Question

A) Prepare journal entries for all of the events that occurred during February 2001.

B) Prepare a statement of cash receipts and disbursements for February 2001.

Comparative Balance Sheets										Income Statement
As of the month ending				1/31/01		2/28/01		Change		For the month ending				28-Feb
Assets										Revenues
Cash				$                11,000		$               23,000		$       12,000		Sales Revenue				$    48,000
Accounts Receivable				7,600		17,000		9,400
Inventory				10,000		5,000		(5,000)		Total Revenue				$    48,000
Prepaid Rent				2,500		2,000		(500)
Property, Plant & Equipment				45,000		45,000		0		Expenses
	Accumulated Decreciation			(675)		(1,350)		(675)
	Total Assets			$                75,425		$               90,650		$       15,225		Cost of Goods Sold			$  21,000
										Operating Expense			9,880
										Decreciation Expense			675
Liabilities & Owners' Equity										Rent Expense			500
Advances from Customers				$                        800		$                            -		$             (800)		Interest Expense			445
Accounts Payable - Merchandise				5,100		4,000		(1,100)		Tax Expense			6200
Accounts Payable - Services				1,275		3,456		2,181
Interst Payable				450		445		(5)		Total Expense				$  (38,700)
Tax Payable				3,200		9,400		6,200
Current Portion - Long Term Debt				6,373		5,822		(551)		Net Income				$       9,300
Long Term Debt				38,627		38,627		0
Common Stock				13,000		13,000		0		Thought Questions:
Retained Earnings				6,600		15,900		9,300		1. For what accounting event would you debit (decrease) the account Advances from Customers (Deferred Revenue)? 2. What is the minimum amount that the Advances from Customers account could have been debited during the month of February 2001? 3. What is the maximum amount that the Advances from Customers account could have been debited during the month of February 2001?
	Total Liabilities & Owner's Equity			75,425		90,650		15,225
Notes to the Consolidated Financial Statements:
No common stock was issued during Feb 2001

Answer 1

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Part 1					Part 2
S No	Account	Debit	Credit		Cash Receipts:
1	Accounts Receivable	$   47,200			Cash received from customers		$   37,800
	Advance from customer	$         800
	Sales Revenue		$   48,000		Cash Disbursments:
2	Cash	$   37,800			Cash paid for inventory		$   17,100
	Accounts Receivable		$   37,800		Cash Paid for operating expense		$     7,699
	($47,200-$9,400 Increase)				Cash paid for interest		$         450
					Cash paid for long term debt		$         551
3	Cost of Goods Sold	$   21,000
	Inventory		$   21,000		Total Cash Disbrusment		$   25,800
					Net Increase in Cash		$   12,000
4	Inventory	$   16,000
	Accounts Payable-Merchandise		$   16,000
	(To record purchases) $21,000 COGS-$5,000 Decrease in inventory				1. For what accounting event would you debit (decrease) the account Advances from Customers (Deferred Revenue)?
					When service promised has been performed.
5	Accounts Payable-Merchandise	$   17,100
	Cash		$   17,100		2. What is the minimum amount that the Advances from Customers account could have been debited during the month of February 2001?
	($16,000 Purchase+$1,100 Decrease)				ZERO
6	Operating Expense	$     9,880			3. What is the maximum amount that the Advances from Customers account could have been debited during the month of February 2001?
	Accounts Payable-Service		$     9,880		$                                                                    800
	(To record operating expense)
7	Accounts Payable-Service	$     7,699
	Cash		$     7,699
	($9,880 Operating Expense -$2,181 Increase)
8	Depreciation Expense	$         675
	Accumulatd Depreciation		$         675
9	Rent Expense	$         500
	Prepaid Rent		$         500
10	Interest Expense	$         445
	Interest Payable		$         445
11	Interest Payable	$         450
	Cash		$         450
	(To record interest payment)
12	Income Tax Expense	$     6,200
	Income tax payable		$     6,200
13	Long Term Debt	$         551
	Cash		$         551