PROJECT 1

ACCT 3303

Spring 2013

Background Information

The 2011 balance sheet of the Blackberry Mountain Inc. is provided below:

BLACKBERRY MOUNTAIN INC.

BALANCE SHEET

DECEMBER 31, 2011

Current Assets

Cash 52,485

Shortterm Investments 51,030

Accounts Receivable 165,824

Less: Allowance for Doubtful Accounts (1,850)

Prepaid expenses 16,252

Inventories 489,713

Total Current Assets 773,454

NonCurrent Assets

Longterm Investments

Investments in heldformaturity securities 82,000

Land held for future development 5,500

Property, Plant, and Equipment

Land 125,000

Buildings 975,800

Less: Accumulated Depreciation (341,200)

Intangible Assets

Capitalized Development Costs 6,000

Goodwill 66,000

Other Identifiable Intangible Assets 28,000

Total NonCurrent Assets 947,100

Total Assets 1,720,554

Current Liabilities

Deposit Received from Customers 4,380

Provisions Related to Warranties 12,500

Salary and Wages Payable 5,560

Interest Payable 20,500

Accounts Payable 197,532

Notes Payable 80,000

Total Current Liabilities 320,472

NonCurrent Liabilities

Provisions Related to Pensions 75,000

Bonds Payable 425,000

Total NonCurrent Liabilities 500,000

Total Liabilities 820,472

Stockholders' Equity

Common Stock 400,000

Preferred Stock 300,000

Paidincapital Common Stock 27,500

Paidincapital Preferred Stock 10,000

Retained Earnings 170,482

Accumulated Other Comprehensive Income 4,850

Less: Treasury Stock (12,750)

Total Stockholders' Equity 900,082

Total Liabilities and Stockholders' Equity 1,720,554

Transactions for Blackberry Mountain Inc for the month of January is as follows:

1 Owners invest $21,000 of additional cash in the business

2a Supplies are purchased for $3,000.

2b Insurance is paid for 6 months beginning January 1: $5,400 (record as an asset)

2c Rent is paid for 3 months beginning in January: $4,500 (record as an asset)

2d Three employees are hired. Each employee will be paid $2,800 per month.

3 FFD borrows $45,000 from 1st State Bank at 12% annual interest.

6 A delivery van is purchased for $22,500 cash. It will be used for 3 years and will be depreciated monthly using

straight-line depreciation with no salvage value. A full month of depreciation will be charged in January.

7 All of the receivables from Decembers sales are collected.

8 All of the accounts payable from December are paid.

9 Services are performed for customers on account. Invoices totaling $9,800 are mailed.

10 Services are performed for cash customers: $7,600.

15 FFD borrows $16,000 from 2nd State Bank at 9% annual interest.

16 Wages for the first half of the month are paid on January 16: $4,200

20 The company receives $3,000 from a customer for an advance order for services to be provided in January and

February.

25 Collections from customers on account (see January 9 transaction): $4,500.

30 A $3,100 utility bill for January arrived. It is due on February 15.

Additional information for the adjusting entries at January 31:

a. The company completed 60% of the deliveries for the customer that paid in advance on January 20th.

b. Interest is accrued for the two bank loans (assume a full month for the 1st State Bank loan and month for

the 2nd State Bank loan).

c. The last 2 weeks wages earned by employees are $1,400 per employee and will be paid on February 3rd.

d. Record January depreciation.

e. Adjust the prepaid asset accounts as needed.

Instructions:

1. Prepare journal entries for each event.

2. Prepare the t-accounts

3. Prepare the Unadjusted Trial Balance

4. Prepare Adjusting Entries.

5. Prepare adjusted trial balance.

6. Prepare Income Statement, Balance sheet, and Statement of Retained Earnings.

7. Prepare closing Entries