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Accounting 301 Project - Zippy Lines, Inc.

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Question;Zippy Lines, Inc. is a small company based in Colorado. Zippy Lines, Inc. sells specialtyoutdoor sporting goods and equipment used by mountain climbers. Zippy Lines sells its goodsto 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 companyhas requested that you prepare the monthly close for January 2013, including preparation of themonthly financial statements. The companys fiscal year coincides with the calendar year. Themonthly financial statements should include a balance sheet, income statement and cash flowstatement for the month.The companys president, Al Titude, has provided you with access to all of the companys booksand 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 itscash receipts are deposited. The companys general ledger records the cash disbursementtransactions, and reflects the cash receipts. Exhibit 1 is a list of accounts and balances as ofJanuary 31, 2013 taken from the general ledger. Exhibit 2 is a list of all of the transactionsshown on the general ledger account for cash (Account 1010001). A copy of the companysbank statement for January is provided in Exhibit 3.The company maintains a subsidiary ledger for accounts receivable. All of the companysaccounts receivable balances have been updated to reflect the cash receipt, and a journal entry tothe cash account and the accounts receivable has been made. There are 20 outdoor adventurefirms that have accounts with Zippy with terms N30, 10 of these firms had an open balance as ofJanuary. A copy of the accounts receivable subsidiary ledger is provided in Exhibit 4. Theallowance for doubtful accounts was $1,500 as of December 31, 2012. The allowance is basedon estimated default rates and set at 1% of balances currently due and balances past due less than30 days, 2% on balances past due 30 to 60 days, 15% on balances past due over 60 but less than90 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 periodicinventory system and applies FIFO cost flow assumption. Exhibit 5 contains information on itsinventory.The monthly adjusting entries have not been prepared. The following information has beengathered to support the closing process. The staff has done a physical count of inventory andsupplies 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) (seeExhibit 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 notehas 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 theyare 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 inJanuary.-The prepaid insurance balance is for an annual property and liability policy with anannual 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 fora team-building activity for Big Corporation. Zippy charges $10,000 for the class, buthas not been paid, prepared the invoice or recorded the revenue.The accrued expense of $2,125 on December 31, 2012 represented unpaid consultingbills. The company paid the consultant $1,575 on January 14th and has an estimatedbalance of $3,250 open as of January 31, 2013.The company uses straight-line depreciation. The depreciation periods are 20 years forthe building, 10 for the equipment and 5 for office equipment. There is no salvage valuefor any of the property, plant and equipment assets.Requirements1. Prepare a bank reconciliation and any journal entries.2. Prepare a trial balances as of January 31, 20133. Calculate the allowance for doubtful accounts, inventory, monthly depreciation, interest,cost of goods sold etc., and prepare all necessary adjusting entries for the month ofJanuary.4. Prepare an adjusted trial balance for the month of January.5. Prepare the financial statements for the month of January (income statement, statement ofretained earnings, balance sheet and statement of cash flow (either direct or indirectbasis).

 

Paper#38730 | Written in 18-Jul-2015

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