case assignments ch 1 - 4

8/11/2019 Case Assignments Ch 1 - 4

1/22

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


2/22

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


3/22

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


4/22

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


5/22

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.


6/22

+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


7/22

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


8/22

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


9/22


10/22

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


11/22

Reporting Period: March 31


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


12/22


13/22

Description

Loan from Cousin with Interest Interest ExpenseInvestment Merchandise Inventory Cash Register Deposit SuppliesPrepaid AdvertisingComputer & Software


14/22

March 1 - June 30 Transactions


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


15/22

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


16/22

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


17/22

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


18/22

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


19/22


20/22

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


21/22


22/22

7,830

4,940

12,770

15,890

(3,120)

12,770

case assignments ch 1 - 4

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