Question

Un January 1, 2021, the general ledger or Grand Finale Fireworks includes the following account balances: Accounts Cash Accou
Supplies at the end of January total $6,900. Prepare the adjusting entry for supplies. Note: Enter debits before credits. Deb
Depreciation on the equipment for the month of January is calculated using the straightline method. At the time the equipment
Enter your Return on Equity value to one decimal place and earnings per share value to 2 decimal places. Analyze the followin
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Answer #1

Transaction

Date

Account title

Debit

Credit

B

Jan. 31

Supplies expense (9300+6700-6900)

9100

Supplies

9100

C

Jan. 31

Depreciation expense (82000-11800)/3*1/12

1950

Accumulated depreciation

1950

net income = revenue – expenses = (19500+50900) – (43800+8000+9100+1950+2900) = $4650

beginning stockholders’ equity = common stock + APIC + retained earnings = 18000+98000+40700 = 156700

Ending stockholders’ equity = common stock + APIC + retained earnings – Treasury stock = (18000+2000)+(98000+(40000-2000)+(600*(23-21)))+(40700+4650-((18000+2000-1200)*0.3))-((1200*21)-(600*21)) = $184310

Return on equity = net income / average stockholers’ equity = 4650/((156700+184310)/2) = 2.73%

Therefore

Part A

Return on equity = 2.73%

The company is more profitable than other companies (2.73%>2.50%)

Part B

Number of common share outstanding = 19400 shares (18000+2000-1200+600)

Part C

Earings per share = net income / average shares outstanding = 4650/((18000+19400)/2) = $0.25

Earnings per share for January 2021 is better (0.25>0.20)

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