Financial accounting project part i and ii 27002

QuestionFinancial Accounting Project I.
The Jasmine Department store is located in Chicago, Illinois. At the close of the year ended December
31,2008, the following accounts appeared in two of its trial balances.
Trial Balances

Accounts Payable
Accounts Receivable
Accumulated Depreciation-Delivery Equipment
Accumulated Depreciation-Store Equipment
Cash
Delivery Expense
Delivery Equipment
Depreciation Expense-Delivery Equipment
Depreciation Expense-Store Equipment
Freight-in
Common Stock
Retained Earnings
Dividends
Insurance Expense
Interest Expense
Interest Revenue
Merchandise Inventory
Notes Payable
Prepaid Insurance
Property Tax Expense
Purchases
Purchase Discounts
Purchase Returns and Allowances
Rent Expense
Salaries Expense
Sales
Sales Commissions Expense
Sales Commissions Payable
Sales Returns and Allowances
Store Equipment
Property Taxes Payable
Utilities Expense

Unadjusted
$23,215
10,880
15,680
32,300
6,000
7,000
57,000

5,060
70,000
16,305
11,000
8,000
3,700
34,360
45,000
13,500
630,500
7,000
3,000
18,400
120,000
860,000
8,000
12,500
125,000
9,000

Adjusted
$23,215
10,880
19,680
41,800
6,000
7,000
57,000
4,000
9,500
5,060
70,000
16,305
11,000
9,000
8,000
3,700
34,360
45,000
4,500
3,500
630,500
7,000
3,000
18,400
120,000
860,000
14,000
6,000
12,500
125,000
3,500
9,000

Analysis reveals the following additional data:
1.
2.
3.
4.
5.
6.
7.

The beginning balance of accounts receivable is $12,750.
The amount of total assets at the beginning of the year is $145,921.
Salaries expense is 65% selling and 35% administrative.
Insurance expense is 50% selling and 50% administrative.
A physical inventory was conduced for year ended December 31, 2008 and the inventory was valued at
$38,100.
Rent expense, utilities expense, and property tax expense are administrative expenses.
$15,000 of the notes payable is due for payment next year.

Instructions
1) Journalize the adjusting entries that were made by the company.
2) Prepare a multiple-step income statement and a retained earnings statement for the year and a classified
balance sheet as of December 31, 2008.
3) Journalize the closing entries.
4) Prepare a post-closing trial balance.
5) Prepare the following ratios and show all support for your computations:
(No partial credit if work or computations are not shown)
a) Current Ratio
b) Quick Ratio
c) Working Capital
d) Accounts Receivable Turnover
e) Average Collection Period
f) Inventory Turnover
g) Days in Inventory
h )Debt to Total Assets Ratio
i) Gross Profit Ratio
j) Profit Margin Ratio
k) Return on Assets Ratio
l) Asset Turnover Ratio
6) Based on the ratios computed in 5) above, answer the following questions and use the financial statement
ratios to support your answers where appropriate:
Do you feel that the company is able to meet its current and long term obligations as they become due?
Comment on the profitability of the company with respect to the various profitability ratios that you
computed.
Would you lend money to this company for the long term?
Comment on the ability of the company to collect its receivables and mange inventory.

Industry
Average

2005

2006

2007

1.10
0.96
$ 14,500.00

1.26
1.11
$ 13,000.00

1.40
1.21
$ 15,980.00

50.08%
5.12

49.89%
5.99

47.99%
6.31

46.84%
6.89

18.20
5.92
4.67

19.52
6.45
5.03

20.03
7.01
5.17

26.52
7.76
5.49

5.45
62.31
20.05

5.12
67.02
18.70

5.08
69.87
18.22

4.95
72.15
19.20

Liquidity
Current
Quick
Working Capital
Leverage
Debt to Total Assets (%)
Times Interest Earned
Activity
Inventory Turnover (sales)
Fixed Asset Turnover
Total Asset Turnover
Average Collection Period
(days)
Accounts Receivable Turnover
Days in Inventory

1.37
1.10
$15,000.00

Profitability
Gross Profit Margin (%)
Net Profit (%)
Return on Total Assets (%)
Return on Equity (%)
Payout Ratio

25.61%
1.99%
7.30%
16.79%
54.00%

25.22%
2.56%
8.20%
17.56%
63.00%

26.87%
3.58%
9.43%
18.03%
73.00%

27.81%
4.60%
9.89%
19.02%
48.00%

 

 

Financial Accounting Project II.
The bank section of the bank reconciliation for the Bondar Company at November 30, 2007 was as follows:
.
BONDAR COMPANY
Bank Reconciliation
November 30, 2007

Cash balance per bank
Add: Deposits in transit

$14,367.90
2,530.20
16,898.10

Less:

Outstanding checks
Check Number Check Amount
3451
$2,260.40
3470
720.10
3471
844.50
3472
1,426.80
3474
1,050.00

6,301.80

Adjusted cash balance per bank

$10,596.30

The adjusted cash balance per bank agreed with the cash balance per books at November 30.
The December bank statement showed the following checks and deposits.

12-1
12-2
12-7
12-4
12-8
12-10
12-15
12-27
12-30
12-29
12-31

Date
12-1

Check
Number

Amount

3451
3471
3472
3475
3476
3477
3479
3480
3482
3483
3485

$2,260.40
844.50
1,426.80
1,640.70
1,300.00
2,130.00
3,080.00
600.00
475.50
1,140.00
540.80

Total

Date

$15,438.70

Deposit Amount
$2,530.20

12-4
12-8
12-16
12-21
12-26
12-29
12.30

1,211.60
2,365.10
2,672.70
2,945.00
2,567.30
2,836.00
1,025.00

Total

$18,152.90

The cash records per books for December showed the following:
Cash Payments Journal
Date
12-1
12-2
12-2
12-4
12-8
12-10
12-17

Number
3475
3476
3477
3478
3479
3480
3481

Amount
$1,640.70
1,300.00
2,130.00
538.20
3,080.00
600.00
807.40

Date
12-20
12-22
12-23
12-24
12-30
Total

Cash Receipts Journal
Number
3482
3483
3484
3485
3486

Amount
$ 475.50
1,140.00
832.00
450.80
1,389.50
$14,384.10

Date
Amount
12-3
$1,211.60
12-7
2,365.10
12-15
2,672.70
12-20′
2,954.00
12-25
2,567.30
12-28
2,836.00
12-30
1,025.00
12-31
1,190.40
Total $16,822.10

The bank statement contained two memoranda:
1.

A credit of $2,145 for the collection of a $2,000 note for Bondar Company plus interest of $160 and less a collection fee of $15.00. Bondar
Company has not accrued any interest on the note.

2.

A debit of $527.10 for an NSF check written by A. Jordan, a customer. At December 31, the check had not been redeposited in the bank.

At December 31 the cash balance per the books was $13,034.30 and the cash balance per the bank statement was $18,700.
The bank did not make any errors but two errors were made by Bondar Company.

Instructions
(a) Prepare the bank reconciliation at December 31, 2007
(b) Prepare the adjusting entries based on the reconciliation. (Note: The correction of any errors pertaining to recording checks should be made to
Accounts Payable. The correction of any errors relating to recording cash receipts should be made to Accounts Receivable.)

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