Question

ACTG223: H1 - Financial Accounting 201 Refresher The following transactions occurred during 2019; the first year of operations for the Bozeman Ski Shop, Incorporated. 1. BSS, Inc. was organized as a corporation in Montana on January 1, 2019. BSS sold 20,000 shares of common stock at $10 per share. 2. On Jan. 1, 2019 a ski tuning machine was purchased for $50,000. It will be used for 5 years. The straight-line method will be used, and there is no salvage value. 3. The business paid $250,000 in cash to vendors for skis. 4. A building was rented (including insurance and utilities) for 12 months at $2,500 per month; all twelve-monthly payments were paid in cash during the year. 5. In 2019, cash paying customers bought $250,000 of ski merchandise. 6. Employees were paid $110,000 for wages in 2019, which includes a $30,000 salary to the owner/manager. 7. The business also purchased $50,000 of skis on account from vendors. This amount was still owed at December 31, 2019. 8. The business also sold $150,000 of skis to customers on account. This amount was still owed at December 31, 2019. 9. The year-end inventory taken on 12/31/2019 of unsold ski merchandise amounted to $100,000 at cost. 10. On December 15th, 2019 the corporation declared and paid cash dividends of $.50 per share. 11. The corporate income tax rate is 30%, and the income taxes will not be paid until the end of February 2020. Required: For Wednesday 8/28 Prepare the following financial statements for Bozeman Ski Shop, Inc. for 2018; a Multi-Step Income Statement, the Statement of Stockholders' Equity, and a Classified Balance Sheet, using the accrual basis of accounting. You may determine the amounts any way you like (journal entries, t- accounts, trial balances, worksheets or just using math.

Answer 1

Working as follows:

Tran sacti Account Title Debit Credit Cash $200,000 Common sto ck (20,000 x $10 per share) $200,000 |Machine Ski tuming $50,000 Cash $50,000 Inventory $250,000 Cash $250,000 Prepaid rent Cash ($2,500 x 12 months) $30,000 $30,000 Cash $250,000 Sale $250,000 Salary & wage expense $110,000 Cash $110,000 Inventory Accounts payable $50,000 $50,000

Accounts receivable $150,000 Sales $150,000 COGS $200,000 Inventory ($250000+ $50000 - $100000 = $200,000) $200,000 10 Dividends $10,000 Cash (20,000 x $0.50) $10,000 Adjustting entries Income tax expense Income tax payable $15,000 $15,000 Rent expense $30,000 Prepaid rent $30,000 3 Depreciation expense-Machine Ski tuming $10,000 Accumulated Depreciation expense-Machine Ski tuming $10,000 $50,000/5 years) Prepare Income statement as follows:

Income Statement $400,000 Sales Less: COGS Gross profit Less: Operating expense (S200,000) $200,000 Salary & wage expense $110,000 Rent expense Deperciation expense Net Income before tax $30,000 $10,000 $150,000 $50,000 $15,000 Less: tax expense ($50,000*30%) Net Income $35,000 Prepare statement of retained eamings as follows: Statement of retained earnings Beginning balance Add: Income Less: Dividend Ending balance $35,000 S10,000 S25,000

Prepare Balance Sheet as follows: Balance sheet Assets: so Cash Accounts receivable $150,000 Inventory Machine, Net ($50,000 - $10,000) Total Assets $100,000 $40,000 $290,000 Liabilities Accounts payable Income tax payable $50,000 $15,000 Shareholders' Equity: $200,000 Common stock Retained earnings $25,000 Total liabilites and shareholders' equity $290,000