ACCOUNTING

T-Accounts Setup

Worksheet 1 of 6. Template for requirement 1: Set up appropriate T-accounts for cash, accounts receivable, supplies, inventory, prepaid expenses, equipment, furniture and fixtures, accounts payable, notes payable, contributed capital, sales revenue, cost of goods sold (expense), advertising expense, wage expense, and repair expense. All accounts begin with zero balances.
Learner:
Audrey’s Ice Cream Parlor
Cash Accounts Receivable Supplies
cash 1,000.00
01/04/201x capital 40,000.00 1/4/201x rent 2,000.00
2/4/201x loan cap 11,000.00 2/4/201x sup 1,000.00
2/4/201x equip 3,000.00
2/4/201xfitings 8,000.00
Prepaid Expenses Equipment
51,000.00 – 0 1/rent 2,000.00 cash 3,000.00
51,000.00
Inventory Accounts Payable Notes Payable
2/4/201x supplies 1,000.00 6,000.00 ice & cones2/
1,000.00 – 0 6,000.00
1,000.00
Furniture & Fixtures Sales Revenue Cost of Goods Sold
cash 8,000.00 ice& cones 6,000.00
supplies 1,000.00
– 0 7,000.00
Advertising Expense Wage Expense Repair Expense
Contribution Capital
1/4/201xequity 40,000
debt 11,000
End of worksheet

T-Accounts

Worksheet 2 of 6. Template for requirement 2: Using columns A through N, record in the T-accounts the effects of each transaction for Audrey’s shop in April, referencing each transaction in the accounts with the transaction letter. Show the ending balances in the T-accounts. Note that transactions (h) and (m) require two types of entries, one for sales and one for cost of goods sold. In columns P through S, prepare trial balances for 4/30/12.
Learner:
Audrey’s Ice Cream Parlor Audrey’s Ice Cream Parlor
Trial Balance
30-Apr-12
Cash Accounts Receivable Supplies Debit Credit
(a) 40,000.00 2,000.00 (b) (h) 750.00 700.00 (k) (d) 1,000.00 Cash 44,450.00
(e) 11,000.00 1,000.00 (d) Accounts Receivable 50.00
(h) 4,250.00 11,000.00 (f ) 50.00 Supplies 1,000.00
(k) 700.00 600.00 (g) Inventory 1,600.00
(m) 6,000.00 600.00 (i) Prepaid Expenses 2,000.00
2,000.00 (j) Equipment 3,000.00
300.00 (l) Prepaid Expenses Equipment Furniture and Fixtures 8,000.00
61,950.00 17,500.00 (b) 2,000.00 (f) 3,000.00 Accounts Payable 5,400.00
44,450.00 Notes Payable 11,000.00
Common Stock 40,000.00
Sales 11,000.00
Inventory Accounts Payable Notes Payable Cost of Goods Sold 4,400.00
( c ) 6,000.00 2,000.00 (h) (i) 600.00 6,000.00 (c ) 11,000.00 (e) Advertising 600.00
2,400.00 (m) Wages 2,000.00
6,000.00 4,400.00 5,400.00 Repairs 300.00
1,600.00
Totals 67,400.00 = 67,400.00
Furniture & Fixtures Sales Revenue Cost of Goods Sold
(f) 8,000.00 5,000.00 (h) (h) 2,000.00
6,000.00 (m) (m) 2,400.00
11,000.00 4,400.00
Advertising Expense Wage Expense Repair Expense
(g) 600.00 (j) 2,000.00 (l) 300.00
Contribution Capital
40,000.00 (a)
End of worksheet

Income Statement

Worksheet 3 of 6. Template for requirement 3: Prepare the income statement at the end of the month ended April 30, 2012.
Learner:
Audrey’s Ice Cream Parlor
Income Statement
For the Month Ended April 30, 2012
Sales $ 11,000.00
Less: Cost of Goods Sold 4,400.00
Gross Profit 6,600.00
Less: Expenses
Advertising $ 600.00
Wages 2,000.00
Repairs 300.00 2,900.00
Net Income $ 3,700.00 33.64%
End of worksheet

Stockholders’ Equity

Worksheet 4 of 6. Template for requirement 3: Prepare the statement of stockholders’ equity at the end of the month ended April 30, 2012.
Learner:
Audrey’s Ice Cream Parlor
Statement of Stockholders’ Equity
For the Month Ended April 30, 2012
Contributed Capital:
Balance, April 01 – 0
Add: Issue of Common Stock 40,000.00
Total Contributed Capital $ 40,000.00
Retained Earnings:
Balance, April 01 $ – 0
Add: Net Income $ 3,700.00 9.25%
Retained Earnings, April 30 $ 3,700.00
Total Shareholders’ Equity $ 43,700.00
End of worksheet

Balance Sheet

Worksheet 5 of 6. Template for requirement 3: Prepare the balance sheet at the end of the month ended April 30, 2012.
Learner:
Audrey’s Ice Cream Parlor
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $ 44,450.00 Accounts Payable $ 5,400.00
Total Current Liabliites 5,400.00
Accounts Receivable 50.00 Notes Payable 11,000.00
Total Long-Term liabliites 11,000.00
Supplies 1,000.00 Total Liabilities 16,400.00
Inventory 1,600.00
Prepaid Expenses 2,000.00
Total Current Assets 49,100.00 Stockholders’ Equity
Equipment 3,000.00 Shareholders’ Equity 43,700.00
Furniture and Fixtures 8,000.00
Total Equipment, Furniture and Fixtures 11,000.00
Total Assets $ 60,100.00 Total Liabilities and Owner’s Equity $ 60,100.00
Current Ratio = 909.26%
End of worksheet

Req 4 & 5

Worksheet 6 of 6. Template for requirements 4 and 5: Write a short memo to Audrey offering your opinion on the results of operations during the first month of business. Then, using the financial data from the assessment, compute the total asset turnover ratio for 2014 and 2013 and evaluate the results. Also compute the return on invested capital (net income divided by total stockholders’ equity). Evaluate whether you should be promoted based on how efficiently you have managed the assets of the business.
Learner:
(4) Memo to Audrey on the results of operations during the first month of business.
The liquidity ratio is too high at 909.26% , the managers need to reduce to a manageable level of 2:1. the business is fairly good having realised a profit in the month, however the interest in the loan obtained by the company may eat up the profit gained during the month or the subseqent months. Audrey’s Ice Cream Parlor
Account 2014 2013 2012
Total assets $93,000 $78,000 $61,000
Total liabilities $23,000 $23,000 $16,500
Total contributed capital plus retained earnings $70,000 $55,000 $44,500
Total sales $100,000 $82,500 $57,250
(5) Compute the total asset turnover ratio and the return on invested capital and evaluate the results. Based on this measure, do you think you should be promoted? Why or why not? Net income $15,000 $10,500 $4,500
1.asset turnover=sales/total assets 2. return on capital employed= net operating profit/(total assets- current liabilities) total asset turnover 2012(93.85%),2013(105.77%),2014(107.53%). Return on investment capital employed assume the liabilities are current 2012(32.6%),2013(19.1%),2014(21.43%). one need to be promoted, the sales turnover is increasing yearly. further the asset base of the company is equally incresing given gthe fact that it is a starting company.
2014 2013
Average Assets 85500 69500
Average Capital 62500 49750

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