ACCOUTING 101 PROJECT

After graduating from a Business College with the most valuable degree in Accounting, Michelle and Mary join together to form a new partnership named The Vintage Audio Company (VAC). They sell two items to a specialty market 8 Track Tapes (8TT), and Cassette Tapes (CT). They use a LIFO system of inventory. The partnership operating agreement states that each partner will receive a monthly distribution of $1,000, then commissions for their own sales, then 12% APR return on their beginning equity, and then split the remaining profit 60% for Michelle /40% for Mary (in this order). The monthly distribution and commissions are taken during the month as a draw and the journal entries have already been made at the time of payment. During the month, VAC received a letter from the attorney of Jenny (one of their customers). The letter informed VAC that Jenny had declared bankruptcy and will not be paying the outstanding balance of her account ($300). Another month is finally over!! Time to close the books. Your assignment in that process is to create the first two required financial statements for the previous month. To accomplish this assignment, you will use the provided information to calculate the following:

1. Create the Income Statement in the proper format, including net sales, COGS, gross profit, expenses and net income.

2. Create a Statement of Owners Equity

3. Provide an ending inventory schedule (schedule should include in good order, details by transaction)

4. Provide the Net Book Value for the equipment

5. Provide only the journal entries for the following: a. Income allocation between partners b. Record the monthly bad debt expense c. Record the monthly depreciation expense d. Recognize the bad debt write-off for Jenny

Provided information: Beginning Inventory Schedule (listed in the order they were purchased):

- You estimate that VAC will write off 2% of their sales in bad debt.

- Outbound freight to customers is calculated at $0.50 per unit sold.

- Shipping supplies (boxes, tape, etc.) are calculated at $0.20 per unit sold.

- Commission expense is 10% of net sales. For the previous month Michelle sold 60% of the product. Mary sold the rest.

- Office supplies were $500 for the month.

- VAC is depreciating their packaging equipment on a straight-line basis. The equipment was purchased two years ago on Jan 1. It cost $46,000 and has a useful life of 7 years, with a salvage value estimated at $4,000.

* CHECK FIGURES:

Ending Inventory $502

Net Income $5,266.14

Total Ending Capital $16,416.34

Beginning Inventory 8TT eginning Inventory C1T Units Cost Amount Units Cost 140 $7.00 160S7.50 Amount 130$5.00 135S5.20 156S5.50 421 S650.00 $702.00 $858.00 $2,210.00 $980.00 $1,200.00 $2,048.00 S4,228.00 256 $8.00 556 nventory P urchases during the mont Apr1 Purchased 50 8TT a $5.00 each Paid inbound freight of $25 for Apr 1 purchase Purchased 50 CT a $8.00 each Purchased 50 8TT a $5.00 each Paid inbound freight of $25 for Apr 8 purchase Purchased 50 CT a $8.00 each Purchased 50 CTa $8.00 each Returned 40 CT found to be defective. Purchase price was $7.00 each Purchased 50 8TT a $5.00 each Paid inbound freight of $25 for Apr 17 purchase Apr5 Apr 8 Apr 10 Apr 12 Apr 13 Apr 17 Apr 20 Purchased 50 CT a $8.00 each Apr 24 Purchased 100 8TT a $5.00 eaclh Paid freight bill of $50.00 for Apr 24 Purchased 75 CT a $8.00 each Purchased 75 8TT a $5.50 each Paid freight bill of $37.50 for Apr 28 purchases Purchased 150 CT a $8.20 each Returned 20 CT found to be defective. Purchase price was S8 each Apr 27 Apr 28 Apr 29 Apr 30 Credit Sales during the month Apr 3 Sold 65 8TT $10 each Apr 3 Sold 75 CT $13 each Apr 9 Sold 125 8TT $10 each Apr 9 Sold 155 CT a $13 each Apr 12 Sold 75 8TT $10 each Apr 13 Sold 196 CT a $13 each Apr 18 Sold 120 8TT $10 each Apr 18 Sold 180 CT a $13 each Apr 23 Sold 56 8TT $10 each Apr 23 Sold 75 CT $13 each Apr 27 Sold 140 8TT $10 each Apr 28 Sold 55 CT $13 each Apr 30 Sold 130 8TT $10 each Apr 30 Sold 140 CT @ $13 each Michelle Mary $ 10,000.00 $5,000.00 $ 15,000.00 Beg. Capital- April 1st