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Accounting 301 Project_Zippy Lines, Inc._Financial statement




Question;Accounting 301 Project;Due December 5, 2013;Zippy;Lines, Inc. is a small company based in Colorado. Zippy Lines, Inc. sells specialty outdoor;sporting goods and equipment used by mountain climbers. Zippy;Lines sells its goods to outdoor adventure firms and holds instructional;classes. It is in its second year of;operation.;Kirk;Krazen, the accountant for the company was hurt in a climbing accident and the;company has requested that you prepare the monthly close for January 2013;including preparation of the monthly financial statements. The company?s fiscal year coincides with the;calendar year. The monthly financial statements should include a balance sheet;income statement and cash flow statement for the month.;The;company?s president, Al Titude, has provided you with access to all of the;company?s books and records and you have gathered the information that is;discussed below.;The;company has one bank account in which all of its operating expenses are paid;and all of its cash receipts are deposited.;The company?s general ledger records the cash disbursement transactions;and reflects the cash receipts. Exhibit;1 is a list of accounts and balances as of January 31, 2013 taken from the;general ledger.;Exhibit;2 is a list of all of the transactions shown on the general ledger account for;cash (Account 1010001).;A copy of the company?s bank statement for January;is provided in Exhibit 3.;The;company maintains a subsidiary ledger for accounts receivable. All of the company?s accounts receivable balances;have been updated to reflect the cash receipt, and a journal entry to the cash;account and the accounts receivable has been made. There are 20 outdoor adventure firms that;have accounts with Zippy with terms N30, 10 of these firms had an open balance;as of January. A copy of the accounts;receivable subsidiary ledger is provided in Exhibit 4. The allowance for doubtful accounts was $1,500;as of December 31, 2012. The allowance;is based on estimated default rates and set at 1% of balances currently due and;balances past due less than 30 days, 2% on balances past due 30 to 60 days, 15%;on balances past due over 60 but less than 90 days, and 30% of balances past;due more than 90 days.;The;company uses lower of cost or market to value its inventory. The company uses a periodic inventory system;and applies FIFO cost flow assumption.;Exhibit 5 contains information on its inventory.;The;monthly adjusting entries have not been prepared. The following information has been gathered;to support the closing process. The;staff has done a physical count of inventory and supplies and found the;following balances as of January 31, 2013;-;Supplies - $17,250;-;Inventory ? items shown in Exhibit 5 (valued at Lower of Cost or Market;FIFO) (see Exhibit 5);Below are other items to consider for;adjusting entries;-;The company has a note with TP Bank for $250,000 that is due on July 1;2016. The note has an interest rate of;10%, which is payable on June 30th of each year.;-;Employees earn $1,024 per day and have received payment through January;28th, so they are owed 3 days wages.;There was no salary accrued as of December 31, 2012.;-;The payment for health and all other benefits is $6,125 every two;months. In December, the company issued;the payment and it cleared in January.;No payment was made in January.;-;The prepaid insurance balance is for an annual property and liability;policy with an annual cost of $36,000, which was purchased on July 1, 2012 and;expires on June 30, 2013.;-;The company visited Big Corporation on January 31st and held;an instructional course for a team-building activity for Big Corporation. Zippy charges $10,000 for the class, but has;not been paid, prepared the invoice or recorded the revenue.;-;The accrued expense of $2,125 on December 31, 2012 represented unpaid;consulting bills. The company paid the;consultant $1,575 on January 14th and has an estimated balance of;$3,250 open as of January 31, 2013.;-;The company uses straight-line depreciation. The depreciation periods are 20 years for the;building, 10 for the equipment and 5 for office equipment. There is no salvage value for any of the;property, plant and equipment assets.;Requirements;1. Prepare a bank;reconciliation and any journal entries.;2. Prepare a trial balances as;of January 31, 2013;3. Calculate the allowance for;doubtful accounts, inventory, monthly depreciation, interest, cost of goods;sold etc., and prepare all necessary adjusting entries for the month of;January.;4. Prepare an adjusted trial;balance for the month of January.;5. Prepare the financial;statements for the month of January (income statement, statement of retained;earnings, balance sheet and statement of cash flow (either direct or indirect;basis).;EXHIBIT;1;Below;is a list of accounts with their balances as of January 31, 2013 and December;31, 2012;Account Number;Account Name;January 31, 2013;December 31, 2012;1000001;Cash;60,660;$45,125;1000002;Accounts receivable;27,200;17,500;1000003;Allowance for doubtful accounts;1,500 CR;1,500 CR;1000004;Inventory;33,150;33,150;1000005;Supplies;21,300;21,300;1000006;Prepaid insurance;18,000;18,000;1010001;P,P & E ?Store Equipment;178,000;178,000;1010002;Accumulated depreciation ? Store Equipment;17,800 CR;17,800 CR;1010003;P,P & E ?Office Equipment;25,000;25,000;1010004;Accumulated depreciation ? Office Equipment;5,000 CR;5,000 CR;1010005;P,P & E ? Building;617,500;617,500;1010006;Accumulated depreciation ? building;30,875CR;30,875 CR;2000001;Accounts payable;34,410 CR;31,525 CR;2000002;Accrued expenses;2,125 CR;2,125 CR;2000003;Salaries payable;0 CR;0 CR;2000004;Interest payable;12,500 CR;12,500 CR;2010001;Notes payable;250,000 CR;250,000 CR;3000001;Common stock;100,000 CR;100,000 CR;3000002;Capital in excess of par;400,000 CR;400,000 CR;3000003;Retained earnings;104,250 CR;104,250 CR;3000004;Dividends;0;$0;4000001;Sales Revenue;121,000 CR;-;$0 -;5000001;Purchases;75,000;$0;5000002;Cost of goods sold;0;$0;5010001;Salary expense;20,480;$0;5010002;Benefits expense;0;$0;5010003;Supplies expense;0;$0;5010004;Insurance expense;0;$0;5010005;Utilities expense;895;$0;5010006;Travel expenses;275;$0;5010007;Advertising expenses;425;$0;5010008;Interest expense;0;$0;5010009;Bank fees;0;$0;5010010;Consulting expenses;1,575;$0;5010011;Depreciation expense;0;$0;5010012;Bad debt expense;0;$0;Exhibit;2 ? Detail of transactions on ACCT 100001, Cash.;Date;Description;Amount;DR/CR;Balance;DR/CR;12/31/12;Beginning Balance;DR;$45,125;DR;1/4/13;Cash receipts;$61,500;DR;$106,625;DR;1/4/13;Payment for inventory;$62,115;CR;$44,510;DR;1/7/13;Payment for salaries;$5,120;CR;$39,390;DR;1/11/13;Payment for utilities;$895;CR;$38,495;DR;1/14/13;Payment for salaries;$5,120;CR;$33,375;DR;1/14/13;Payment for consulting;$1,575;CR;$31,800;DR;1/14/13;Cash receipts;$26,525;DR;$58,325;DR;1/21/13;Payment for salaries;$5,120;CR;$53,205;DR;1/27/13;Cash receipts;$13,275;DR;$66,480;DR;1/28/13;Payment for salaries;$5,120;CR;$61,360;DR;1/28/13;Payment for travel;$275;CR;$61,085;DR;1/28/13;Payment for advertising;$425;CR;$60,660;DR;Note;Entries for cash receipts on accounts receivables have not been made for;January. The outstanding checks as of;December 31, 2012 was $6,125. There were;no outstanding deposits.;Exhibit;3 ? Summary of Bank statement;TDC;Bank;Denver;CO;Beginning;balance????????.$51,250;Deposits;?????????????..$61,300;Checks cleared??????????;(51,890);Bank fees????????????? (600);Ending balance?????????..$60,060;Exhibit;4 ? Accounts receivable subsidiary ledger;Name;Balance;12/31/12;New Sales;Cash;Receipts;Balance;3/31/13;Aging Schedule;Due or 90;Johnson;Guides;$1,200;35,000;33,850;$2,350;$2,350;Adirondack;Adventures;$4,000;8,500;7,000;$5,500;$4,500;$1,000;Colorado;Climbers;$2,000;12,500;12,000;$2,500;$2,500;Outdoor;Ways;$3,150;$6,000;$3,000;$6,150;$3,150;Kincade;Climbers;$650;950;600;$1,000;$950;$50;Spartan;Adventures;$500;3,250;500;$3,200;$3,200;Nature?s;Highway;$750;500;$1,250;$500;$750;Billings;Mountains;$2,250;$2,250;$250;$2,000;Sky;Adventures;$2,000;4,350;4,350;$2,000;$2,000;Spirit;Adventures;$1,000;$1,000;$1,000;Total;$17,500;$71,000;$61,300;$28,100;$20,400;$4,000;$2,000;$800;Exhibit;5 ? Inventory;I.;Ending Counts;Item Name;Units;Replacement Cost;Selling Price;Selling Costs;Normal Profit %;Ropes;100;10;25;5;30%;Climbing;shoes;800;35;60;5;25%;Climbing;Hardware;100;20;35;5;20%;Helmets;600;25;40;5;30%;II.;Ropes;Date;Units;Unit Cost;Total;Beginning;inventory;1/1/13;50;9;450;Purchase;1/11/13;100;9.5;950;Purchase;1/18/13;200;10;2000;Purchase;1/25/13;200;10;2000;End;1/31/13;100;III.;Climbing Shoes;Date;Units;Unit Cost;Total;Beginning;inventory;1/1/13;600;32;19,200;Purchase;1/11/13;1000;33;33,000;Purchase;1/18/13;200;34;6,400;Purchase;1/25/13;1000;35;35,000;End;1/31/13;800;IV.;Climbing Hardware;Date;Units;Unit Cost;Total;Beginning;inventory;1/1/13;50;18;900;Purchase;1/11/13;100;19;1,900;Purchase;1/18/13;200;20;4,000;Purchase;1/25/13;200;20;4,000;End;1/31/13;100;V.;Helmets;Date;Units;Unit Cost;Total;Beginning;inventory;1/1/13;500;24;12,000;Purchase;1/11/13;1,000;24;24,000;Purchase;1/18/13;800;25;20,000;Purchase;1/25/13;1,000;25;25,000;End;1/31/13;600


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