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Financial Project - Capstone 2017 December Transactions December 1. 2. Paid rent for December, $4,000. Paid Munson November balance. 3. Purchased merchandise on account from Lingard Co., terms 2/10,30 FOB Shipping Point, $25,000 4. Paid freight on purchases from Dec. 3, $1,000 6. Sold merchandise on account to Holt Co., terms 2/10, n/30, FOB shipping point, $40,000. The cost of the merchandise sold was $24,000. 7. Received cash from Flatt Co. on account. They paid their account in full. 9. Received cash from Kelly Corp. on account for 11/30 invoice. 10. Sold merchandise for cash, $90,000 plus sales tax of $4,500 was collected. The cost of the merchandise sold was $50,000. 13. Paid for merchandise purchased on December 3, less discount. 14. Received merchandise returned on sale on December 6, $7,000. The cost of the merchandise returned was $4,500. 15. Paid advertising expense for the last half of December, $19,000. 15. Paid balance owed to Lingard for November 15th invoice. 16. Paid sales tax collected in November. 16. Received cash from sale on December 6, less return made on December 14, and discount. 19. Purchased merchandise for cash, $122,000. Record the following on the next page in your General Journal 20. Withdrew $50,000 for personal use. 20. Sold merchandise on account to Reedley Co., terms 1/10, n30, FOB shipping point, $140,000. The cost of the merchandise sold was $125,000. 21. For the convenience of Reedley, we paid the freight on the sale to them on December 20, $3,100. 21. Received cash from Owen, as payment on their account, $27,600. 21. Purchased merchandise on account from Munson Co., terms 1/10, n30, FOB destination, $32,000. 24. Returned $5,000 of damaged merchandise purchased on December 21, received credit on account from vendor. 26. Refunded cash on sale made for cash, $12,000 plus sales tax of $600. The cost of the merchandise returned was $7,200. 28. Paid sales salaries of $22,800 and office salaries of $20,200. 29. Purchased store supplies for cash, $2,400. 30. Sold merchandise on account to Dix Co., terms 2/10, n30 FOB shipping point, $38,750. The cost of the merchandise sold was $21,250. 30. Prepaid for advertising for January, $15,000. 30. Received cash from sale made on December 20, less discount, plus freight that was paid on December 21. 31. Paid for purchase made on December 21, less return on December 24, and discount was taken. 31. Cash sales of $130,000 plus sales tax collected of $6,500. Cost of merchandise sold was $90,000. End of Fiscal Year Information: Merchandise Inventory on December 31 was $505,000. Record any variance to a Shrinkage Account (add to end of expenses). Adjust for December Insurance that has expired. Adjust for December Advertising Expense. Store supplies on hand on December 31 was $3,900. Depreciation for December: Store Equipment - $5,600; Office Equipment - $3,750. Accrued salaries on December 31: Sales Salaries - $3,200; Office Salaries - $5,000. Analyzed Goodwill and found the balance should be $240,000. Requirements: 1. Create/ modify all necessary templates: general ledger, general journal, financials (income statement, Statement of Owner's Equity, Balance Sheet), and worksheet for December, 2016. 2. Prepare General Ledger (enter beginning balances), journalize December transactions, post transactions. 60 points 3. Complete worksheet for December. 10 points 4. Complete all year end entries and postings as needed in the proper order. 10 points 5. Prepare financial statements for Year Ended December 31, 2016. For Income Statement and Balance Sheet - prepare year to year comparisons (for 2016 and 2015).25 points 6. Prepare a post-closing trial balance. 5 points 7. Prepare a memo to the controller, J. Mundo. Rubric requirements for the memo: a. No spelling, grammar or punctuation errors. b. Utilize proper memo format c. Memo content: i. First paragraph: Comments about financials you prepared, include 2-5 accounts that require additional analysis and why. ii. Second paragraph: Calculate five ratios (your choice from the following list). Include the details of your calculation and one to two sentences of analysis/commentary for each of the ratios. iii. Third paragraph: content of your own chose iv. Ratio options: Receivable Turnover, Inventory Turnover, Return on Assets, Gross Profit Ratio, Asset Turnover, Profit Margin, Ave. Collection Period, and Ave. Days in Inventory. d. Memo is pass/fail based on any errors. 20 points 130 total points Ocean Atlantic Company Trial Balance November 30, 2016 Acct. No. Account Title 110 Cash Debit Credit $ 303,600 112 Accounts Receivable $ 253,900 115 Merchandise Inventory $ 692,400 117 Prepaid Advertising $ 9,000 118 Prepaid Insurance $ 16,800 120 Store Supplies $ 7,400 150 Store Equipment $ 469,500 150.5 Accum. Deprec. - Store Equip. $ 128,560 $ 172,100 210 Accounts Payable $ 80,600 215 Sales Tax Payable $ 16,000 155 Office Equipment $ 320,000 155.5 Accum. Deprec. - Office Equip. 180 Goodwill $ 257,000 220 L.T. Notes Payable 400,000 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing $ $ 1,160,180 164,950 320 Income Summary 400 Sales 410 Sales Returns & Allow. $ 92,700 415 Sales Discounts $ 59,400 500 Cost of Merch. Sold $ 2,174,200 520 Sales Salaries Expense $ 234,800 525 Advertising Expense $ 91,000 526 Depreciation Exp - Store $ 61,490 528 Store Supplies Expense $ 2,000 529 Misc. Store Expense $ 5,600 550 Office Salaries Expense $ 182,100 555 Depreciation Exp. - Office $ 33,000 556 Rent Expense $ 44,000 557 Misc. Admin. Expense $ 3,800 $ 5,478,640 Accounts Receivable Subsidiary Ledger $ 3,521,200 $ 5,478,640 Prepaid Insurance Flatt Co. 11/5 Invoice 11/30 balance Detail $18,000 Property Ins. Owen Co. 11/7 Invoice Liability 6 mon. 10 mon. $27,600 $48,300 Prepaid Advertising Detail Kelly Corp. 11/30 Invoice (1/10, n30) $9,000 is for Dec. 2016 Advertising $60,000 $153,900 Accounts Payable Subsidiary Ledger Carino Co. 11/5 Invoice $23,100 Atlantic Supplies Co. 11/20 Invoice $10,000 Lindgard 11/15 Invoice (2/10. n30) $20,000 Munson 11/10 Invoice (1/10, n30) $27,500 $80,600 $10,800 $16,800 Holt Co. 11/15 Invoice (2/10. n30) $6,000 Ocean Atlantic Company Trial Balance Account Title Cash Accounts Receivable Merchandise Inventory Prepaid Advertising Prepaid Insurance Store Supplies Store Equipment $ $ $ $ $ $ $ Dec. 31, 2015 Balances Debit Credit 189,020 147,700 610,500 5,000 14,520 6,000 412,500 Accum. Deprec. - Store Equip. Office Equipment $ $ 58,700 $ 150,120 289,000 Accum. Deprec. - Office Equip. Goodwill Accounts Payable Sales Tax Payable Long Term Note Payable Deb Gilmore, Capital Deb Gilmore, Drawing Income Summary Sales Sales Returns & Allow. Sales Discounts Cost of Merch. Sold Sales Salaries Expense Advertising Expense Depreciation Exp - Store Store Supplies Expense Misc. Store Expense Office Salaries Expense Depreciation Exp. - Office Rent Expense Misc. Admin. Expense $ 257,000 $ 50,240 $ 12,000 500,000 $ 850,000 $ $ $ $ $ $ $ $ $ $ $ $ $ 3,875,000 85,420 40,120 2,750,000 213,894 154,205 25,670 4,077 8,945 225,484 18,245 36,000 2,760 $5,496,060 $5,496,060 Ocean Atlantic Company Trial Balance June 30, 20x1 Acct. No. Account Title 110 Cash 112 Accounts Receivable 115 Merchandise Inventory 117 Prepaid Advertising 118 Prepaid Insurance 120 Store Supplies 150 Store Equipment 150.5 Accum. Deprec. - Store Equip. 155 Office Equipment 155.5 Accum. Deprec. - Office Equip. 180 Goodwill 210 Accounts Payable 215 Sales Tax Payable 220 Salaries Payable 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing 320 Income Summary 400 Sales 410 Sales Returns & Allow. 415 Sales Discounts 500 Cost of Merch. Sold 520 Sales Salaries Expense 525 Advertising Expense 526 Depreciation Exp - Store 528 Store Supplies Expense 529 Misc. Store Expense 550 Office Salaries Expense 555 Depreciation Exp. - Office Debit $ $ $ $ $ $ $ $ $ $ Credit 186,310 67,050 518,080 43,000 16,800 9,800 469,500 $ 128,560 $ 172,100 $ $ 33,100 8,900 $ 699,030 $ 3,809,950 320,000 257,000 155,000 $ 111,700 $ 61,060 $ 1,931,550 $ 257,600 $ 91,000 $ 61,490 $ 2,000 $ 5,600 $ 202,300 $ 33,000 556 Rent Expense 557 Misc. Admin. Expense $ 48,000 $ 3,800 $ 4,851,640 $ Accounts Receivable Subsidiary Ledger Flatt Co. 6/5 Invoice $18,000 Owen Co. 6/7 Invoice $27,600 Holt Co. 6/15 Invoice (2/10. n30) $48,300 Kelly Corp. 6/30 Invoice (1/10, n30) $60,000 $153,900 Accounts Payable Subsidiary Ledger Carino Co. 6/5 Invoice Atlantic Supplies Co. 6/20 Invoice Lindgard 6/15 Invoice (2/10. n30) Munson 6/10 Invoice (1/10, n30) $23,100 $10,000 $20,000 $27,500 $80,600 4,851,640 Prepaid Insurance 30-Jun Detail Property Ins. 6 mon. Liability 10 mon. Prepaid Advertising Detail $9,000 is for July Advertising Insurance $6,000 $10,800 $16,800 Ocean Atlantic Company Adjusted Trial Balance July 31, 20x2 Acct. No. Account Title 110 Cash 112 Accounts Receivable 115 Merchandise Inventory 117 Prepaid Advertising 118 Prepaid Insurance 120 Store Supplies 150 Store Equipment 150.5 Accum. Deprec. - Store Equip. 155 Office Equipment 155.5 Accum. Deprec. - Office Equip. 180 Goodwill 210 Accounts Payable 215 Sales Tax Payable 220 Salaries Payable 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing 320 Income Summary 400 Sales 410 Sales Returns & Allow. 415 Sales Discounts 500 Cost of Merch. Sold 520 Sales Salaries Expense 525 Advertising Expense 526 Depreciation Exp - Store 528 Store Supplies Expense 529 Misc. Store Expense 550 Office Salaries Expense 555 Depreciation Exp. - Office Insurance Expense 556 Rent Expense 557 Misc. Admin. Expense Debit $ $ $ $ $ $ $ $ $ $ Credit 186,310 67,050 505,000 15,000 14,720 3,900 469,500 $ 134,160 $ 175,850 $ $ $ $ 33,100 8,900 8,200 699,030 $ 3,809,950 320,000 240,000 155,000 $ 111,700 $ 61,060 $ 1,944,630 $ 260,800 $ 119,000 $ 67,090 $ 7,900 $ 5,600 $ 207,300 $ 36,750 $ 2,080 $ 48,000 $ 3,800 Goodwill Impairment $ 17,000 $ 4,869,190 $ Accounts Receivable Subsidiary Ledger Flatt Co. 6/5 Invoice $18,000 Owen Co. 6/7 Invoice $27,600 Holt Co. 6/15 Invoice (2/10. n30) $48,300 Kelly Corp. 6/30 Invoice (1/10, n30) $60,000 $153,900 Accounts Payable Subsidiary Ledger Carino Co. 6/5 Invoice Atlantic Supplies Co. 6/20 Invoice Lindgard 6/15 Invoice (2/10. n30) Munson 6/10 Invoice (1/10, n30) $23,100 $10,000 $20,000 $27,500 $80,600 4,869,190 Prepaid Insurance 30-Jun Property Ins. Liability Prepaid Advertising Detail $9,000 is for July Advertising Ocean Atlantic Company Trial Balance June 30, 20x1 Acct. No. Account Title 110 Cash 112 Accounts Receivable 115 Merchandise Inventory 117 Prepaid Advertising 118 Prepaid Insurance 120 Store Supplies 150 Store Equipment 150.5 Accum. Deprec. - Store Equip. 155 Office Equipment 155.5 Accum. Deprec. - Office Equip. 180 Goodwill 210 Accounts Payable 215 Sales Tax Payable 220 Salaries Payable 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing 320 Income Summary 400 Sales 410 Sales Returns & Allow. 415 Sales Discounts 500 Cost of Merch. Sold 520 Sales Salaries Expense 525 Advertising Expense 526 Depreciation Exp - Store 528 Store Supplies Expense 529 Misc. Store Expense 550 Office Salaries Expense 555 Depreciation Exp. - Office 556 Rent Expense 557 Misc. Admin. Expense Debit $ 63,600 $ 153,900 $ 602,400 $ 9,000 $ 16,800 $ 7,400 $ 469,500 $ 320,000 $ 257,000 $ 135,000 $ 92,700 $ 59,400 $ 1,773,000 $ 234,800 $ 91,000 $ 61,490 $ 2,000 $ 5,600 $ 182,100 $ 33,000 $ 44,000 $ 3,800 $ 4,617,490 Prepaid Insurance Detail 6 mon. 10 mon. vertising Detail r July Advertising $6,000 $10,800 $16,800 mpany e 1 Credit $ 128,560 $ 172,100 $ $ 80,600 16,000 $ 699,030 $ 3,521,200 $ 4,617,490 Ocean Atlantic Company Income Statement Sales Sales Sales Returns & Allow. Sales Discounts Net Sales Cost of Merch. Sold Gross Profit Expenses: Selling Expenses: Sales Salaries Expense Advertising Expense Depreciation Exp - Store Store Supplies Expense Misc. Store Expense Total Selling Expenses Administrative Expenses: Office Salaries Expense Depreciation Exp. - Office Insurance Expense Rent Expense Misc. Admin. Expense Goodwill Impairment Total Admin. Expenses Total Operating Expenses Net Op. Income (Loss) $ $ $ $ $ $ $ $ For Month of July, x012 288,750 19,000 1,660 $ 268,090 $ 171,630 $ 96,460 26,000 28,000 5,600 5,900 - $ $ $ $ $ $ $ $ $ $ $ $ For Year End, July 31, 20x2 $ 3,809,950 $ 111,700 $ 61,060 $ 3,637,190 $ 1,944,630 65,500 25,200 3,750 2,080 4,000 17,000 $ $ $ $ $ $ $ 260,800 119,000 67,090 7,900 5,600 52,030 $ $ $ 460,390 $ 314,930 207,300 36,750 2,080 48,000 3,800 17,000 117,530 (21,070) Statement of Owner's Equity For Year End, July 31, 20x2 $ 600,030 $ 99,000 $ 917,240 $ 155,000 Beg. Capital Balance Plus Investment Plus Net Income Less Drawing Ending Capital Balance $ 1,461,270 Balance Sheet July 31, 20x2 Assets Current Assets: Cash $ Accounts Receivable $ Merchandise Inventory $ Prepaid Advertising $ Prepaid Insurance $ Store Supplies $ Total Current Assets Long Term Assets: Store Equipment $ Accum. Deprec. - Store Equ$ Office Equipment $ Accum. Deprec. - Office Eq $ Goodwill Total Long Term Assets Total Assets Liabilities Current Liabilities: Accounts Payable $ Sales Tax Payable $ Salaries Payable $ Total Liabilities 186,310 67,050 505,000 15,000 14,720 3,900 $ 33,100 8,900 8,200 $ 50,200 791,980 Owner's Equity 469,500 (134,160) $ 335,340 320,000 (175,850) $ 144,150 $ 240,000 Deb Gilmore, Capital $ 719,490 Total Liabilities & $ 1,511,470 Owner's Equity $ 1,461,270 $ 1,511,470 nd, July 31, 20x2 $ 1,692,560 $ $ 775,320 917,240 MEMORANDUM To : J Mundo, the Controller From : Accountant Date Subject : March 18, 2017 : Analysis of the financial position The financial statements of the company are being prepared after keeping in view all the transactions that had taken place during the month. The cash balance for the period ending December is more than the period ending November which shows that the company had effectively generated cash in the month. I have prepared the trail balance, the income statement and balance sheet of Ocean Atlantic Company. During this work, additional analysis was required in prepaid insurance account, prepaid advertisement account, cost of merchandise sold, accounts payable, accounts receivable which is because of large number of transactions involved. Ratio Analysis: Inventory turnover Ratio = Sales/Closing Inventory = 3,788,190/505,000 = 7.50 times This means that on an average inventory is sold 7.54 times. Gross profit ratio = Gross Profit/ Net sales = 1,376,640/3,788,190 = 36.34% Receivable Turnover Ratio = Net sales/Receivables = 3,788,190/127,050 = 29.81 times Return on assets = Net profit/ total assets = 601,320/1,598,250 = 37.62% Profit Margin = Net Profit/ Net sales = 601,320/3,788,190 = 0.15 According to the above analysis it can be concluded that the financial position of the company is quite satisfactory and the profitability is also higher. The overall financial result of the company is satisfactory. Ocean Atlantic Company Trial Balance June 30, 20x1 Acct. No. Account Title 110 Cash 112 Accounts Receivable 115 Merchandise Inventory 117 Prepaid Advertising 118 Prepaid Insurance 120 Store Supplies 150 Store Equipment 150.5 Accum. Deprec. - Store Equip. 155 Office Equipment 155.5 Accum. Deprec. - Office Equip. 180 Goodwill 210 Accounts Payable 215 Sales Tax Payable 220 Salaries Payable 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing 320 Income Summary 400 Sales 410 Sales Returns & Allow. 415 Sales Discounts 500 Cost of Merch. Sold 520 Sales Salaries Expense 525 Advertising Expense 526 Depreciation Exp - Store 528 Store Supplies Expense 529 Misc. Store Expense 550 Office Salaries Expense 555 Depreciation Exp. - Office 556 Rent Expense Debit $ $ $ $ $ $ $ $ $ $ Credit 186,310 67,050 518,080 43,000 16,800 9,800 469,500 $ 128,560 $ 172,100 $ $ 33,100 8,900 $ 699,030 $ 3,809,950 320,000 257,000 155,000 $ 111,700 $ 61,060 $ 1,931,550 $ 257,600 $ 91,000 $ 61,490 $ 2,000 $ 5,600 $ 202,300 $ 33,000 $ 48,000 557 Misc. Admin. Expense $ 3,800 $ 4,851,640 $ Accounts Receivable Subsidiary Ledger Flatt Co. 6/5 Invoice $18,000 Owen Co. 6/7 Invoice $27,600 Holt Co. 6/15 Invoice (2/10. n30) $48,300 Kelly Corp. 6/30 Invoice (1/10, n30) $60,000 $153,900 Accounts Payable Subsidiary Ledger Carino Co. 6/5 Invoice Atlantic Supplies Co. 6/20 Invoice Lindgard 6/15 Invoice (2/10. n30) Munson 6/10 Invoice (1/10, n30) $23,100 $10,000 $20,000 $27,500 $80,600 4,851,640 Prepaid Insurance 30-Jun Detail Property Ins. 6 mon. Liability 10 mon. Prepaid Advertising Detail $9,000 is for July Advertising Insurance $6,000 $10,800 $16,800 Ocean Atlantic Company Adjusted Trial Balance July 31, 20x2 Acct. No. Account Title 110 Cash 112 Accounts Receivable 115 Merchandise Inventory 117 Prepaid Advertising 118 Prepaid Insurance 120 Store Supplies 150 Store Equipment 150.5 Accum. Deprec. - Store Equip. 155 Office Equipment 155.5 Accum. Deprec. - Office Equip. 180 Goodwill 210 Accounts Payable 215 Sales Tax Payable 220 Salaries Payable 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing 320 Income Summary 400 Sales 410 Sales Returns & Allow. 415 Sales Discounts 500 Cost of Merch. Sold 520 Sales Salaries Expense 525 Advertising Expense 526 Depreciation Exp - Store 528 Store Supplies Expense 529 Misc. Store Expense 550 Office Salaries Expense 555 Depreciation Exp. - Office Insurance Expense 556 Rent Expense 557 Misc. Admin. Expense Debit $ $ $ $ $ $ $ $ $ $ Credit 186,310 67,050 505,000 15,000 14,720 3,900 469,500 $ 134,160 $ 175,850 $ $ $ $ 33,100 8,900 8,200 699,030 $ 3,809,950 320,000 240,000 155,000 $ 111,700 $ 61,060 $ 1,944,630 $ 260,800 $ 119,000 $ 67,090 $ 7,900 $ 5,600 $ 207,300 $ 36,750 $ 2,080 $ 48,000 $ 3,800 Goodwill Impairment $ 17,000 $ 4,869,190 $ Accounts Receivable Subsidiary Ledger Flatt Co. 6/5 Invoice $18,000 Owen Co. 6/7 Invoice $27,600 Holt Co. 6/15 Invoice (2/10. n30) $48,300 Kelly Corp. 6/30 Invoice (1/10, n30) $60,000 $153,900 Accounts Payable Subsidiary Ledger Carino Co. 6/5 Invoice Atlantic Supplies Co. 6/20 Invoice Lindgard 6/15 Invoice (2/10. n30) Munson 6/10 Invoice (1/10, n30) $23,100 $10,000 $20,000 $27,500 $80,600 4,869,190 Prepaid Insurance 30-Jun Property Ins. Liability Prepaid Advertising Detail $9,000 is for July Advertising Ocean Atlantic Company Trial Balance June 30, 20x1 Acct. No. Account Title 110 Cash 112 Accounts Receivable 115 Merchandise Inventory 117 Prepaid Advertising 118 Prepaid Insurance 120 Store Supplies 150 Store Equipment 150.5 Accum. Deprec. - Store Equip. 155 Office Equipment 155.5 Accum. Deprec. - Office Equip. 180 Goodwill 210 Accounts Payable 215 Sales Tax Payable 220 Salaries Payable 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing 320 Income Summary 400 Sales 410 Sales Returns & Allow. 415 Sales Discounts 500 Cost of Merch. Sold 520 Sales Salaries Expense 525 Advertising Expense 526 Depreciation Exp - Store 528 Store Supplies Expense 529 Misc. Store Expense 550 Office Salaries Expense 555 Depreciation Exp. - Office 556 Rent Expense 557 Misc. Admin. Expense Debit $ 63,600 $ 153,900 $ 602,400 $ 9,000 $ 16,800 $ 7,400 $ 469,500 $ 320,000 $ 257,000 $ 135,000 $ 92,700 $ 59,400 $ 1,773,000 $ 234,800 $ 91,000 $ 61,490 $ 2,000 $ 5,600 $ 182,100 $ 33,000 $ 44,000 $ 3,800 $ 4,617,490 Prepaid Insurance Detail 6 mon. 10 mon. vertising Detail r July Advertising $6,000 $10,800 $16,800 mpany e 1 Credit $ 128,560 $ 172,100 $ $ 80,600 16,000 $ 699,030 $ 3,521,200 $ 4,617,490 Ocean Atlantic Company Income Statement Sales Sales Sales Returns & Allow. Sales Discounts Net Sales Cost of Merch. Sold Gross Profit Expenses: Selling Expenses: Sales Salaries Expense Advertising Expense Depreciation Exp - Store Store Supplies Expense Misc. Store Expense Total Selling Expenses Administrative Expenses: Office Salaries Expense Depreciation Exp. - Office Insurance Expense Rent Expense Misc. Admin. Expense Goodwill Impairment Total Admin. Expenses Total Operating Expenses Net Op. Income (Loss) $ $ $ $ $ $ $ $ For Month of July, x012 288,750 19,000 1,660 $ 268,090 $ 171,630 $ 96,460 26,000 28,000 5,600 5,900 - $ $ $ $ $ $ $ $ $ $ $ $ For Year End, July 31, 20x2 $ 3,809,950 $ 111,700 $ 61,060 $ 3,637,190 $ 1,944,630 65,500 25,200 3,750 2,080 4,000 17,000 $ $ $ $ $ $ $ 260,800 119,000 67,090 7,900 5,600 460,390 $ 314,930 207,300 36,750 2,080 48,000 3,800 17,000 52,030 $ $ $ 117,530 (21,070) Statement of Owner's Equity For Year End, July 31, 20x2 $ 600,030 $ 99,000 $ 917,240 $ 155,000 Beg. Capital Balance Plus Investment Plus Net Income Less Drawing Ending Capital Balance $ 1,461,270 Balance Sheet July 31, 20x2 Assets Liabilities Current Assets: Cash $ Accounts Receivable $ Merchandise Inventory $ Prepaid Advertising $ Prepaid Insurance $ Store Supplies $ Total Current Assets Long Term Assets: Store Equipment $ Accum. Deprec. - Store Equ$ Office Equipment $ Accum. Deprec. - Office Eq $ Goodwill Total Long Term Assets Total Assets Current Liabilities: Accounts Payable $ Sales Tax Payable $ Salaries Payable $ Total Liabilities 186,310 67,050 505,000 15,000 14,720 3,900 $ 33,100 8,900 8,200 $ 50,200 791,980 Owner's Equity 469,500 (134,160) $ 335,340 320,000 (175,850) $ 144,150 $ 240,000 Deb Gilmore, Capital $ 719,490 Total Liabilities & $ 1,511,470 Owner's Equity $ 1,461,270 $ 1,511,470 nd, July 31, 20x2 $ 1,692,560 $ $ 775,320 917,240 Ocean Atlantic Company Journal Entries Date Particulars Amount (Dr.) Amount (Cr.) 1-Dec Dr. Rent $4,000.00 Cr. Cash $4,000.00 (Paid rent for the month of december) 2-Dec Dr. Munsun $27,500.00 Cr. Cash $27,500.00 (Paid Munsun the november Balance) 3-Dec Dr. Purchases $25,000.00 Cr. Lingard Co. $25,000.00 (Purchased merchandise on account from Lingrad Co.) 4-Dec Dr. Freight $1,000.00 Cr. Cash $1,000.00 (Paid freight on purchases of 3 December) 6-Dec Dr. Holt Co. $40,000.00 Cr. Sales $40,000.00 (Sold goods to Holt Co. costing $24,000 for $40,000.) 7-Dec Dr. Cash $18,000.00 Cr. Flatt Co. $18,000.00 (Received cash from Flatt Co. on account) 9-Dec Dr. Cash $60,000.00 Cr. Kelly Corp. $60,000.00 (Received cash from Kelly Corp of 11/30 invoice) 10-Dec Dr. Cash $94,500.00 Cr. Sales $90,000.00 Cr. Sales tax Payable $4,500.00 (Sold Mechandise for cash plus sales tax collected. Cost of merchandise sold was $50,000) 13-Dec Dr. Lingard Co. $25,000.00 Cr. Cash $24,500.00 Cr. Discount Availed $500.00 (Paid for mechandise purchased on 3 December, less discount) 14-Dec Dr. Sales Return $7,000.00 Cr. Holt Co. $7,000.00 (Received merchandise return on sale on dec 6, $7,000 costing $4,500.) 15-Dec Dr. Advertisement Expense $19,000.00 Cr. Cash $19,000.00 (Paid advertisement expense for the last half of december.) 15-Dec Dr. Lingard Co. $20,000.00 Cr. Cash $20,000.00 (Paid Balance owed to Lingard for Nov 15 invoice.) 15-Dec Dr. Sales Tax Payable $16,000.00 Cr. Cash (Paid sales tax collected in November) 16-Dec Dr. Cash $32,340.00 Dr. Discount Allowed $660.00 Cr. Holt Co. $16,000.00 $33,000.00 (Received Cash from sale on Dec 6 after adjusting the sales return and discount.) 19-Dec Dr. Purchases $122,000.00 Cr. Cash $122,000.00 (Paid merchandise for cash) Ocean Atlantic Company Journal Entries Date Particulars Amount (Dr.) Amount (Cr.) 20-Dec Dr. Drawings $50,000.00 Cr. Cash $50,000.00 (Withdrew cash for personal use) 20-Dec Dr. Reedley Co. $140,000.00 Cr. Sales $140,000.00 (Sold goods to Reedley Co. costing $125,000 for $140,000.) 21-Dec Dr. Reedley Co. $3,100.00 Cr. Cash $3,100.00 (Freight paid to Reedley for convinience on FOB shipping point) 21-Dec Dr. Cash $27,600.00 Cr. Owen Co. $27,600.00 (Received cash from Owen) 21-Dec Dr. Purchases $32,000.00 Cr. Munson Co. $32,000.00 (Purcahsed Merchandise from Munson Co.) 24-Dec Dr. Munson Co. $5,000.00 Cr. Purchase Return $5,000.00 (Return goods on account of being damaged) 26-Dec Dr. Sales Return $12,000.00 Dr. Sales Tax Payable $600.00 Cr. Cash $12,600.00 (Refunded $12,000 plus $600 on account of sales return. Cost of goods sold was $7,200) 28-Dec Dr. Sales Salaries $22,800.00 Dr. Office Salaries $20,200.00 Cr. Cash $43,000.00 (Paid sales salaries of $22,800 and office Salaries of $20,200) 29-Dec Dr. Store Supplies $2,400.00 Cr. Cash $2,400.00 (Purchased store supplies for cash) 30-Dec Dr. Dix Co. $38,750.00 Cr. Sales $38,750.00 (Sold goods to Dix Co. costing $21,250 for $38,750, FOB Shipping Point) 30-Dec Dr. Prepaid Advertisement $15,000.00 Cr. Cash $15,000.00 (Purchased store supplies for cash) 30-Dec Dr. Cash $143,100.00 Cr. Reedley Co. $143,100.00 (Received cash from Reedley Co.) 31-Dec Dr. Munson Co. Cr. Cash Cr. Discount availed $27,000.00 $26,730.00 $270.00 (Paid for merchandise purchased on 21 Dec after adjusting the purchase return and adjusting discount) 31-Dec Dr. Cash $136,500.00 Cr. Sales $130,000.00 Cr. Sales tax Payable $6,500.00 (Sold Mechandise for cash plus sales tax collected. Cost of merchandise sold was $90,000) 31-Dec Dr. Shrinkage $62,850.00 Cr. Merchnadise Inventory $62,850.00 (Closing Inventory was $505,000 and any variance is debited to Shrinkage account) Calculation of Shrinkage Beginning Inventory $692,400.00 Add: Purchases 179000 Less: Purchase Return 5000 Less: Sales 310250 Add: Sales Return 11700 Less: Closing Inventory $505,000.00 Shrinkage $62,850.00 31-Dec Dr. Advertisement expenses $9,000.00 Cr. Prepaid Advertisment $9,000.00 (Adjustment of prepaid advertisement that has expired) 31-Dec Dr. Insurance expenses $2,080.00 Cr. Prepaid Insurance $2,080.00 (Adjustment of prepaid insurance that has expired) Expired Insurance: Property Insurance 1000 Liability 1080 Total 2080 31-Dec Dr. Store Supply expense $5,900.00 Cr. Store Supply $5,900.00 (Store supply expense adjusted) Store Supply expense: Opening Balance 7400 Add: Purchases 2400 Less: Closing Bal 3900 Store Supply expense 5900 31-Dec Dr. Depreciation: Store Equip. $5,600.00 Cr. Acc. Dep. (Depreciation charged on equipment) 31-Dec Dr. Depreciation: Ofc Equip. $3,750.00 $5,600.00 Cr. Acc. Dep. (Depreciation charged on equipment) 31-Dec Dr. Sales Salaries $3,200.00 Cr. Salary Payable (Sales salaries accrued) 31-Dec Dr. Office Salaries $5,000.00 Cr. Salary Payable (Office salaries accrued) 31-Dec Dr. Goodwill Impairment $17,000.00 Cr. Goodwill (Goodwill impaired on being analysed) $3,750.00 $3,200.00 $5,000.00 $17,000.00 Ocean Atlantic Company Adjusted Trial Balance Dec 31, 2016 Acct. No. Account Title Debit 110 Cash $ 213,090 112 Accounts Receivable $ 127,050 115 Merchandise Inventory $ 505,000 117 Prepaid Advertising $ 15,000 118 Prepaid Insurance $ 14,720 120 Store Supplies $ 3,900 150 Store Equipment $ 469,500 150.5 Accum. Deprec. - Store Equip. 155 Office Equipment $ 320,000 155.5 Accum. Deprec. - Office Equip. 180 Goodwill $ 240,000 210 Accounts Payable 215 Sales Tax Payable 220 Salaries Payable 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing $ 214,950 320 Income Summary 400 Sales 410 Sales Returns & Allow. $ 111,700 415 Sales Discounts $ 60,060 500 Cost of Merch. Sold $ 2,411,550 520 Sales Salaries Expense $ 260,800 525 Advertising Expense $ 119,000 526 Depreciation Exp - Store $ 67,090 528 Store Supplies Expense $ 7,900 529 Misc. Store Expense $ 5,600 550 Office Salaries Expense $ 207,300 555 Depreciation Exp. - Office $ 36,750 Insurance Expense $ 2,080 556 Rent Expense $ 48,000 557 Misc. Admin. Expense $ 3,800 Goodwill Impairment $ 17,000 $ 5,481,840 Accounts Receivable Subsidiary Ledger Holt Co. 12/6 Invoice (2/10. n30) 6/15 Invoice (2/10. n30) Dix Co. Sales Credit $ 134,160 $ 175,850 $ $ $ $ 33,100 10,400 8,200 1,160,180 $ 3,959,950 $ 5,481,840 Prepaid Insurance 31-Dec $40,000 Property Ins. $48,300 Liability $38,750 $127,050 Accounts Payable Subsidiary Ledger Carino Co. 6/5 Invoice Atlantic Supplies Co. 6/20 Invoice $23,100 $10,000 Cash Account $33,100 Opening Balance Add: Sum Recd Flatt Co. Kelly Corp Sales Sales tax Holt Co. Owen Co. Reedley Co. Less: Sum paid Rent Munson Freight Sales return Lingard Co. Advertisement exps Sales tax Purchases Drawings Reedley Co. Sales Salaries Office Salaries Store Supplies Prepaid Advertisement Closing Balance Ocean Atlantic Company Trial Balance Nov 30, 2016 Acct. No. Account Title Debit 110 Cash $ 303,600 112 Accounts Receivable $ 253,900 115 Merchandise Inventory $ 692,400 117 Prepaid Advertising $ 9,000 118 Prepaid Insurance $ 16,800 120 Store Supplies $ 7,400 150 Store Equipment $ 469,500 150.5 Accum. Deprec. - Store Equip. 155 Office Equipment $ 320,000 155.5 Accum. Deprec. - Office Equip. 180 Goodwill $ 257,000 210 Accounts Payable 215 Sales Tax Payable 220 Long Term Notes Payable 300 Deb Gilmore, Capital 310 Deb Gilmore, Drawing $ 164,950 320 Income Summary 400 Sales 410 Sales Returns & Allow. $ 92,700 415 Sales Discounts $ 59,400 500 Cost of Merch. Sold $ 2,174,200 520 Sales Salaries Expense $ 234,800 525 Advertising Expense $ 91,000 526 Depreciation Exp - Store $ 61,490 528 Store Supplies Expense $ 2,000 529 Misc. Store Expense $ 5,600 550 Office Salaries Expense $ 182,100 555 Depreciation Exp. - Office $ 33,000 556 Rent Expense $ 44,000 557 Misc. Admin. Expense $ 3,800 $ 5,478,640 $ Prepaid Insurance Detail 5 mon 9 mon - $5,000 $9,720 $14,720 Credit $ 128,560 $ 172,100 $ $ $ $ 80,600 16,000 400,000 1,160,180 $ 3,521,200 $ 5,478,640 Cash Account $ 303,600 $ $ $ $ $ $ $ $ 18,000 60,000 220,000 11,000 32,340 27,600 143,100 512,040 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 4,000 54,230 1,000 12,000 44,500 19,000 16,600 122,000 50,000 3,100 22,800 20,200 2,400 15,000 386,830 428,810 428,810 Ocean Atlantic Company Income Statement Sales For Month of Dec, x016 Sales Sales Returns & Allow. Sales Discounts Net Sales Cost of Merch. Sold Gross Profit Expenses: Selling Expenses: Sales Salaries Expense Advertising Expense Depreciation Exp - Store Store Supplies Expense Misc. Store Expense Total Selling Expenses Administrative Expenses: Office Salaries Expense Depreciation Exp. - Office Insurance Expense Rent Expense Misc. Admin. Expense Goodwill Impairment Total Admin. Expenses Total Operating Expenses Net Op. Income (Loss) $ $ $ 438,750 19,000 660 $ $ $ $ $ $ $ $ $ $ $ $ $ 419,090 237,350 $ 181,740 $ $ 117,530 64,210 26,000 28,000 5,600 5,900 $ 65,500 $ 52,030 25,200 3,750 2,080 4,000 17,000 Statement of Owner's Equity For Year End, Dec 31, 2016 Beg. Capital Balance Plus Investment Plus Net Income Less Drawing Ending Capital Balance Balance Sheet Assets Current Assets: Cash Accounts Receivable Liabilities 2016 $ $ 213,090 127,050 $ $ 2015 Current Liabilities: 189,020 Accounts Payable 147,700 Sales Tax Payable Merchandise Inventory $ Prepaid Advertising $ Prepaid Insurance $ Store Supplies $ Total Current Assets Long Term Assets: Store Equipment $ Accum. Deprec. - Store Equ$ Office Equipment $ Accum. Deprec. - Office Eq $ Goodwill Total Long Term Assets Total Assets 505,000 15,000 14,720 3,900 $ $ $ $ $ 610,500 Salaries Payable 5,000 Total Liabilities 14,520 6,000 878,760 Owner's Equity 469,500 (134,160) $ 335,340 320,000 (175,850) $ 144,150 $ 240,000 $ 719,490 $ 1,598,250 $ 412,500 $ (58,700) $ 289,000 $ (150,120) $ 257,000 Deb Gilmore, Capital Total Liabilities & $ 1,722,420 Owner's Equity For Year End, Dec 31, 2016 $ 3,959,950 $ 111,700 $ 60,060 $ 3,788,190 $ 2,411,550 $ 1,376,640 For Year End, Dec 31, 2015 $ 3,875,000 $ 85,420 $ 40,120 $ 3,749,460 $ 2,750,000 $ 999,460 $ $ $ $ $ $ $ $ $ $ 260,800 119,000 67,090 7,900 5,600 $ $ $ $ $ $ $ 460,390 207,300 36,750 2,080 48,000 3,800 17,000 $ 314,930 For Year End, Dec 31, 2016 $ 1,160,180 $ $ 601,320 214,950 $ $ 775,320 601,320 $ 850,000 $ 310,180 $ 1,546,550 $ 1,160,180 Liabilities 2016 $ $ 33,100 10,400 213,894 154,205 25,670 4,077 8,945 $ $ 2015 50,240 12,000 $ $ 225,484 18,245 $ $ 36,000 2,760 $ 406,791 $ 282,489 $ $ 689,280 310,180 $ 8,200 $ $ 500,000 51,700 Owner's Equity ore, Capital $ 1,546,550 1,160,180.00 $ 1,598,250 $ 1,722,420