Vanishing Games Corporation (VGC) operates a massively multiplayer online game,
ID: 2467498 • Letter: V
Question
Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $15. At the start of January 2015, VGC's income statement accounts had zero balances and its balance sheet account balances were as follows:
In addition to the above accounts, VGC's chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense.
Required:
-Analyze the effect of the January transactions (shown below) on the accounting equation, using the format shown in this chapter's Demonstration Case B.
a. Received $50,000 cash from customers on 1/1 for subscriptions that had already been earned in 2014.
b. Purchased 10 new computer servers for $33,500 on 1/2; paid $10,000 cash and signed a three-year note for the remainder owed.
c.Paid $10,000 for an Internet advertisement run on 1/3.
d.On January 4, purchased and received $3,000 of supplies on account.
e. Received $170,000 cash on 1/5 from customers for service revenue earned in January.
f.Paid $3,000 cash to a supplier on January 6.
g.On January 7, sold 15,000 subscriptions at $15 each for services provided during January. Half was collected in cash and half was sold on account.
h.Paid $378,000 in wages to employees on 1/30 for work done in January.
i.On January 31, received an electric and gas utility bill for $5,350 for January utility services. The bill will be paid in February.
-Prepare journal entries for the January transactions listed in requirement 1, using the number of each transaction as a reference.
-If you are completing this requirement manually, create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts. If you are completing this problem using the GL tool in Connect, this requirement will be automatically completed using your answers to earlier requirements.
-Prepare an unadjusted trial balance as of January 31, 2015. If you are completing this problem using the GL tool in Connect, this requirement will be automatically completed using your answers to earlier requirements.
-Prepare an Income Statement for the month ended January 31, 2015, using unadjusted balances from requirement 4.
-Prepare a Statement of Retained Earnings for the month ended January 31, 2015, using the beginning balance given above and the net income from requirement 5. Assume VGC has no dividends.
-Prepare a classified Balance Sheet at January 31, 2015, using your response to requirement 6.
-Calculate net profit margin, expressed as a percent (to one decimal place).
Explanation / Answer
Journal entries
Refrence Number
Date
Account Title
Debit
Credit
a
1-Jan
Cash
$ 50,000.00
Accounts Receivables
$ 50,000.00
(cash Received against balance)
b
2-Jan
Computer Server
$ 33,500.00
cash
$ 10,000.00
Notes Payable
$ 23,500.00
(Computer server purchased)
c
3-Jan
Advertisement expenses
$ 10,000.00
`
Cash
$ 10,000.00
(cash paid for Advertisement)
d
4-Jan
Supplies
$ 3,000.00
Accounts Payabe
$ 3,000.00
(Supplies Purchased)
e
5-Jan
cash
$ 170,000.00
Service revenue
$ 170,000.00
(Revenue eaned and received)
f
6-Jan
Accounts payable
$ 3,000.00
cash
$ 3,000.00
(cash paid to supplier)
g
7-Jan
Cash
$ 112,500.00
Subscription fee receivable
$ 112,500.00
subcribtion fee
$ 225,000.00
(subscription fee received for january and rest to be received)
h
30-Jan
Wages
$ 378,000.00
cash
$ 378,000.00
(wages paid for January)
i
31-Jan
Utility Expenses
$ 5,350.00
Accounts Payable
$ 5,350.00
$ 877,850.00
$ 877,850.00
Cash Account
1-Jan
Opening Balance
1500000
1-Jan
Accounts Receivables
$ 50,000.00
2-Jan
Computer Server
$ 10,000.00
5-Jan
Service revenue
$ 170,000.00
3-Jan
Advertisement expenses
$ 10,000.00
7-Jan
Subscription fee
$ 112,500.00
6-Jan
Accounts payable
$ 3,000.00
30-Jan
Wages
$ 378,000.00
31-Jan
Balance
$ 1,431,500.00
$ 1,832,500.00
$ 1,832,500.00
Accounts Receibables
1-Jan
Opening Balance
150000
1-Jan
cash
$ 50,000.00
31-Jan
Balance
$ 100,000.00
$ 150,000.00
$ 150,000.00
Supplies
1-Jan
Opening Balance
$ 14,700.00
31-Jan
Balance
$ 17,700.00
4-Jan
Accounts Payable
$ 3,000.00
$ 17,700.00
$ 17,700.00
Service revenue
31-Jan
Balance
$ 170,000.00
5-Jan
Cash
$ 170,000.00
$ 170,000.00
$ 170,000.00
Subscription fee
31-Jan
Balance
$ 225,000.00
7-Jan
Cash
$ 112,500.00
7-Jan
Subscription fee receivable
$ 112,500.00
$ 225,000.00
$ 225,000.00
Accounts Payable
6-Jan
Cash
3000
1-Jan
Balance
108000
31-Jan
Balance
$ 113,350.00
4-Jan
supplies
$ 3,000.00
31-Jan
Utilities
$ 5,350.00
$ 116,350.00
$ 116,350.00
Subscription fee Receivable
7-Jan
Subscription fee
$ 112,500.00
31-Jan
Balance
$ 112,500.00
$ 112,500.00
$ 112,500.00
Wages
30-Jan
cash
$ 378,000.00
31-Jan
Balance
$ 378,000.00
$ 378,000.00
$ 378,000.00
Advertisement expenses
3-Jan
cash
$ 10,000.00
31-Jan
Balance
$ 10,000.00
$ 10,000.00
$ 10,000.00
Notes Payable
31-Jan
balance
$ 83,500.00
1-Jan
Balance
$ 60,000.00
2-Jan
Computer Server
$ 23,500.00
$ 83,500.00
$ 83,500.00
Utility expenses
31-Jan
Accounts Payable
$ 5,350.00
31-Jan
Balance
$ 5,350.00
$ 5,350.00
$ 5,350.00
Trial Balance
Vanishing Games corporation
Jan 31st 2015
Account title
Debit
Credit
Cash
$ 1,431,500.00
Accounts Recivables
$ 100,000.00
Building
$ 422,000.00
Unearned Revenue
$ 73,500.00
Common Stock
$ 2,500,000.00
Retained Earning
$ 1,419,700.00
Computer Server
Land
$ 1,200,000.00
Supplies
$ 17,700.00
Computer Server
$ 33,500.00
Accounts Payable
$ 113,350.00
Utility expenses
$ 5,350.00
Equipment
$ 874,500.00
Wages
$ 378,000.00
Subscription fee receivable
$ 112,500.00
Service revenue
$ 170,000.00
Subscription fee
$ 225,000.00
Advertisement expenses
$ 10,000.00
Notes Payable
$ 83,500.00
Total
$ 4,585,050.00
$ 4,585,050.00
Income Statement
Vanishing Games corporation
Jan 31st 2015
Subscription fee
$ 225,000.00
Service revenue
$ 170,000.00
$ 395,000.00
Less:
Utility expenses
$ 5,350.00
Wages
$ 378,000.00
Advertisement expenses
$ 10,000.00
$ (393,350.00)
Net Income during Period
$ 1,650.00
Statement of Retained Earning
Balance, Jan 1 2015
$ 1,419,700.00
Add: Net Income
$ 1,650.00
$ 1,421,350.00
Less: Dividends
Paid
$ -
Ending Retained Earning balance
$ 1,421,350.00
Balance sheet
Vanishing Games corporation
Jan 31st 2015
Assets
Fixed Assets
Equipment
$ 874,500.00
Land
$ 1,200,000.00
Building
$ 422,000.00
Computer server
$ 33,500.00
$ 2,530,000.00
Current Assets
Cash
$ 1,431,500.00
Accounts Receivable
$ 100,000.00
Supplies
$ 17,700.00
Subscription Receivable
$ 112,500.00
$ 1,661,700.00
Total Assets
$ 4,191,700.00
Liabilities
Current Liabilities
Accounts Payable
$ 113,350.00
Notes Payable
$ 83,500.00
Unearned Revenue
$ 73,500.00
$ 270,350.00
Shareholders fund
Common Stock
$ 2,500,000.00
Retained earning on 31 jan 2015
$ 1,421,350.00
$ 3,921,350.00
Total Liabilities
$ 4,191,700.00
Journal entries
Refrence Number
Date
Account Title
Debit
Credit
a
1-Jan
Cash
$ 50,000.00
Accounts Receivables
$ 50,000.00
(cash Received against balance)
b
2-Jan
Computer Server
$ 33,500.00
cash
$ 10,000.00
Notes Payable
$ 23,500.00
(Computer server purchased)
c
3-Jan
Advertisement expenses
$ 10,000.00
`
Cash
$ 10,000.00
(cash paid for Advertisement)
d
4-Jan
Supplies
$ 3,000.00
Accounts Payabe
$ 3,000.00
(Supplies Purchased)
e
5-Jan
cash
$ 170,000.00
Service revenue
$ 170,000.00
(Revenue eaned and received)
f
6-Jan
Accounts payable
$ 3,000.00
cash
$ 3,000.00
(cash paid to supplier)
g
7-Jan
Cash
$ 112,500.00
Subscription fee receivable
$ 112,500.00
subcribtion fee
$ 225,000.00
(subscription fee received for january and rest to be received)
h
30-Jan
Wages
$ 378,000.00
cash
$ 378,000.00
(wages paid for January)
i
31-Jan
Utility Expenses
$ 5,350.00
Accounts Payable
$ 5,350.00
$ 877,850.00
$ 877,850.00
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