Journal Entries, Trial Balance, and Financial Statements (Appendix)

Peregrin Delivery is incorporated on January 2 and enters into the following transactions during its first month of operations.

Required:

1. Prepare journal entries on the books of Peregrin Delivery to record the transactions entered into during the month. How does this entry affect the accounting equation?

Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

January 2: Filed articles of incorporation with the state and issued 100,000 shares of capital stock. Cash of $100,000 is received from the new owners for the shares.

January 3: Purchased a warehouse and land for $89,000 in cash. An appraiser values the land at $20,000 and the warehouse at $69,000. If an amount box does not require an entry, leave it blank.

January 6: Purchased five new delivery trucks for a total of $45,000 in cash.

January 31: Performed services on account that amounted to $15,900 during the month.

January 31: Cash amounting to $7,490 was received from customers on account during the month.

January 31: Established an open account at a local service station at the beginning of the month. Purchases of gas and oil during January amounted to $3,230. Peregrin has until the 10th of the following month to pay its bill.

2. Prepare a trial balance at January 31. If an amount box does not require an entry, leave it blank.

3. Prepare an income statement for the month of January 31.

4. Prepare a classified balance sheet at January 31.

5. Assume that you are considering buying stock in the company. Beginning with the transaction to record the purchase of the property on January 3, indicate which information you would least consider about each of the transactions during the remainder of the month.

Jan. 3:	How large is it?Is the warehouse new?Is it insured?What volume of business can it support?What is the interest rate on the loan?
Jan. 4:	Are there any restrictions on the companys operations in the debt agreement (covenants)?What is the interest rate on the loan?Were any assets offered as collateral?What is the repayment schedule?What volume of business can they support?
Jan. 6:	How large is it?How long are the trucks expected to last?Will they have any salvage value?What volume of business can they support?
Jan. 31:	Is there a limit on how much the company charges?Is the warehouse new?When will customers pay the remaining balance?What is the credit standing of the customers?What if the company cannot pay by the 10th?

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Journal Entries, Trial Balance, and Financial Statements (Appendix)

Neveranerror Inc. was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business:

Required:

1. Prepare journal entries on the books of Neveranerror Inc. to record the transactions entered into during the month. Ignore depreciation expense and interest expense.

Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

June 2: Received contributions of $11,300 from each of the three owners of the business in exchange for shares of stock.

June 5: Purchased a computer system for $11,400. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days.

June 8: Signed a two-year promissory note at the bank and received cash of $21,800.

June 15: Billed $14,560 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days.

June 17: Paid a $900 bill from the local newspaper for advertising for the month of June.

June 23: Received the amounts billed to clients for services performed during the first half of the month.

June 28: Received and paid gas, electric, and water bills. The total amount is $2,790.

June 29: Received the landlords bill for $2,050 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month.

June 30: Paid salaries and wages for June. The total amount is $5,460.

June 30: Billed $18,360 to clients for the second half of June.

June 30: Declared and paid dividends in the amount of $4,710.

2. Prepare a trial balance at June 30. If an amount box does not require an entry, leave it blank.

3a. Prepare the income statement for the month of June.

3b. Prepare the statement of retained earnings for the month of June. If an amount is zero, enter 0.

3c. Prepare the classified balance sheet at June 30.

4. From your reading of the financial statements for the first month, would you consider working at the company? Why?

Yes/No

The company

Was/was not

able to generate revenues and control costs. The profit margin was

159%37%66%59%

and current ratio was

6.60.22.40.42

.