Question

C3-1 Analyzing, Recording, and Posting, and Preparing and Evaluating Financial Statements (Chapters 1-3) LO 3-2,3-3,3-4, 3-5 Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $15. At the start of January 2018, VGC's income statement accounts had zero balances and its balance sheet account balances were as follows: Cash $1,500,000 150,000 Accounts Receivable 14,700 Accounts Payable Deferred Revenue Notes Payable (due 2025) Common Stock Retained Earnings Supplies Equipment Buildings Land $ 108,000 73,500 60.000 2,500,000 1,419,700 874,500 422,000 1,200,000 In addition to the above accounts, VGC's chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense.

Answer 1

Solution:-

Req. 1 Assets = Liabilities + Stockholders' Equity 1. Cash +50,000 Accounts = No change Receivable -50,000 2. Note Equipment +33,500 Cash -10,000 Payable (long- term) +23,500 3. Cash -10,000 = Advertising Expense (+E) -10,000

4. Supplies +3,000 Accounts Payable +3,000 5. Cash +170,000 = Service Revenue (+R) +170,000 6. Accounts Cash -3,000 = Payable -3,000 7. Cash +112,500 Service Revenue Accounts +225,000 (+R) Receivable +112,500 8. Cash -378,000 = -378,000 Salaries/Wages Expense (+E) Utilities Expense (UE) 9. Accounts No Change = Payable +5,350 -5,350 Req. 2. 1. 50,000 Cash (+A). Accounts Receivable (-A) 50,000 2. 33,500 Equipment (+A). Cash (-A) Note Payable (long-term) (+L) 10,000 23,500 3. 10,000 Advertising Expense (+E, -SE) Cash (-A). 10,000 4. 3,000 Supplies (+A). Accounts Payable (+L) 3,000 5. 170,000 Cash (+A). Service Revenue (+R, +SE). 170,000

6. 3,000 Accounts Payable (-L). Cash (-A) 3,000 7. Cash (+A). Accounts Receivable (UA) Service Revenue (+R, +SE) 112,500 112,500 225,000 8. 378,000 Salaries and Wages Expense (+E, -SE) Cash (-A) 378,000 9. 5,350 Utilities Expense (+E, -SE). Accounts Payable (+L). 5,350 Req. 3 Cash (A) Supplies (A) Beg. Accounts Receivable (A) Beg. 150,000 7. 112,500 50,000 Beg. 14,70 1. 1,500,0 00 10,000 50,000 10,000 2. 1. 4. 0 5. 3. 3,000 7. 6. 170,000 3,000 112,500 378,000 8. End. End. End. 1,431,500 212,500 17,700 Land (A) Building (A) Beg. Equipment (A) 874,500 33,500 Beg. 1,200,000 Beg. 422,000 2. End. End. End. 908,000 1,200,000 422,000 Accounts Payable (L) Unearned Revenue (L) Notes Payable (L)

Beg. 73,50 Beg. 108,000 3,000 60,000 23,500 Beg. 2. 6. 3,00 4. 0 0 5,350 9. 113,350 73,500 83,500 End. End. End. Common Stock (SE) Retained Earnings (SE) 1,419,70 Beg. Beg. 2,500,00 0 0 2,500,000 1,419,700 End. End. Service Revenue (R) Beg. 0 5. 170,0 7. 00 225,0 00 395,000 End. Advertising Expense (E) Utilities Expense (E) Salaries and Wages Expense(E) 0 Beg. 0 Beg. 0 Beg. 378,00 3. 10,000 9. 5,350 8. 0 End. End. End. 378,000 10,000 5,350

Req.4 VANISHING GAMES CORPORATION Unadjusted Trial Balance At January 31, 2018 Debit Credit Cash $1,431,500 Accounts Receivable Supplies Equipment Building Land 212,500 17,700 908,000 422,000 1,200,000 $ 113,350 Accounts Payable Unearned Revenue Notes Payable Common Stock 73,500 83,500 2,500,000 1,419,700 395,000 Retained Earnings Service Revenue 378,000 10,000 Salaries and Wages Expense Advertising Expense Utilities Expense Total 5,350 $4,585,050 $4,585,050 Req. 5 VANISHING GAMES CORPORATION Income Statement For the Month Ended January 31, 2018 Revenues: Service Revenue $ 395,000 395,000 Total Revenues Expenses:

378,000 Salaries and Wages Expense Advertising Expense Utilities Expense Total Expenses Net Income (Loss) 10,000 5,350 393,350 $ 1,650 Req. 6 VANISHING GAMES CORPORATION Statement of Retained Earnings For the Month Ended January 31, 2018 Retained Earnings, January 1, 2015 $ 1,419,700 Add (Subtract): Net Income (Loss) 1,650 Subtract: Dividends 0 Retained Earnings, January 31, 2015 $ 1,421,350 Req. 7 VANISHING GAMES CORPORATION Balance Sheet At January 31, 2018 Assets Current Assets Cash Accounts Receivable Supplies Total Current Assets $ 1,431,500 212,500 17,700 1,661,700 908,000 422,000 1,200,000 $ 4,191,700 Equipment Building Land Total Assets Liabilities Current Liabilities

$ 113,350 Accounts Payable Unearned Revenue Total Current Liabilities 73,500 186,850 83,500 270,350 Notes Payable (long-term) Total Liabilities Stockholders' Equity Common Stock Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 2,500,000 1,421,350 3,921,350 $ 4,191,700 Req. 8 Net Profit Margin=Net Income Revenues = 0.004 or 0.4% = $ 1,650 $395,000