Purpose Improve your understanding of the relationships between the financial statements; increase your confidence in preparing and recording accounting entries; increase your ability to understand the preparation of formal financial statements. Instructions Included are the unadjusted trial balance for Blue Hen Magic at December 31, 2022, and a list of adjusting journal entries required at year-end. - First, enter the December 31, 2022, beginning balances from the Unadjusted Trial Balance into your accounting "system" (i.e., enter the beginning balances into the T-accounts provided on pp. 4-7). - Second, "record" (i.e., write out in proper journal entry format) each of the adjusting entries from page 3 on page 8 (i.e., on blank page with the header "Adjusting Entries"). IMPORTANT - Don't forget to post each of these adjusting entries to the correct Taccounts on pp. 4-7 - this ensures that your adjusting entries are properly updating the various accounts in your "system". - After journalizing and posting all of your adjusting entries, tally up all the ending balances in the T-accounts on pp. 4-7. Then, use these ending balances to fill out the Adjusted Trial Balance on page 9. - From the Adjusted Trial Balance, complete the Multiple-Step Income Statement (p. 10), Statement of Retained Earnings (p. 11) for the year ended December 31, 2022, and the Classified Balance Sheet (p. 12) as of December 31, 2022. (Hint: One of your asset accounts will have a zero balance.) Expectations This is an individual project. Therefore, each student will turn in his/her own copy of this completed packet. However, I want this to be a pleasant learning experience. Therefore, while I want everyone to complete their own packet, I encourage you to work together! Have "fun" with it! Due Date All packets must be submitted to me via email by Thursday December 1st. If you do not turn in the project by this date, you will receive a zero - no exceptions. Further, if you decide that you want to turn in the project before the deadline, that's fine by me! In fact, I encourage you to do so! ADDITIONAL NOTES - Do not wait until the last minute to do this project - things always take longer than you expect them to. I suggest you knock this project out in one shot - i.e., set aside a block of time and complete it. - You are NOT required to prepare closing entries for this project. - This is a project is great review for the final exam and one that nobody should have a real problem completing. We have reviewed problems like this in class. Therefore, do not expect me to sit down with you and walk you through this project (I will answer simple questions to keep you on track - feel free to reach out). Get together, set aside a block of time, and knock it out! EXTRA CREDIT (6 points - - out of 100) Calculate the following amounts/ratios for Blue Hen Magic (using the adjusted financial statements: 1. Current Ratio 2. Days in Inventory (Note: Inventory at 12-31-21 was $6,000 ) 3. Gross Profit Rate Blue Hen Nagic Unadjusted Trial Balance December 31, 2022 Adjusting \& Other Entries (All December 31): 1 In reviewing the bank statement, we find that during December, $1,100 in revenue was incorrectly debited to supplies instead of cash (the credit was correct). 2: Determine that we earned (but haven't received) $9,300 in interest revenue on our savings account during the year. 3: We earned $9,725 in sweets sales revenue during December 2022 that was paid for in advance by our customers. The cost of those sweets was $2,850. Prepare entries to record both the sale and cost of goods sold. Record both entries. 4: Entire year's advertising (\$14,400 or \$1,200 per month) was paid in advance on January 1, 2022 (recorded in January) - one month of Prepaid Advertising remains to be recorded as Advertising Expense. 5: Determined that $1,100 of supplies were used during the period. 6: December utilities are $2,900. The bill will be paid in January 2023. Utilities Expense and a Utilities Payable should be recorded. 7: The company has not recorded bad debt expense for 2022. Blue Hen Magic uses the Aging of Receivables approach and estimates that the ending balance in the Allowance for Bad Debts should be $6,000 (Hint: You need to "back in" to this number Ch. 8). 8: The long term note payable was recorded on March 1, 2022. The interest and the note are due on July 31, 2027. Interest rate is 12%. Record 2022 interest expense. 9: Calculate Net Income Before Taxes and then record income taxes as 35% of this number (use the Multiple-Step Income Statement) - use this tax \# to record the final adjusting entry for Income Tax Expense \& Income Tax Payable AND as the Income Tax Expense figure in your Multiple-Step Income Statement. Note The taxes will be paid in March 2023. 10: The bookkeeper forgot to enter a journal entry into the system. Therefore, you must also record an entry for a $5,000 dividend payment that the company made to its shareholders. (Debit Dividends \& Credit Cash). This entry will not affect the tax entry above, as Dividends are not recorded on the Income Statement (but instead reduce RE on the Statement of RE). Accounts Receivable Allowance for Bad Debts Interest Receivable Prepaid Advertising Supplies Accounts Payable Income Tax Payable Common Stock Dividends Advertising Expense Adjusting Entries \begin{tabular}{|c|l|r|r|} \hline# & \multicolumn{1}{|c|}{ Accounts/Description } & Debit & Credit \\ \hline 1 & Dr. Cash Cr. Supplies & 1,100 & 1,100 \\ \hline 2 & & & \\ \hline 3 & & & \\ \hline 4 & & & \\ \hline 5 & & & \\ \hline 6 & & & \\ \hline 7 & & & \\ \hline 8 & & & \\ \hline \end{tabular} Adjusted Trial Balance Blue Hen Magic Adjusted Trial Balance December 31, 2022 Multiple-Step Income Statement Blue Hen Magic Statement of Retained Earnings For the Year Ended December 31, 2022 Balance Sheet Blue Hen Magic Balance Sheet As of December 31,2022 Purpose Improve your understanding of the relationships between the financial statements; increase your confidence in preparing and recording accounting entries; increase your ability to understand the preparation of formal financial statements. Instructions Included are the unadjusted trial balance for Blue Hen Magic at December 31, 2022, and a list of adjusting journal entries required at year-end. - First, enter the December 31, 2022, beginning balances from the Unadjusted Trial Balance into your accounting "system" (i.e., enter the beginning balances into the T-accounts provided on pp. 4-7). - Second, "record" (i.e., write out in proper journal entry format) each of the adjusting entries from page 3 on page 8 (i.e., on blank page with the header "Adjusting Entries"). IMPORTANT - Don't forget to post each of these adjusting entries to the correct Taccounts on pp. 4-7 - this ensures that your adjusting entries are properly updating the various accounts in your "system". - After journalizing and posting all of your adjusting entries, tally up all the ending balances in the T-accounts on pp. 4-7. Then, use these ending balances to fill out the Adjusted Trial Balance on page 9. - From the Adjusted Trial Balance, complete the Multiple-Step Income Statement (p. 10), Statement of Retained Earnings (p. 11) for the year ended December 31, 2022, and the Classified Balance Sheet (p. 12) as of December 31, 2022. (Hint: One of your asset accounts will have a zero balance.) Expectations This is an individual project. Therefore, each student will turn in his/her own copy of this completed packet. However, I want this to be a pleasant learning experience. Therefore, while I want everyone to complete their own packet, I encourage you to work together! Have "fun" with it! Due Date All packets must be submitted to me via email by Thursday December 1st. If you do not turn in the project by this date, you will receive a zero - no exceptions. Further, if you decide that you want to turn in the project before the deadline, that's fine by me! In fact, I encourage you to do so! ADDITIONAL NOTES - Do not wait until the last minute to do this project - things always take longer than you expect them to. I suggest you knock this project out in one shot - i.e., set aside a block of time and complete it. - You are NOT required to prepare closing entries for this project. - This is a project is great review for the final exam and one that nobody should have a real problem completing. We have reviewed problems like this in class. Therefore, do not expect me to sit down with you and walk you through this project (I will answer simple questions to keep you on track - feel free to reach out). Get together, set aside a block of time, and knock it out! EXTRA CREDIT (6 points - - out of 100) Calculate the following amounts/ratios for Blue Hen Magic (using the adjusted financial statements: 1. Current Ratio 2. Days in Inventory (Note: Inventory at 12-31-21 was $6,000 ) 3. Gross Profit Rate Blue Hen Nagic Unadjusted Trial Balance December 31, 2022 Adjusting \& Other Entries (All December 31): 1 In reviewing the bank statement, we find that during December, $1,100 in revenue was incorrectly debited to supplies instead of cash (the credit was correct). 2: Determine that we earned (but haven't received) $9,300 in interest revenue on our savings account during the year. 3: We earned $9,725 in sweets sales revenue during December 2022 that was paid for in advance by our customers. The cost of those sweets was $2,850. Prepare entries to record both the sale and cost of goods sold. Record both entries. 4: Entire year's advertising (\$14,400 or \$1,200 per month) was paid in advance on January 1, 2022 (recorded in January) - one month of Prepaid Advertising remains to be recorded as Advertising Expense. 5: Determined that $1,100 of supplies were used during the period. 6: December utilities are $2,900. The bill will be paid in January 2023. Utilities Expense and a Utilities Payable should be recorded. 7: The company has not recorded bad debt expense for 2022. Blue Hen Magic uses the Aging of Receivables approach and estimates that the ending balance in the Allowance for Bad Debts should be $6,000 (Hint: You need to "back in" to this number Ch. 8). 8: The long term note payable was recorded on March 1, 2022. The interest and the note are due on July 31, 2027. Interest rate is 12%. Record 2022 interest expense. 9: Calculate Net Income Before Taxes and then record income taxes as 35% of this number (use the Multiple-Step Income Statement) - use this tax \# to record the final adjusting entry for Income Tax Expense \& Income Tax Payable AND as the Income Tax Expense figure in your Multiple-Step Income Statement. Note The taxes will be paid in March 2023. 10: The bookkeeper forgot to enter a journal entry into the system. Therefore, you must also record an entry for a $5,000 dividend payment that the company made to its shareholders. (Debit Dividends \& Credit Cash). This entry will not affect the tax entry above, as Dividends are not recorded on the Income Statement (but instead reduce RE on the Statement of RE). Accounts Receivable Allowance for Bad Debts Interest Receivable Prepaid Advertising Supplies Accounts Payable Income Tax Payable Common Stock Dividends Advertising Expense Adjusting Entries \begin{tabular}{|c|l|r|r|} \hline# & \multicolumn{1}{|c|}{ Accounts/Description } & Debit & Credit \\ \hline 1 & Dr. Cash Cr. Supplies & 1,100 & 1,100 \\ \hline 2 & & & \\ \hline 3 & & & \\ \hline 4 & & & \\ \hline 5 & & & \\ \hline 6 & & & \\ \hline 7 & & & \\ \hline 8 & & & \\ \hline \end{tabular} Adjusted Trial Balance Blue Hen Magic Adjusted Trial Balance December 31, 2022 Multiple-Step Income Statement Blue Hen Magic Statement of Retained Earnings For the Year Ended December 31, 2022 Balance Sheet Blue Hen Magic Balance Sheet As of December 31,2022