Sunshine Boating Project

Sunshine Boating began business on October 1, 2012 as a retail sales outlet for Swellcraft water-ski and fishing boats. Sunshine Boating is located on the outskirts of Las Vegas, Nevada, and the area provides skiers and fishermen with ample opportunities for boating recreation at nearby lake Mead. Joe Truckee was the founder of the company and he was excited that he was able to get his business established in the fall, so that he would have his operations running smoothly by the peak sales period during spring and early summer. Sunshine Boating has adopted October 31 fiscal year end, at the close of the active boating season.

On October 1, Joe and his attorney were involved with issuing the stock of this closely held corporation. On this same date, he hired a recent graduate of a local trade school, Henry Webster, to be responsible for boat repairs. In the next few days of October, he rented a sales office, boat garage, and lot space. The store is open Monday through Saturday and Joe is there all six days. Henry works 8 hours per day, Monday through Friday. Both Henry and Joe are employees of the corporation.

The page shows Sunshine Boating?s chart of accounts. Following are descriptions of events occurring during October.

CHART OF ACCOUNTS

on the picture

Transactions for October 2012

1. Oct. 1Joe, with the help and advice of his attorney, Jason Rutherfor, issued to himself 5,000 shares of Sunshine Boating, Incorporated common stock (no par) at a price of $20 per share. Joe transferred $100,000 cash from his personal bank account and deposited it in a checking account in the name of Sunshine Boating, Inc.

2. Oct. 1Sunshine Boating hired Henry at $10 per hour. Henry?s typical workweek will be 8 hours a day, 5 days per week. Joe and Henry are paid on the first of each month for the month just ended.

3. Oct. 1Sunshine Boating paid Far West Insurance Agency a one-year general property and liability insurance premium of $2,196.

4. Oct. 1Sunshine Boating paid $2,400 to Ace Property Management Group for three months? rent (October, November, and December) on the sales office and boat lot.

5. Oct. 3Sunshine Boating wrote a $900 check to Jason Rutherford to pay for his assistance in issuing the common stock. The payment is considered a start-up cost. It should be recorded as organization cost and will be expensed immediately.

6. Oct. 5Sunshine Boating purchased boat moving equipment, office furniture, and boat repair machinery. Sunshine Boating paid $6,880 in cash and signed a note payable to pay the rest $20,000 within one year with interest rate of 9.6%. (The note assumes a 360-day year and 30 days of interest charged for each full month. Months with 31 days accrue only 30 days of interest, but so does February).

7. Oct. 6Sunshine Boating purchased, at a cost of $11,500, a Fast Glass model Swellcraft ski boat for resale. Transportation cost from the Swellcraft factory to Sunshine Boating was $550, which Sunshine Boating paid in cash. Sunshine Boating uses a perpetual inventory system for both boats and accessories. Payment terms to Swellcraft are net 60 days.

8. Oct. 6Sunshine Boating purchased on account a variety of accessory merchandise at a cost of $1,330 from Miller Ski Supplies. Freight was paid by Miller. Terms are net 30 days.

9. Oct. 8Sunshine Boating purchased supplies costing $760, paying cash.

10. Oct. 9John Phillips, a local ski enthusiast, provided Sunshine Boating with its first sale when he bought a $490 slalom ski for cash. The ski had been included in the October 6 purchase and had cost Sunshine Boating $350.

11. Oct. 10Albert Snell, another skier, brought his Manvader ski boat into be ?summarized?. Henry changed both the engine and out drive oil, drained the water from the engine, replaced the spark plugs, and tuned the engine. Albert, a long time friend of Joe, agreed to pay the $220 invoice within Sunshine Boating? customary 30-day trade terms.

12. Oct. 12Sold Frank Featherstone a dry suit with a $410 price. After checking his credit, he was allowed the 30-day trade terms. The dry suit also was included in the October 6 purchase and had cost $225.

13. Oct. 12 Sunshine Boating purchased additional accessory merchandise from Fisherman?s Warehouse at a cost of $860. Sunshine Boating agreed to the 15-day payment terms from Fisherman?s and paid $40 cash to a tracking firm for transportation.

14. Oct. 13Sunshine Boating paid Admirable Advertising Agency $180 for a newspaper advertisement.

15. Oct. 14After inspecting the merchandise from Fisherman?s Warehouse on October 12, Joe noticed that part of the merchandise was damaged. Sunshine Boating returned the damaged merchandise, which had cost $130, and received a debit memorandum from Fisherman?s Warehouse.

16. Oct. 15 Art Jensen, a new customer, purchased fishing gear at a price of $335, paying cash. The merchandise was included in the October 12 purchase at a cost of $222.

17. Oct. 16Joe was hopeful that his newspaper advertisement would bring in boat customers, so he purchased a 15-foot, Swellcraft fishing boat with a 25-housepower outboard motor. Sunshine Boating received an invoice for $7,800 from Swellcraft and paid $310 cash for transportation.

18. Oct. 17 Sunshine Boating?s advertisement in the morning paper paid off when Lance Layitover signed a sales contract to buy the Fast Glass Swellcraft ski boat for an ?out-the-door? price of $18,999.

19. Oct 18Sunshine Boating had a booth in the Nevada State Boat Show to be held Sunday, October 21, paying the organizers of the event $300 (Advertising expense).

20. Oct. 19 Lance delivered the bank?s check for $17,000 and his own for the balance of $1,999 to fulfill the sales contract signed on Oct. 17^th (transaction #18). Sunshine Boating delivered the Fast Glass Swellcraft ski boat to Lance.

21. Oct. 20Sunshine Boating paid Swellcraft the $11,500 it owed on its purchase of the Swellcraft ski boat.

22. Oct. 20 Henry finished repairs and maintenance jobs on several boats. Cash receipts for this work amounted to $1,755.

23. Oct. 22 Sunshine Boating?s advertisement was so successful that he paid another $180 for another advertisement.

24. Oct. 23Sunshine Boating purchased another Fast Glass Swellcraft ski boat with some additional options that weren?t included in the one he sold. The invoice cost was $12,100, which he agreed to pay on the same terms as his first purchase. Transportation cost, which Sunshine Boating paid in cash, was $515.

25. Oct. 24 Ski accessory sales for cash totaled $704 for the day. The cost of these sales was $425.

26. Oct. 25 Frank Hammons, an avid skier, purchased a slalom ski from the manufacturer?s catalogue. He paid the entire $580 price and the ski was back-ordered because it was not in stock.

27. Oct. 25Sunshine Boating wrote a $730 check to pay Fisherman?s Warehouse for its October 12 purchase.

28. Oct. 26Accessories costing $545 were sold to Vivian Ellis for a price of $770. Joe?s check of her credit qualified her for 30-day credit terms.

29. Oct. 26Additional accessory merchandise costing $827 was purchased from Tackle and Line Shop. Shipping costs were paid for in cash ($23) by Sunshine Boating. Payment terms are 30 days.

30. Oct. 26James Murphy, a long-time associate of Joe Truckee, had major repairs to his boat performed during the last week of October. Henry finished the repairs on this date and Murphy was billed $2,329. Payment from James is due in 30 days.

31. Oct. 27Joe and his wife, Martha, who is the Vice-president of Sunshine Boating, constitute the Board of Directors. They met and declared a $.50 per share cash dividend, to be paid on November 15, 2012.

Adjusting Entries: additional information as of October 31, 2012

1. Joe was very conscientious in checking his customers? credit history. However, while at the Nevada State Boat Show, he learned that it is customary within the pleasure boating industry for retail boat sales to suffer bad debt losses equal to 5% of credit sales. Joe decides that it is prudent to use the 5% industry-wide standard until he has more experience with his own business and customers. Round estimates to the nearest dollar.
2. Joe counts his Supplies after the close of business on the last day of the month and determines the cost of unused supplies to be $262.
3. Joe estimates that his office furniture and boat related equipment will last eight years with no salvage. Fixed assets purchased in the first half of the month are depreciated for the entire month, while fixed assets purchased in the last half of the month are not depreciated until the second month. The company uses the straight-line method. Depreciation is rounded to the nearest dollar.
4. Henry worked 20 days during October and did not work any overtime. Joe gets a monthly salary of $3,000.
5. On November 4, Sunshine Boating received a $357 invoice from Desert Gas and Electric Company for utilities consumed during October.

Required: All numbers should be rounded to whole dollars.

Part 1(18 points):

1. Journalize the transactions for October (use general journal forms).
2. Prepare T-accounts for all accounts (e.g., cash, accounts receivable, etc.). Each T-account should have its account title and account number from the chart of accounts written on the top line of the T-account.
3. Post each journal entry to the appropriate T-account, and then determine unadjusted ending balances for each T-account.
4. Prepare unadjusted trial balance.

Part 2(16 points):

1. Journalize adjusting journal entries for October.
2. Post adjusting entries to the appropriate T-accounts, then calculate ending balances.
3. Prepare adjusted trial balance.

Part 3(16 points):

1. Journalize and post the closing entries for October 2012.
2. Prepare post-closing trial balance.
3. Prepare the following statements (assuming no income tax):
4. Multiple-step income statement for the month ended October 31, 2012.
5. Statement of Retained Earnings dated October 31, 2012
6. Classified balance sheet dated October 31, 2012.

All journal entries must be entered in the same format in the template. Deductions will be taken for each entry not in the correct format.