Find an Online Tutor Now

Chris .

asked • 05/26/16

how can i make make financial statements for this business.

The project should be submitted in the following order: Journal Entries, T-accounts, Unadjusted Trial Balance, Adjusted trial balance, Post Closing Trial balance, Multi-Step Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows. Font should be no smaller than 10.5, submissions should be printed single sided, each financial statement will fit on one page. Students may submit final project hand written, but will be marked down if submission is illegible. Credit will be awarded based on the students’ ability to prepare flawless financial statements for the month ended January 31, 2015. Please use the following Chart of accounts.

CHART OF ACCOUNTS
101 Cash 230 Interest Payable
106 Accounts Receivable 301 Common Stock
110 Allowance For Doubtful Accounts 350 Retained Earnings
126 Inventory 405 Sales Revenue
128 Prepaid Insurance 406 Sales Discounts and Allowance
131 Prepaid Rent 501 Cost of Goods Sold
135 Prepaid Advertising 520 Utility Expense
163 Office Equipment 525 Wage Expense
164 Mixing Barrels 530 Interest Expense
165 Factory Equipment 535 Rent expense
190 Accumulated Depreciation 545 Insurance Expense
201 Accounts Payable 550 Bad Debt Expense
215 Notes Payable 560 Depreciation Expense
220 Line of Credit 565 Advertising Expense
225 Income Taxes Payable 570 Income Tax Expense

Company Background and Accounting Policies:
• Grandpa’s Cough Inc. (GCI) sells a uniquely flavored cough syrup either wholesale or through its own storefront.
• Cases contain 24 bottles. Each bottle costs the company $2 to make and the company sells bottles for $4.5. Each case is sold for $90 the cost to ship is paid for by the customer. Customers pay at the last minute of their terms unless otherwise noted.
• Gene has a revolving line of credit with a local bank, if the cash balance drops below $15,000 then Gene will draw money against the line of credit in $5,000 increments, until the balance is above $25,000. Simple interest rate on the line is 3.4%. Interest accrues daily and paid at the end of each month.
• The company maintains inventory at $72,000, and will purchase materials every time the inventory drops below that amount in $4,000 increments, vendor pays shipping. Terms are N/15. Gene pays all bills at the last minute.
• Round all answers to the nearest dollar


Grandpa's Cough Inc.
Balance Sheet
As of December 31, 2015

Assets
Current Assets
Cash $ 16,000
Accounts Receivable 10,000
Allowance for Doubtful Accounts (1,000)
Inventory 50,000
Prepaid Insurance 700
Prepaid Rent 2,200
Total Current Assets $ 77,900

Fixed Assets
Office Equipment $ 3,500
Mixing Barrels 9,500
Factory Equipment 15,000
Less: Accumulated Depreciation (19,860)
Total Fixed Assets $ 8,140
Total Assets $ 86,040

Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 25,000
Interest Payable 44
Current Portion of Long Term Debt 1,600
Total Current Liabilities $ 26,644

Long Term Debt
Notes Payable 16,000
Total Long Term Debt 16,000
Total Liabilities $ 42,644

Stockholders' Equity
Retained Earnings $ 28,931
Common Stock 14,465
Total Stockholders' Equity 43,396
Total Liabilities and Stockholders' Equity $ 86,040

Date Transaction
January 1, 2015 Gene Autry became a new owner by investing $25,000 Cash and office equipment worth $6,000 in return for common stock of Grandpa’s Cough Inc.
1 Purchased Mixing Barrels worth $3,000 and Other Factory Equipment worth $600 on credit, N/30
1 Purchased Inventory on credit for $72,000 with terms N/15
1 Paid Vendor $15,000 for prior month purchases
2 Paid $4,500 for annual premium on insurance coverage starts at the end of the month.
3 During the grand opening of the store GCI sold 256 Bottles of Cough Syrup.
4 A wholesale customer ordered 100 cases, GCI shipped the order and billed the customer 2/5 N/10
5 Received payment from customer from prior month sale $5,000.
6 Sold 300 Bottles of Cough Syrup through the store.
7 Received half the payment for sale of goods on January 4
10 Paid $4,200 for three months’ rent for store front starting on January 1, 2015.
13 Sold 400 Bottles of Cough Syrup through the store
15 Shipped order for another wholesale customer 500 cases N/10
15 Received and paid Utility Bill for $500
18 Shipped order of 300 Cases to a wholesale customer N/10
20 Sold 625 Bottles of Cough Syrup through the store
25 Shipped order to wholesale customer 1,000 cases 2/10 N/30
26 Paid for mixing barrels and equipment purchased on January 1
27 Sold 1,000 bottles of Cough Syrup through the store
30 Paid wages under the table to employees of $15,000
31 Paid $2,000 for 12 month advertising campaign through local radio stations. The campaign starts February 1st.



Additional Project information:
• Ensure you are using the December 31 balance sheet for the beginning balances of your accounts.
• When you are setting up your accounts use the chart of accounts included on the front page (you will not need to create any new account or account number).
• Please follow the journal entry format from the first two weeks of class.
• There is only one general journal where all transactions are recorded.
• Pay close attention to the transactions as they are listed on page three, these are not all transactions that you will need to journalize. The accounting policies on page 1 will require you to post additional entries (it helps to keep a tickler file).





Adjusting Journal Entry Information:
The beginning balance in Prepaid Rent was for the factory as of December 31, 2015 the balance had two months remaining.

Prior Period Prepaid Insurance was for an annual policy that expires at the end of January.

The Note was borrowed on December 31, 2015 and holds interest of 3%. Interest is accrued and not paid at the end of the month. The first principle payment is due in the month of June.

GCI wrote off $5,000 of bad debt at the end of the month, and used the aging of receivables method to estimate the allowance for doubtful accounts to be $10,000

All depreciation is straight-line with no residual value.
Office equipment is expected to last 5 years
Factory Equipment is expected to last 4 years
Mixing barrels are expected to last 10 years.

Assume the income tax rate for GCI is 15%.

1 Expert Answer

By:

Serge M. answered • 12/10/16

Tutor
5 (11)

PhD and CPE with 40 years of experience teaching accounting

Still looking for help? Get the right answer, fast.

Ask a question for free

Get a free answer to a quick problem.
Most questions answered within 4 hours.

OR

Find an Online Tutor Now

Choose an expert and meet online. No packages or subscriptions, pay only for the time you need.