Question

On January 1, 2021, the general ledger of Grand Finale Fireworks includes the following account balances: Credit Accounts Debit $44,100 47,300 8,900 78,000 Cash Accounts Rece ivable Supplies Equipment Accumulated Depreciation Accounts Payable Common Stock, $1 par value Additional Paid-in Capital Retained Earnings 10,400 16,000 14,000 94,000 43,900 $178,300 $178,300 Totals During January 2021, the following transactions occur: January January January 10 Purchase additional supplies on account, $6,300. January 12 Purchase 1,100 shares of treasury stock for $21 per share. January 15 Pay cash on accounts payable, $17,900. January 21 Provide services to customers for cash, $50,500. January 22 Receive cash on accounts receivable, $18,000. January 29 Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable 2 Issue an additional 2,000 shares of $1 par value common stock for $40,000. 9 Provide services to customers on account, $18,200. February 15. (Hint: Grand Finale Fireworks had 14,000 shares outstanding on January 1, 2021, and dividends are not paid on treasury stock.) on January 30 Resell 800 shares of treasury stock for $23 per share January 31 Pay cash for salaries during January, $43,400 The following information is available on January 31, 2021. a. Unpaid utilities for the month of January are $7,600 b. Supplies at the end of January total $6,500. c. Depreciation on the equipment for the month of January is calculated using the straightline method. At the time the equipment was purchased, the company estimated a service life of three years and a residual value of $11,400. d. Accrued income taxes at the end of January are $2,500.

Answer 1

Grand Finale Fireworks Journal Enteries Date Particulars 2.1.2021 Cash a/c Dr. To Common Stock To Paid in Capital in excess of par (Additional capital issued) Debit in $ Credit in $ 40000 2000 38000 18200 9.1.2021 Accounts Receivable a/c Dr. To Service Revenue (Service provided on account) 18200 6300 10.1.2021 Supplies a/c Dr. To Accounts Payable (Supplies purchased on account) 6300 23100 12.1.2021 Treasury Shares a/c Dr. To Cash (Treasury shares purchased) 1100 x 21 23100 17900 15.1.2021 Accounts Payable a/c Dr,. To Cash (Accounts Payable paid off) 17900 50500 21.1.2021 Cash a/c Dr. To Service Revenue (Service provided in cash) 50500 Dr. 18000 22.1.2021 Cash a/c To Accounts Receivable (Cash received from debtors) 18000 4470 29.1.2021 Dividend a/c Dr. To Dividend Payable (Dividend declared) (14000+2000-1100) x 0.3 4470 Dr. 30.1.2021 Cash a/c 18400 To Treasury Stock 16800 To Paid in Capital in excess of par 1600 (Treasury shares reissued) 800 x 21 = 16800; 800 x 23 = 18400 Dr. 43400 31.1.2021 Salaries Expense a/c To Cash (Salaries paid in cash) 43400

Adjusting Enteries Date Particulars 31.1.2021 Utilities Expense a/c To Accounts Payable (Expenses accrued) Dr. Debit in $ Credit in $ 7600 7600 8700 31.1.2021 Supplies Expense a/c Dr. To Supplies (Supplies expensed) 8900 + 6300 - 6500 8700 1850 1850 31.1.2021 Depreciation Expense - Equip a/c Dr. To Accum. Depre - Equip (Depreciation charged to Equip) (78000-11400)/( 12 x 3) Dr. 2500 31.1.2021 Income Tax Expense a/c To Income Tax Payable (Income Tax accrued) 2500

Trial Balance For the period ending 31.1.2021 Particulars Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Dividend Payable Income Tax Payable Common Stock $1 par value Additional Paid in Capital Additional Paid in Capital - Treasury Retained Earnings Treasury Shares Dividend Service Revenue Salaries Expense Utilities Expense Supplies Expense Depreciation Expense - Equip Income Tax Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 86600 86600 47500 47500 15200 8700 6500 78000 78000 10400 1850 12250 4400 7600 12000 4470 4470 2500 2500 16000 16000 132000 132000 1600 1600 43900 43900 6300 4470 4470 68700 68700 43400 43400 7600 7600 8700 8700 1850 1850 2500 2500 281470 281470 20650 20650293420293420 6300 Statement of Income For the period ending 31.1.2021 Service Revenue 68700 Salaries Expense Utilities Expense Supplies Expense Depreciation Expense - Equip 43400 7600 8700 1850 61550 7150 -2500 Income Tax Expense Net Income 4650 Statement of Retained Earnings For the period ending 31.1.2021 Beginning Net Income 43900 4650 48550 -4470 44080 Dividend

Amounts in $ Amounts in $ Balance sheet As at 31.1.2021 Assets Current Assets Cash Accounts Receivable Supplies Amounts in $ Amounts in $ Liabilities Current Liabilities 86600 Accounts Payable 47500 Dividend Payable 6500 140600 Income Tax Payable 12000 4470 2500 18970 Non Current Assets Equipment Accumulated Depreciatioi Total Assets Share holders Equity Common Stock $1 par value Additional Paid in Capital Additional Paid in Capital - Treasury Retained Earnings 65750 Treasury Shares 206350 Total Liabilities & Equity 16000 132000 1600 44080 -6300 78000 -12250 187380 206350 Return on Equity = Net Income / Total Equity = 4650/(14000+ 94000 + 43900 + 187380)/2 = 4650 / 169640 = 2.74% The Company is more profitable than other companies Number of shares outstanding = 14000 +2000-1100 + 800 = 15700 Earning per share = 4650 / (14000 + 15700)/2 = 4650 / 14850 = $0.313 Grand Final Fireworks has better EPS this year