Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The company estimates that 3 % of its accounts receivable balance will be uncollectable. Economic Events February 1 . Nicole sold one - half of

The company estimates that 3% of its accounts receivable
balance will be uncollectable.
Economic Events
February 1. Nicole sold one-half of the training equipment purchased in January for cash.
The sale resulted in a profit of $300. Hint: determine the book value of the equipment sold
and then determine the selling price. Profit = selling price book value.
February 1. Nicole obtained a line of credit with Commerce Bank for $25,000. The interest
rate on the line of credit is 9%. Payments of interest and 5% of outstanding balance are due
on the last day of each month.
February 2. Nicole obtained $8,000 from the line of credit established on February 1.
February 1. Nicole purchased a van for $42,000 plus 6% sales tax by paying $10,000 cash
and issuing a 60 month installment note for the balance. The monthly payment on the note
is $667. Nicole estimates the van to have a 6-year useful life and a salvage value of
$15,000.
February 2. Nicole hired a part-time assistant to begin working on February 15. The
assistant is paid $2,000 per month on the 15th day of the month with the first payment due
on March 15.
February 9. DunnRite Training purchased $3,000 in office supplies on account.
February 10. DunnRite Training paid for the inventory purchased on January 10.
February 14. DunnRite purchased 100 logoed tank tops for $9 per tank and 75 logoed t-
shirts for $10 per t-shirt. This inventory was purchased on account with payment due in 30
days.
February 15. DunnRite Training received $9,000 cash for training services February 1 to
February 14.
February 17. DunnRite Training performed $3,000 of training services on account. Payment
is due in 30 days.
February 17. DunnRite Training received payment in full for all training services performed
on account in January.
February 19. Lynne Lulu, one of Nicoles clients, filed a lawsuit against DunnRite Training for
$75,000. The lawsuit alleges that Nicole did not take proper precautions during a training
session. While Ms. Lulu did not receive any physical injuries, she claims that the lack of care
resulted in emotional distress that prevents her from training. Nicole consulted an attorney
which stated that the likelihood of any payment to Ms. Lulu is remote.
February 20. DunnRite Training completed $2,000 training for Champions Scholastic
Programs on account. Payment is due in 30 days.
February 25. DunnRite Training paid $3,500 in dividends.
February 29. DunnRite Training received $8,000 cash for training services to be performed
from March 1 to March 31.
February 29. DunnRite sold 105 tanks during the month of February for $20 per tank and
67 t-shirts at $25 per t-shirt. All customers paid cash at the time of purchase.
February 29. Nicole completed an inventory of supplies and determined that $800 was on
hand.
February 29. Nicole made the first payment on the installment note issued on February 1.
February 29. Nicole made the minimum payment due on the line of credit with Commerce
Bank.
Assignment
The starting point for this assignment is the midterm project solution. In addition, the
economic events in January should be considered when preparing the February financial
statements (e.g., depreciation).
Review the transactions and add any accounts that will be needed to the chart of accounts
for DunnRite Training, Inc. (see midterm solution for chart of accounts established in
January). The chart of accounts should list the name of the account, the type of account
(e.g., asset, liability, revenue, etc.), and where the account will appear (e.g., balance sheet,
income statement, etc.) Include all accounts needed for the monthly transactions and for
the month-end adjustments.
1. Record the transactions using the horizontal balance sheet method used
throughout the course.
Set up an Excel spreadsheet with all the accounts identified in part 1 of this
assignment listed in the spreadsheet's columns. Accounts should appear in
the following order:
Assets
Liabilities
Equity
Revenue
Expense
Record each transaction in the rows under the account name.
The last two columns should be for the statement of cash flows. Indicate the
amount of the change in cash (+,-) and the type of cash flow (e.g., Investing,
Financing, Operating)
Record any necessary adjusting entries in the spreadsheet.
Determine the ending balance in each account by summing each column.
2. Prepare comparative financial statements (includeFebruary side-by-
side) and include the income statement, statement of changes in stockholders'
equity, classified balance sheet, and statement of cash flows for DunnRite Training.
Please do it for every transaction.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Loss Control Auditing A Guide For Conducting Fire Safety And Security Audits

Authors: E. Scott Dunlap

1st Edition

1439828865, 978-1439828861

More Books

Students also viewed these Accounting questions