Question

Financial Accounting Problem

T-accounts / Statement of earnings / Ratio

Joanne Beauport, a connoisseur of fine chocolate, opened Joanne's Chocolates Inc. in Newtown on March 1. 2017. The shop specializes in a selection of gourmet chocolates and a line of gourmet ice cream. You have been hired as manager. Your duties include maintaining the store's financial records. The following transactions occurred in March 2017, the first month of operations: a. Received contributions of $78,000 in total from four shareholders to form the corporation b. Paid store rent for three months at $2,500 per month (recorded as prepayment) c. Purchased supplies for $1,700 cash. d. Purchased chocolates on account for $11,400, due in 30 days e. Issued additional shares to new investors for $19,000 cash. f. Used the money from (e) to purchase a computer for $5,800 (for recordkeeping and inventory tracking) The rest was used to buy furniture and fixtures for the store. g. Placed a grand-opening advertisement in the local paper for $1,030 cash h. Sold chocolates for $6,000, $4,650 was in cash and the rest on account. The cost of the chocolates sold was $3,900. i Made a $2,800 payment on accounts payable. j. Incurred and paid employee wages of $4,320. k Collected accounts receivable of $380 from customers. 1 Made a repair on one of the display cases for $358 cash. m. Made cash sales of $10,900 during the rest of the month. The cost of the chocolates and ice cream sold was $3,800 Required: 1. & 2. Post the above transactions in to the appropriate T-accounts. Cash Accounts Receivable Beg. bal. Beg. bal. End. bal. End. bal. Supplies Merchandise Inventory Beg bal. Beg, bal End. bal. End. bal.

Answer 1

Cash Accounts Receivable Beg. bal. Beg. bal. 1,350 380 lk. 78,000 19,000 4,650 380 10,900 End. bal. 970 7,500 b. 1,700C. 19,000 1,030 g 2,800 4,320 3581 End, bal. 76,222 Supplies Merchandise Inventory Beg bal. Beg. bal. 1,700 11,400 3,900 h. 3,800 m. End, bal. 1,700 End, bal

Prepaid Rent Equipment Beg. bal. Beg. bal. b. 7,500 HI 5,800 End. bal. 7,500 End. bal. 5,800 Furniture and Fixtures Accounts Payable Beg bal. Beg bal. 13,200 2,800 11,400 d. End, bal 13,200 End. bal. RELA 8,600 Contributed Capital Sales Revenue Beg. bal. Beg bal. 78,000 a 19,000 e. 6,000 h. 10,900 m. End. bal. 97,000 End. bal. 16,900 Cost of Sales Advertising Expense Beg bal. Beg. bal. 1,030 3,900 3,800 End. bal. 1,030 End bal 7,700 Wages Expense Repair Expense Beg bal. Beg, bal 4,320 358 End bal. 4,320 End. bal 358

16,900 7,700 9,200 JOANINE'S CHOCOLATES INC. Statement of Earnings (unadjusted) For the Month Ended March 31, 2017 Sales revenue Less: Cost of sales Gross margin Less: Operating expenses: Advertising expense 1,030 Wages expense 4,320 Repair expense Total Operating Expenses Net earnings 358 5,708 3,492 Explanation: Taking the closing balance of all revenue and expense account from the T- Accounts. Since it is an unadjusted statement, thus expenses which have been paid but not incurred or charged are not taken into accoount, like rent etc.

Ratio 5 Average Asset 2018 Calculation (67000+81000)/2 2019 Answer Calculation 74000 (81000+13900)/2 Answer 47450 Formula (Beginning Asset + Ending Asset)/2 Sales Average Asset Net Earnings X 100 Average Asset Asset Turnover 123000/74000 1.66 137000/47450 2.89 Return on Assets 35600/74000 X 100 48.11% 51400/47450 X 100 108.32%