HZMT transports chemical products and bi-products in the Midwest market. The com
ID: 2484123 • Letter: H
Question
HZMT transports chemical products and bi-products in the Midwest market. The company has successfully completed the first two months of operations. The 11/30/16 unadjusted account balances (summarizing its transactions for October and November 2016) have been entered on the attached worksheet. HZMT additionally engaged in the following transactions as of December 31, 2016:
Dec
3
Paid $990 to MailChimp for advertising costs.
4
Paid $400 cash for minor repairs to one of its trucks.
6
Received $4,850 cash from Eli Engineering for the receivable from November.
9
Paid $660 cash to an independent driver for work done in December.
9
Received notice that HZMT’s bid for an $8,000 contract was accepted by Trump Trucking. Trump paid a $2,400 cash advance to HZMT.
9
Purchased $1,500 of office supplies on credit from Staples.
16
Sent a reminder to Kaisich Co. to pay the fee for services recorded in November.
20
Transported materials for Cruzzz, Inc. and received $5,775 cash.
28
Cash of $3,500 was received from Hilary! Hilary! Company on its receivable.
In addition to the above, the following information was collected to make HZMT’s year-end adjusting entries to prepare its financial statements for the first three months of operations:
A count of the office supplies at December 31st indicated that there are still $660 supplies available.
Three of the 12-months of the insurance premium have expired since the premium was paid in full in advance.
At December 31st, another independent driver had not been paid for four days of work at $110 per day.
The maintenance equipment, purchased on October 1st, is expected to have a 5-year life with no salvage value.
The trucks, purchased on October 1st, are expected to have a 4-year life with no salvage value.
The prepaid rent was paid on October 1st for four months.
a. Enter the December 2016 transactions and year-end adjustments in the accounting equation matrix on the attached Excel worksheet (submit this completed worksheet with your exam answers) and then answer the following questions based on your worksheet (show all your work for partial credit, if needed!).
What is the ending balance in the accounts receivable account?
c.
On the year end statement of cash flows what is the amount of net cash flow from financing activities?
d.
What is the ending balance for rent expense?
e.
What are the total liabilities?
f.
Is there unearned revenue at the end of 2016? If so, how much?
g.
On the statement of cash flows what is the amount of net cash flow from investing activities?
h.
What are the total expenses?
i.
What is total transport revenue?
j.
What is net income in 2016?
k. What is the ending balance in retained earnings? Show your work to support your answer.
Closing account work sheet
Dec
3
Paid $990 to MailChimp for advertising costs.
4
Paid $400 cash for minor repairs to one of its trucks.
6
Received $4,850 cash from Eli Engineering for the receivable from November.
9
Paid $660 cash to an independent driver for work done in December.
9
Received notice that HZMT’s bid for an $8,000 contract was accepted by Trump Trucking. Trump paid a $2,400 cash advance to HZMT.
9
Purchased $1,500 of office supplies on credit from Staples.
16
Sent a reminder to Kaisich Co. to pay the fee for services recorded in November.
20
Transported materials for Cruzzz, Inc. and received $5,775 cash.
28
Cash of $3,500 was received from Hilary! Hilary! Company on its receivable.
Explanation / Answer
Answer
Answer (a) Enter the December 2016 transactions and year-end adjustments in the accounting equation
December 3
Advertising Expenses (+ $ 990) = Cash (- $ 990)
December 4
Repair Expenses (+ $ 400) = Cash ( - $ 400)
December 6
Receivables (- $ 4850) = Cash (+ $ 4850)
December 9
Driver Expenses (+ $ 660) = Cash ( - $ 660)
December 9
Unearned revenue (+ $ 2400) = Cash (+ $ 2400)
December 9
Office Supplies (+ $ 1500) = office supplies payables (+ $ 1500)
December 16
No Entry
December 20
Cash (+ $ 5775) = Sales revenue (+ $ 5775)
December 28
Cash (+ $ 3500) = Receivables (- $ 3500)
December 31
Supplies Expense (+ $ 840) = Office Supplies ( - $ 840) [ i.e. $ 1500 - $ 660]
Insurance Expenses (+ $ 555) = Prepaid Insurance (-$ 555) i.e. ($ 2220 / 4)
December 31
Driver Expenses (+ $ 440) = Driver Expenses payable (+ $ 440) (i.e. $ 110 * 4)
December 31
Depreciation on maintenance equipment (+ $ 435) = maintenance equipment ( - $ 435) ( $ 8700 * 3 months/60 months)
December 31
Depreciation on Truck (+ Amount is missing) = Truck ( - Amount is missing)
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