Chapter 10 General Ledger Accounting Cycle

On January 1, 2018, the general ledger of Grand Finale Fireworks includes the following account balances:

Accounts		Debit		Credit
Cash		$ 42,700
Accounts Receivable		44,500
Supplies		7,500
Equipment		64,000
Accumulated Depreciation				$ 9,000
Accounts Payable				14,600
Common Stock, $1 par value				10,000
Additional Paid-in Capital				80,000
Retained Earnings				45,100
Totals		$158,700		$158,700

During January 2018, the following transactions occur:

January 2	Issue an additional 2,000 shares of $1 par value common stock for $40,000.
January 9	Provide services to customers on account, $14,300.
January 10	Purchase additional supplies on account, $4,900.
January 12	Repurchase 1,000 shares of treasury stock for $18 per share.
January 15	Pay cash on accounts payable, $16,500.
January 21	Provide services to customers for cash, $49,100.
January 22	Receive cash on accounts receivable, $16,600.
January 29	Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15.
	(Hint: Grand Finale Fireworks had 10,000 shares outstanding on January 1, 2018 and dividends are not paid on treasury stock.)
January 30	Reissue 600 shares of treasury stock for $20 per share.
January 31	Pay cash for salaries during January, $42,000.

1.		Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 - 10) assuming a FIFO perpetual inventory system. Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances.
2.		Record adjusting entries on January 31. in the 'General Journal' tab (these are shown as items 11-14).

a.		Unpaid utilities for the month of January are $6,200.
b.		Supplies at the end of January total $5,100.
c.		Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a service life of three years and a residual value of $10,000.
d.		Accrued income taxes at the end of January are $2,000.

3.

Review the adjusted 'Trial Balance' as of January 31, 2018, in the 'Trial Balance' tab.

4.

Prepare a multiple-step income statement for the period ended January 31, 2018, in the 'Income statement' tab.

5.

Prepare a classified balance sheet as of January 31, 2018, in the 'Balance Sheet' tab.

6.

Record the closing entries in the 'General Journal' tab (these are shown as items 15-17).

7.

Using the information from the requirements above, complete the 'Analysis' tab.

Analysis:

Analyze the following for Grand Finale Fireworks:
(a) Calculate the return on equity for the month of January. If the average return on equity for the industry for January is 2.5%, is the company more or less profitable than other companies in the same industry?
The return on equity is:		%
Is the company more or less profitable than other companies?
(b) How many shares of common stock are outstanding as of January 31, 2018?
The number of common shares outstanding as of January 31, 2018 is
(c) Calculate earnings per share for the month of January. (Hint: To calculate average shares of common stock outstanding take the beginning shares outstanding plus the ending shares outstanding and divide the total by 2.) If earnings per share was $3.60 last year (i.e., an average of $0.30 per month), is earnings per share for January 2018 better or worse than last years average?
Earnings per share is:
Is earnings per share for January 2018 better or worse than last years average?