QUARTER 1 OPENING ENTRIES: • Sold 100 shares of common stock for $12 each. Par v

Question

QUARTER 1
OPENING ENTRIES:
• Sold 100 shares of common stock for $12 each. Par value = $10/share
• Purchased supplies with cash for $150
• Purchased 50 units of inventory for $10 each on account.
• Purchased equipment for $1200 on account. Residual value = $200. Useful life = 5 years
• Invested $300 into an interest bearing account earning 8%
• Borrowed $1800 and signed a 4 year notes payable. Interest = 10%
• Prepaid insurance for 18 months with cash $360
• Prepaid rent for the next 8 months with cash $120
• Collected deposits of $400 to be earned evenly over the next 6 months

End of Quarter 1 work:  Quarter 1 due Tuesday Oct 13th
• Transfer all entries to “t” accounts and determine the ending balances in each account.
• Create a trial balance on your worksheet and make sure all debit balances = credit balances
• Do the following adjustments (refer to the original entries for additional information)
o Supplies used = $25
o Interest on loans
o Interest on investments
o Depreciation on equipment
o Amount of prepaid insurance and prepaid rent that has been used
o Amount of unearned revenue that has been earned by the end of Q1
*Remember to put them in your journal, t-accounts and worksheet
• Finish up the worksheet by extending column totals over to the appropriate column
• Calculate the following ratios and list them at the bottom of your worksheet
o Current Ratio
o Debt/Equity
o Earnings per share

Quarter 2 Opening Entries:
1. Purchase supplies with cash for $30
2. Purchase another 30 units of inventory for $12 each on account (A/P)
3. Invest another $100 into your investment account.
4. Pay $500 towards A/P
5. Sell another 100 shares: If you had a profit in Q1, selling price = $14 per share, if you had a loss in Q1, selling price = $12 per share
6. Purchase an intangible asset for $400 cash. Call the account “intangible” and in your report your group will need to describe the nature of this account. The intangible asset should be amortized over 4 years.

*If you need a loan in Q2 interest rates are as follows:
If you had a loss in Q1 interest = 12% per year
If you produced a profit in Q1 interest = %8 per year

End of Quarter 2 Work

Last entries for all students in quarter 2:
• Sold 50 units on account for $20 each
• Customer returned 5 units on account

1. Transfer all entries including the beginning entries I gave you in class and all game playing transaction in Q2 to your t-accounts
2. Determine the ending balance in all t-accounts (remember the ending balance from your balance sheet accounts from Q1 came over the Q2)
3. Start the worksheet by completing the trial balance
4. Do all adjustments including: (create a journal entry, transfer to t-accounts, and list these on the worksheet)
a. Supplies used $25
b. Interest on loans
c. Interest on investments
d. Insurance expense
e. Rent expense expired from the prepaid rent
f. Depreciation on equipment and houses. For all houses useful life = 5 years, no residual value
g. Amortize the intangible over 4 years
h. Unearned revenue
i. Cost of goods sold using FIFO
j. Bad debt expense using the “net sales” method with a historical bad debt percentage of 5%
5. Finish the worksheet: adjusted trial balance, income statement and balance sheet
6. Calculate the following ratios: Current ratio, debt/equity, EPS, & inventory turnover

quarter 2 journal entries:

I need help in constructing the worksheets for both the quarters and T-accounts

cash 1200 common stock 1000 Additional paid in capital in excess of par 200 supplies 150 cash 150 inventory 500 accounts payable 500 equipment 1200 accounts payable 1200 investment 300 cash 300 cash 1800 notes payable(4yr note/ interest 10%) 1800 prepaid insurance 360 cash 360 prepaid rent 120 cash 120 cash 400 unearned rev. 400 rent expense 25 cash 25 property purchase 120 cash 120 rent expene 12 cash 12 property purchased 180 cash 180 rent expese 25 cash 25 rent reenue 14 cash 14 property purchased 320 cash 320 rent expense 6 cash 6 utility expense 24 cash 24 rent revenue 28 cash 28 rent expense 18 cash 18 misc. revenue 200 cash 200 rent expense 26 cash 26 rent revenue 8 cash 8 rent rev. 8 cash 8 rent expense 50 cash 50 (Adjustments) supplies expense 25 supplies 25 interest expense 45 interest payable 45 interest receivable 6 interest revenue 6 depreciation expense 50 accumulated 50 insurance expense 60 prepaid insurance 60 rent expense 45 prepaid rent 45 unearned revenue 200 service revenue 200

Explanation / Answer

Current ratio:

It is determined using the following formulae:

Current ratio = Current assets/Current liabilities

=2,644/545

=4.85

Particulars

Amount($)

Current assets:

Cash

1,769

Inventory

500

Prepaid insurance

300

Prepaid rent

75

2,644

Current liabilities:

Accounts payable

500

Interest payable

45

545

Quick ratio:

Quick ratio = Quick assets/Current liabilities

=2,144/545

=3.9

Debt equity ratio:

Debt equity ratio= Debt/Equity

Earnings per share:

Earnings per share = Earnings after tax/Number of shares outstanding

Particulars

Amount($)

Current assets:

Cash

1,769

Inventory

500

Prepaid insurance

300

Prepaid rent

75

2,644

Current liabilities:

Accounts payable

500

Interest payable

45

545

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