NEED BEFORE MIDNIGHT 12/10/19 CST
1) Using Trap Adventures, Inc.’s income statement, evaluate the operations for the month of December. Complete a common-size income statement using sales as the base number.
What is the largest percentage?
What is the smallest percentage?
What recommendations could be made to increase Trap’s net income?
2) Currently, Trap Adventures, Inc. does not own any loans or bank notes (long-term liabilities).
What would happen if Trap decides to obtain a bank loan for $25,000 to fund daily operations?
How would this transaction impact the financial statements – which accounts would be affected?
What is the debt to equity ratio?
What does the debt to equity ratio represent?
Journal Entries
| Dec | 1 | Cash | 60000 | |
| Common Stock | 60000 | |||
| 2 | Prepaid Rent | 18000 | ||
| Cash | 18000 | |||
| 2 | Office Equipment | 17500 | ||
| Cash | 17500 | |||
| 3 | Office Supplies | 1500 | ||
| Accounts Payable | 1500 | |||
| 10 | Prepaid Insurance | 3600 | ||
| Cash | 3600 | |||
| 14 | Salaray Expense | 10750 | 10750 | |
| Cash | ||||
| 24 | Cash | 54000 | ||
| Commission Revenue | 54000 | |||
| 28 | Salaray Expense | 12125 | ||
| Cash | 12125 | |||
| 29 | Repair Expense | 350 | ||
| Cash | 350 | |||
| 30 | Telephone Expense | 450 | ||
| Cash | 450 | |||
| 30 | Dividends | 3000 | ||
| Cash | 3000 | |||
| 181275 | 181275 |
Unadjusted Trial Balance
| Trap Adventures, Inc. | ||
| Unadjusted Trial Balance | ||
| December 31, 2015 | ||
| Cash | $ 48,225 | |
| Prepaid Rent | 18,000 | |
| Prepaid Insurance | 3,600 | |
| Office Supplies | 1,500 | |
| Office Equipment | 17,500 | |
| Accounts Payable | $ 1,500 | |
| Common Stock | 60,000 | |
| Dividends | 3,000 | |
| Commission Revenue | 54,000 | |
| Salary Expense | 22,875 | |
| Repair Expense | 350 | |
| Telephone Expense | 450 | |
| Totals | $ 115,500 | $ 115,500 |
Adjusting Entries
| Dec | 31 | Insurance Expense | 300 |
| Prepaid Expense | 300 | ||
| 31 | Rent Expense | 3000 | |
| Prepaid Rent | 3000 | ||
| 31 | Office Supplies Expense | 900 | |
| Office Supplies | 900 | ||
| 31 | Depreciation Expense | 325 | |
| Accumulated Depreciation | 325 | ||
| 31 | Salary Expense | 525 | |
| Salary Payable | 525 |
Adjusted Trial Balance
| Trap Adventures, Inc. | ||
| Adjusted Trial Balance | ||
| December 31, 2015 | ||
| Cash | $ 48,225 | |
| Prepaid Rent | 15,000 | |
| Prepaid Insurance | 3,300 | |
| Office Supplies | 600 | |
| Office Equipment | 17,500 | |
| Accumulated Depreciation | 325 | |
| Accounts Payable | $ 1,500 | |
| Salary Payable | $ 525 | |
| Common Stock | 60,000 | |
| Dividends | 3,000 | |
| Commission Revenue | 54,000 | |
| Salary Expense | 23,400 | |
| Repair Expense | 350 | |
| Telephone Expense | 300 | |
| Insurance Expense | 450 | |
| Rent Expense | 3,000 | |
| Office Supplie Expense | 900 | |
| Depreciation Expense | 325 | |
| Totals | $ 116,350 | $ 116,350 |
Financial Statements
| Trap Adventures, Inc. | NOTE that there are THREE Statements included on this sheet. | ||
| Income Statement | |||
| For the year ended December 31, 2015 | |||
| Revenues: | |||
| Commissions Revenue | $ 60,000.00 | ||
| Expenses: | |||
| Salary Expense | $ 23,400.00 | ||
| Repair Expense | 350 | ||
| Telephone Expense | 450 | ||
| Insurance Expense | 300 | ||
| Rent Expense | 3000 | ||
| Office Supplies Expense | 900 | ||
| Depreciation Expense | 325 | ||
| Total Expenses | 28,725 | ||
| Net Income | $ 31,275 | ||
| Trap Adventures, Inc. | |||
| Statement of Stockholder’s Equity | |||
| For the year ended December 31, 2015 | |||
| Common Stock | Retained Earnings | Totral Stockholder’s Equity | |
| Beginning Balance, December 1, 2015 | $ – 0 | $ – 0 | $ – 0 |
| Add issuance of common stock | 60,000 | 60,000 | |
| Add net income | 31,275 | 31,275 | |
| Less dividends | (3,000) | (3,000) | |
| Ending Balance, December 31, 2015 | $ 60,000 | $ 28,275 | $ 88,275 |
| Trap Adventures, Inc. | |||
| Balance Sheet | |||
| December 31, 2015 | |||
| Assets | Liabilities | ||
| Current Assets: | Current Liabilities: | ||
| Cash | $ 48,225 | Accounts Payable | $ 1,500 |
| Prepaid Rent | 15,000 | Salary Payable | 525 |
| Prepaid Insurance | 3,300 | Total Current Liabilities | $ 2,025 |
| Ofiice Supplies | 600 | ||
| Total Current Assets | $ 67,125 | ||
| Long-term Assets: | |||
| Office Equipment | $ 17,500 | ||
| Less Accumulated Depreciation | (325) | Stockholder’s Equity | |
| Total Long-term Assets | $ 17,175 | Common Stock | $ 60,000 |
| Retained Earnings | 28,275 | ||
| Total Stockholder’s Equity | 88,275 | ||
| Total Assets | $ 84,300 | Total Liabilities and Stockholder’s Equity | $ 90,300 |
Closing Entries
| Dec | 31 | Retained Earnings | 28725 |
| Salary Expense | 23400 | ||
| Repair Expense | 350 | ||
| Telepohone Expense | 450 | ||
| Insurance Expense | 300 | ||
| Rent Expense | 3000 | ||
| Office Supplies Expense | 900 | ||
| Depreciation Expense | 325 | ||
| 31 | Commission Revenue | 54000 | |
| Retained Earnings | 54000 | ||
| 31 | Retained Earnings | 3000 | |
| Dividends | 3000 |
Post-Closing Trial Balance
| Trap Adventures, Inc. | |
| Post-Closing Trial Balance | |
| December 31, 2015 | |
| Cash | $ 48,225 |
| Prepaid Rent | 15,000 |
| Prepaid Insurance | 3,300 |
| Office Supplies | 600 |
| Office Equipment | 17,500 |
| Accumulated Depreciation | $ 325 |
| Accounts Payable | $ 1,500 |
| Salary Expense | 525 |
| Common Stock | $ 60,000 |
| Retained Earnings | 22,275 |
| $ 84,625 | $ 84,625 |
Writing Portion
| NOTE that this tab should be used for the writing portion of the Unit 5 IP Assignment. |
| Answer two of the questions below in 1-2 fully developed paragraphs. A fully developed paragraph should have a major point with 3 to 5 support sentences. One or two sentences is not acceptable or does not discuss the question. Be sure to show what you know!!! |
| 1. Trap Adventures, Inc. is looking for an accountant. In your own words, explain to Trap’s hiring team the role of accountant and accounting within business. |
| Provide examples of the expectations of the accountant. |
| 2. Discuss the financial position of Trap Adventures, Inc using the following ratios: |
| Current ratio |
| Return on equity |
| For each ratio, provide the calculation and an explanation of the meaning. |
| Is this a positive or negative result for the Trap Adventures, Inc.? |
| 3. Using Trap Adventures, Inc.’s income statement, evaluate the operations for the month of December. Complete a common-size income statement using sales as the base number. |
| What is the largest percentage? |
| What is the smallest percentage? |
| What recommendations could be made to increase Trap’s net income? |
| 4. Currently, Trap Adventures, Inc. does not own any loans or bank notes (long-term liabilities). |
| What would happen if Trap decides to obtain a bank loan for $25,000 to fund daily operations? |
| How would this transaction impact the financial statements – which accounts would be affected? |
| What is the debt to equity ratio? |
| What does the debt to equity ratio represent? |
Leave a Reply
Want to join the discussion?Feel free to contribute!