Question

On January 1, 2021, the general ledger of Grand Finale Fireworks includes the following account balances:

Accounts	Debit			Credit
Cash	$	44,200
Accounts Receivable		47,500
Supplies		9,000
Equipment		79,000
Accumulated Depreciation				$	10,500
Accounts Payable					16,100
Common Stock, $1 par value					15,000
Additional Paid-in Capital					95,000
Retained Earnings					43,100
Totals	$	179,700		$	179,700

During January 2021, the following transactions occur:

January		2		Issue an additional 2,200 shares of $1 par value common stock for $44,000.
January		9		Provide services to customers on account, $18,300.
January		10		Purchase additional supplies on account, $6,400.
January		12		Purchase 1,000 shares of treasury stock for $22 per share.
January		15		Pay cash on accounts payable, $18,000.
January		21		Provide services to customers for cash, $50,600.
January		22		Receive cash on accounts receivable, $18,100.
January		29		Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15. (Hint: Grand Finale Fireworks had 15,000 shares outstanding on January 1, 2021, and dividends are not paid on treasury stock.)
January		30		Resell 900 shares of treasury stock for $24 per share.
January		31		Pay cash for salaries during January, $43,500.

The following information is available on January 31, 2021.

1. Unpaid utilities for the month of January are $7,700.
2. Supplies at the end of January total $6,600.
3. Depreciation on the equipment for the month of January is calculated using the straightline method. At the time the equipment was purchased, the company estimated a service life of three years and a residual value of $11,500.
4. Accrued income taxes at the end of January are $2,600.

Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis Enter your Return on Equity value to one decimal place and earnings per share value to 2 decimal places. Analyze the following for Grand Finale Fireworks: (a) Calculate the return on equity for the month of January. If the average return on equity for the industry for January is 2.30%, is the company more or less profitable than other companies in the same industry? The return on equity is: Is the company more or less profitable than other companies? (b) How many shares of common stock are outstanding as of January 31, 2021? The number of common shares outstanding as of January 31, 2021 is (c) Calculate earnings per share for the month of January (Hint: To calculate average shares of common stock outstanding take the beginning shares outstanding plus the ending shares outstanding and divide the total by 2.) If earnings per share was $2.40 last year (i.e., an average of $0.20 per month), is earnings per share for January 2021 better or worse than last year's average? Earnings per share is: Is earnings per share for January 2021 better or worse than last year's average?

Answer 1

Credit Debit $44,000 $2,200 $41,800 $18,300 $18,300 $6,400 $6,400 $22,000 $22,000 $18,000 Step 1 Transation for Jan 2021 Sr.No. Date Particulars 2-Jan-21 Cash Common Stock Additional Paid-in Capital (To record issue of common stock) 2 9-Jan-21 Accounts Receivable Service Revenue (To record service revenue) 10-Jan-21 Supplies Accounts Payable (To record purchase of supplies) 12-Jan-21 Treasury Stock Cash (To record purchase of treasury stock) 15-Jan-21 Accounts Payable Cash (To record payment to account payable) 6 21-Jan-21 Cash Service Revenue (To record service revenue) 22-Jan-21 Cash Accounts Receivable (To Record collection of accounts receivable) 29-Jan-21 Retained Earnings Dividend payable (To record declaration of dividend) 9 30-Jan-21 Cash Common Stock Paid in Capital Treasury Stock (To record reissue of treasuy stock) 10 31-Jan-21 Salary Expense Cash (To Record salary expense) $18,000 $50,600 $50,600 $18,100 $18,100 $4,200 $4,200 $21,600 $900 $20,700 $43,500 $43,500

Credit Debit $7,700 $7,700 $8,800 $8,800 $1,875 Step 2 Adjusting Entry Date Particulars 31-Jan-21 Utilities Expense Accounts Payable (To record accrual of utilities expense) 31-Jan-21 Supplies Expense Supplies (To record supplies expense) 31-Jan-21 Depreciation Accumulated Depreciation (To Record depreciation on equipment) 31-Jan-21 Income Tax Income Tax Payable (To Record income tax provision) Working Supplies Expense Beginning Supplies as on Jan 1, 2021 Add: Purchase Less: Ending Supplies as in Jan 31, 2021 Supplies Expense $1,875 $2,600 $2,600 $9,000 $6,400 ($6,600) $8,800 2 Depreciation Cost Less: Salvage Value $79,000 ($11,500) $67,500 Net Useful life (in years) Per Year Depreciation ($67500/3] Depreciation for January ($22500/12] $22,500 $1,875

Step 3 Particulars Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Income Tax Payable Dividend Payable Common Stock Additional Paid-in Capital Paid in Capital Treasury Stock Treasury Stock Retained Earnings Service Revenue Salary Expense Utilities Expense Supplies Expense Depreciation Income Tax Grand Finale Fireworks Trial Balance January 1, 2021 Entry Adjustment Debit Credit Debit Credit $44,200 $134,300 $83,500 $47,500 $18,300 $18,100 $9,000 $6,400 $8,800 $79,000 $0 $10,500 $1,875 $16,100 $18, $14,100 $2,600 $4,200 $15,000 $3,100 $95,000 $41,800 $20,700 $22,000 $43,100 $4,200 $68,900 $43,500 $7,700 $8,800 $1,875 $2,600 Adjusted Trail Balance January 31, 2021 Debit Credit $95,000 $47,700 $6,600 $79,000 $12,375 $12,200 $2,600 $4,200 $18,100 $136,800 $20,700 $22,000 $38,900 $68,900 $43,500 $7,700 $8,800 $1,875 $2,600 $179,700 $179,700 $267,675 $267,675 $314,775 $314,775

Amount $68,900 Step 4 Grand Finale Fireworks Income Statement For the year month 31st January 2021 Particulars Amount Service Revenue Less: Operating Expense Salary Expense $43,500 Utilities Expense $7,700 Supplies Expense $8,800 Depreciation $1,875 Total Operating Expense Net Income Before Tax Less: Income Tax Net Income ($61,875) $7,025 ($2,600) $4,425 Step 5 Grand Finale Fireworks Statement of Retained Earnings For the year month 31st January 2021 Particulars A Beginning Balance Add: Net Income mount $43,100 $4,425 $47,525 ($4,200) $43,325 Less: Dividend Ending Balance

Step 6 Assets Cash Accounts Receivable Supplies Total Current Assets Grand Finale Fireworks Classified Balance Sheet January 31, 2021 Amount Amount Liabilities $95,000 Accounts Payable $47,700 Dividend Payable $6,600 Income Tax Payable $149,300 Total Current Liabilities Amount $12,200 $4,200 $2,600 $19,000 Non Current Assets Equipment Less: Accumulated Depreciation $79,000 ($12,375) Shareholders' Equity Common Stock $66,625 Additional Paid-in Capital Paid in Capital Treasury Stock Retained Earnings Less: Treasury Stock Total Shareholders' Equity $18,100 $136,800 $20,700 $43,325 ($22,000) $196,925 Total Assets $215,925 Total Liabilities and Shareholder's Equity $215,925 (a) 2.25% Analysis The return on equity ($4425/$196925] Return on Equity = Net Income / Shareholders' Eugity The company is less profitable than other compnay's (b) The number of common shares outstanding as of January 31, 2021 is 14900 (15000-1000-900] (C) Earning Per share = Net Income / Avergae Share outstading Average Share Ourstanding [(15000+14900)/2] 14950 Earning Per share = [$4425/14950] 0.30 Earning per share for January 2021 is better than the last year's average.