Question

C9-1 Accounting for Operating Activities (Including Depreciation) and Preparing Financial Statements (Chapters 3, 4, 8, and 9) [LO 3-3, 4-2, 8-2 9-2, 9-3] Grid Iron Prep Inc. (GIPI) is a service business incorporated in January of the current year to provide personal training for athletes aspiring to play college football. The following transactions occurred during the month ended January 31. a. GIPI issued stock in exchange for $160,000 cash on 1/01 b. GIPI purchased a gymnasium building and gym equipment on 1/02 for $56,000, 80% of which related to the gymnasium and 20% to the equipment. c. GIPI paid $300 cash on 1/03 to have the gym equipment refurbished before it could be used. d. GIPI provided $10,000 in training on 1/04 and expected collection in February. e. GIPI collected $42,000 cash in training fees on 1/10, of which $39,000 related to January and $3,000 related to February. f. GIPI paid $29,500 of wages and $8,000 in utilities on 1/30. g. GIPI will depreciate the gymnasium building using the straight-line method over 10 years with a residual value of $5,000. Gym equipment will be depreciated using the double-declining-balance method, with an estimated residual value of $4,500 at the end of its four-year useful life. Record depreciation on 1/31 equal to one-twelfth the yearly amount. h. GIPI received a bill on 1/31 for $670 for advertising done on 1/31. The bill has not been paid or recorded. i. GIPI uses the aging method for estimating doubtful accounts and, on 1/31, will record an estimated 3 percent of its under-30-day-old accounts as not collectible. j. GIPI's income tax rate is 30%. Assume depreciation for tax is the same amount as depreciation for financial reporting purposes. Statement of General Journal General Income Trial Balance Retained Balance Sheet Requirement Ledger Statement Earnings

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Answer 1

Grid Iron Prep Inc. Journal Enteries Trans. Particulars Cash a/c Dr. To Common Stock (Common Stock issued) Debit in $ Credit in $ 160000 160000 b. Dr. Dr. 44800 11200 Building a/c Equipment a/c To Cash (Assets purchased) 56000 300 Equipment a/c Dr. To Cash (Equipment refurbished) 300 d. 10000 Accounts Receivable a/c Dr. To Training Revenue (Revenue on account) 10000 Dr. 42000 Cash a/c To Training Revenue To Unearned Revenue (Cash fro services) 39000 3000 Dr. Dr. 29500 8000 Wages Expense a/c Utilities Expense a/c To Cash (Expense paid) 37500

Adjusting Enteries Trans. Particulars Depreciation a/c Dr. To Accumulated Depreciationn - Build (Being depreciation charged to asset) (44800 - 5000)/( 10 x 12) Debit in $ Credit in $ 332 332 479 479 Depreciation a/c Dr. To Accumulated Depreciation - Equip (Being depreciation charged to asset) (11200 + 300 ) x 2 x 1/4 x 1/12 h. Dr. 670 Advertising Expense a/c To Accounts Payable (Expense accrued) 670 300 300 Bad Debts a/c Dr. To Allowance fro Doubtful accounts (Bad debts estimated) 10000 x 3% Dr. 2916 Income Tax Expense a/c To Income Tax Payable (Income tax accrued) 2916

Worksheet For the period ending January 31 Particulars Cash Accounts Receivable Allowance for Doubtful accounts Building Accumulated Depreciationn - Build Equipment Accumulated Depreciationn - Equip Accounts Payable Unearned Revenue Income Tax Payable Common Stock Training Revenue Wages Expense Utilities Expense Depreciation Advertising Expense Bad Debts Income Tax Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 108200 108200 10000 10000 300 300 44800 44800 332 332 11500 11500 479 479 670 670 3000 3000 2916 2916 160000 160000 49000 49000 29500 29500 8000 8000 811 811 670 670 300 300 2916 2916 212000 212000 4697 4 697216697 216697 49000 Statement of Income For the period ending January 31 Training Revenue Less: Wages Expense Utilities Expense Depreciation Advertising Expense Bad Debts 29500 8000 811 670 300 39281 9719 -2916 6803 Income Tax Expense @ 30% Net Income Statement of Retained Earnings For the period ending January 31 Net Income 6803

Amounts in $ Amounts in $ Balance sheet As at Jan 31 Assets Amounts in $ Amounts in $ Liabilities Current Assets Current Liabilities Cash 108200 Accounts Payable Accounts Receivable 10000 Unearned Revenue Allowance for Doubtfu -300 117900 Income Tax Payable 670 3000 2916 6586 Non Current Assets Building Accumulated Deprecia Equipment Accumulated Deprecia Total Assets 44800 -332 11500 -479 44468 Shareholders Equity Common Stock 160000 11021 Retained Earnings 6803 173389 Total Liabilities & Shareholders Eq. 166803 173389