completed them for the U.S. GAAP statements. (Note that comprehensive income can only be displayed in two forms.)

 

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