Financial Information

The following information was provided to you from Cinder in an email. It is important to note that since Cinder is not an accountant, she does not know exactly what information you need to prepare the financial statements. Therefore, it is your responsibility to use your knowledge of financial accounting to determine the relevant accounting information.

From: Cinder Blackburn (cinder@repairshop.com)

Date: Thursday, December 31, 2020

Re: Financial Information for December

Thanks so much again for helping me out, I dont have any idea how to keep the books and prepare those confusing financial statements. All I know is that my bank wants them!

I wrote down everything I did since I wasnt sure what you would need, so here it is:

Dec. 1: I invested $500 cash and $1,580 of supplies into the business.

1: Purchased a 12-month business insurance policy valued at $1,625 but I received a new customer discount and only had to pay $1,200! Coverage begins immediately.

2: Took out small business loan of $5,000 from Commonwealth Bank.

3: Paid landlord $875 for December rent on business space for repair shop.

4: Customer Kai Kingsman brought in an old droid for repair. I started work immediately and it took me two weeks to complete the repair. I provided Kai an invoice for $10,900 on December 18^th when he came into pick up the repaired droid.

5: Paid my roommate $375 for the December rent on my rented room in the Phoenix apartment building.

6: Purchased $380 of supplies with cash from Circuits R Us.

8: I paid my outstanding November Accounts Payable balance.

14: Customer Sasha Chang dropped off her portscreen for repair along with a cash prepayment of $50.

15: Paid assistants salary of $1,200. I have one worker, Iko, and she is amazing! I pay her every two weeks on Friday.

16: Purchased $440 of supplies on account from Not Your Mothers Technology Warehouse.

18: Complete Sasha Changs repair. Total repair charge was $75. Sasha paid the remaining balance when she came to pickup the portscreen on December 18^th.

21: I was interviewed by the local paper for a piece regarding new businesses in the area. Usually, the paper charges $85 to an ad but this article will run free of charge and be a great source of advertising!

22: Customer Dr. Erland prepaid $4,000 for a Med-Droid he plans to deliver on January 3^rd for repair.

23: Met with Government Advisor Torin Korr to discuss future potential work regarding installing a recording/reporting system for the local government. The potential worth of this contract could be as much as $45,000. The government will decide in the new year whether or not to move forward with the project.

26: Received Kai Kingsmans complete cash payment for December 18^th billed work.

27: I took money out of $1,000 for myself.

31: Received the December utility bill. It is for $95. I will pay it next month since it is not due until January 10th.

Financial Accounting Project 1: Accounting Cycle & Analysis Overview: The objective of the individual projects is to grant students the opportunity to apply concepts learned in class to normal business situations. In this project you will process the accounting cycle for a small business and analyze your findings. Grading: This project is worth a total of 100 points with the breakdown as follows: Financial Statements 20 points Trial Balances 10 points General Ledger 10 points General Journal 30 points Typed Responses 30 points Total 100 points -Only complete projects are accepted- Submissions: Guidelines for submission include: Work submitted must reflect each student's individual work (no plagiarism, group work, or peer collaboration is permitted). Please don't cheat. I will find it and it isn't worth it. Projects must be neatly hand-written (with the exception of the Typed Responses). Only complete projects (those addressing all requirements) will be accepted. Submissions must by the due date to be accepted. Submissions need to reflect college-level writing skills.* Background Information Cinder Blackburn has long been successful at repairing electronic devices, big or small , and decided to finally make a business out of it. In November 2020, she started her own business called Cinder's Repair Shop. The shop is located in an industrial warehouse complex in San Jose where Cinder rents a small workspace within one of the bigger warehouses. Cinder has had success so far completing many projects for clients (enough to work 30 hours a week), receiving inquiries from potential new customers, and even generating a profit in the first month. Below are the financial statements for the company's first month of operations. Cinder Repair Shop Cinder Repair Shop Income Statement Statement of Retained Earnings For the Month Ended November 30, 2020 For the Month Ended November 30, 2020 Revenues Repair fees earned $ 1,250 Beginning retained earnings $ Interest earned 800 Add: Net income Total revenue Less: Dividends Ending retained earnings Expenses Rent expense Cinder Repair Shop Salaries expense Balance Sheet Utilities expense Total expenses 1,300 November 30, 2020 Assets Cash Accounts receivable Supplies Equipment Total assets $ $ 2,050 750 75 675 $ 850 400 50 Net income $ 750 $ 1,440 400 900 6,000 8,740 Liabilities Accounts payable Total liabilities $ 225 225 Stockholder's Equity Common stock Retained earnings Total stockholder's equity Total liabilities and stockholder's equity 7,840 675 8,515 $ 8,740 For the first month, Cinder had a friend assist her with her accounting. That friend has since found a full-time job and is no longer able to assist her, so she has turned to you. She knows that you are greatly enjoying your accounting class and thinks you will be able to assist her. You feel confident that you are up to the task and agree to go through the financial information, prepare the necessary journal entries, prepare the financial statements, and ready the books for the upcoming new year. Chart of Accounts Here is Cinder's chart of accounts as (prepared by the previous accountant). After some research you determine this to be sufficient for the company at this point. Acct. Acct. No. Account Name No. Account Name 101 Cash 401 Repair fees earned 104 Accounts receivable 405 Interest earned 110 Prepaid insurance 601 Salaries expense 115 Supplies 610 Rent expense 140 Equipment 611 Utilities expense 141 Accumulated depreciation -equipment 615 Insurance expense 201 Accounts payable 620 Delivery expense 203 Salaries payable 640 Supplies expense 205 Unearned revenue 650 Advertising expense 240 Interest payable 660 Depreciation expense 250 Loan payable 690 Interest expense 301 Common stock 302 Retained earnings 305 Dividends 350 Income summary Adjusting Entry Information At the end of December, the following information is determined: a. One month of the business insurance coverage has expired. b. At the end of December, $880 of the supplies have been used. c. Iko is paid every two weeks on Friday. Since December 31st fell on a Thursday, the majority of her biweekly pay ($1,080) is unrecorded at December 314. d. The equipment is expected to last 5 years and is expected to have no residual value. Depreciation is recorded at the end of the year. e. Cinder had completed a repair job worth $3,000 at the end of the month but hadn't had a chance to bill customer Linh Adri for it yet. f. The loan from Commonwealth Bank carries an annual interest rate of 9%. Requirements 1.) Using the guidelines for accrual-basis accounting, identify the December events that represent financial transactions. 2.) Using the accrual basis of accounting, journalize the December transactions. 3.) Post the journal entries to general ledger accounts. T-accounts may be substituted for the general ledger accounts. Tip -the Retained Earnings balance (account 302) should be $0. 4.) Prepare the unadjusted trial balance at December 31. 5.) Journalize the adjusting entries. Show your calculations where necessary (like items a, d & ) and round to whole numbers 6.) Post the adjusting entries. 7.) Prepare an adjusted trial balance at December 31. 8.) Prepare an income statement, a statement of retained earnings, and a balance sheet for the business for the two-month period ending December 31, 2020. 9.) Journalize the closing entries at December 31, 2020. 10.) Post the closing entries. 11.) Prepare a post-closing trial balance at December 31. 12.) Prepare your typed responses to the questions on page 6. Typed Responses M 30% Please provide your responses to the following prompts. Your responses should be typed, in complete sentences and free of spelling or of your grade! grammatical errors. Use MLA format when citing any sources. Address your responses directly to the owner, Cinder, remembering that she has no accoun ng or business training (meaning define and explain any accounting terms or concepts)! This section is worth 30% of the 1.) List one positive item you noticed after preparing and reviewing Cinder's financial project grade, so statements. Tip-the positive item can be for November, December or the two-month period. don't skimp on Excellent responses will use external, credible sources to support their point. this part! 2.) Identify at least two concerns you have after preparing and reviewing Cinder's financial important part of statements. Tip-remember to review November's financial statements as well for any changes in accounting is December that concern you. Excellent responses will use external, credible sources to support their communicating concerns. the financial financial users. 3.) Provide Cinder with at least one business recommendation to strengthen her new business. Excellent responses will use external, credible sources to support their concerns. This is your chance to show me that skill-so 4.) Provide Cinder with at least one accounting recommendation to help her new show off! business. Excellent responses will use external, credible sources to support their concerns. Remember an results to non