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Grid Iron Prep Incorporated (GIPI) is a service business incorporated in January of the current year to provide personal training for athletes aspiring to play
Grid Iron Prep Incorporated (GIPI) is a service business incorporated in January of the current year to provide personal training for athletes aspiring to play college football. The following transactions occurred during the month ended January 31.
- GIPI issued stock in exchange for $210,000 cash on 1/01.
- GIPI purchased a gymnasium building and gym equipment on 1/02 for $61,000, 80% of which related to the gymnasium and 20% to the equipment.
- GIPI paid $300 cash on 1/03 to have the gym equipment refurbished before it could be used.
- GIPI provided $8,000 in training on 1/04 and expected collection in February.
- GIPI collected $40,000 cash in training fees on 1/10, of which $37,000 related to January and $3,000 related to February.
- GIPI paid $22,000 of wages and $10,000 in utilities on 1/30.
- GIPI will depreciate the gymnasium building using the straight-line method over 10 years with a residual value of $3,000. Gym equipment will be depreciated using the double-declining-balance method, with an estimated residual value of $4,000 at the end of its four-year useful life. Record depreciation on 1/31 equal to one-twelfth the yearly amount.
- GIPI received a bill on 1/31 for $530 for advertising done on 1/31. The bill has not been paid or recorded.
- GIPI uses the aging method for estimating doubtful accounts and, on 1/31, will record an estimated 3 percent of its under-30-day-old accounts as not collectible.
- GIPIs income tax rate is 30%. Assume depreciation for tax is the same amount as depreciation for financial reporting purposes.
10 January 31 January 31 January 31 January 31 Depreciation Expense Accumulated Depreciation-Buildings Accumulated Depreciation-Equipment Advertising Expense Accounts Payable Bad Debt Expense Allowance for Doubtful Accounts Income Tax Expense Income Tax Payable 530 530 Revenues: GRID IRON PREP INCORPORATED Income Statement For the Month Ended January 31 Service Revenue Deferred Revenue Operating Expenses: Salaries and Wages Expense Utilities Expense Bad Debt Expense Advertising Expense Depreciation Expense Total Operating Expenses Income before Income Tax Expense Net Income $ $ 45,000 3,000 22,000 10,000 0 530 0 0 32,530 0 GRID IRON PREP INCORPORATED Statement of Retained Earnings For the Month Ended January 31 Balance, January 1 Net Income Dividends Balance, January 31 GRID IRON PREP INCORPORATED Balance Sheet As of January 31 $ $ 0 O 0 O 0 0 0
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