Question

Francine’s Fast Deliveries, Inc. (FFD) was organized in December last year. The resulting balance sheet at the beginning of the current provided below:

Francine’s Fast Deliveries, Inc. Balance Sheet at January 1
Assets:				Liabilities:
Cash	$	10,900		Accounts Payable	$	500
Accounts Receivable		800		Stockholders’ Equity:
Supplies		400		Contributed Capital	$	11,000
				Retained Earnings		600
Total Assets	$	12,100		Total Liabilities & Stk. Equity	$	12,100
Two employees have been hired, at a monthly salary of $2,200 each.

January Transactions for Francine’s Fast Deliveries, Inc. (FFD)

Date
1	$5,700 is paid for 12 months insurance starting Jan 1 (record as an asset)
2	$4,200 is paid for 12 months of rent beginning Jan 1 (record as an asset)
3	FFD borrows $30K cash from the bank at 6% annual interest, this is notes payable in 2 years
4	A delivery can is purchased using cash. Including tax, the total cost was $24K
5	Stockholders contribute 6K of additional cash to FFD for its common stock
6	Additional supplies costing $1K are purchased on account and received
7	$600 of accounts receivable arising from last year's DEC sales are collected.
8	$400 of account payable from DEC of last year are paid
9	Performed services for customers on account. Sent invoices totaling $10,400
10	$7,600 of services are performed for customers who paid immediately in cash
16	$2,200 of salaries are paid for the first half of the month.
20	FFD receives $3,500 cash from a customer for an advance order for services to be provided late in Jan and in FEB
25	$4,500 is collected from customer on account (See JAN 9 transaction)

Additional Information for adjusting entries :

31a.	A $1,200 bill arrives for JAN utility services. Payment is due 2/15
31b.	supplies on hand on JAN 31 are counted and determined to have cost $250
31c.	As of Jan 31, FFD had completed 60% of the deliveries for the customer who paid in advance on Jan 20
31d.	Accrue one month of interest on the bank loan. Yearly interest is determined by multiplying amount borrowed by the annual interest rate (expressed as 0.06)
31e.	Assume the van will be used in 4 years, after it will have no value. Thus, each year, 1/4 of the van benefits will be used up, which implies annual depreciation equal to 1/4 of the van total cost. Record depreciation for the month of JAN, equal to 1/12 of the annual depreciation expense.

31f.	Salaries earned by the employees for the period from JAN 16-31 are $1,100 per employee and will be paid on FEB 3.

31g.	Adjust the prepaid asset account (for rent and insurance as needed).

-Record journal entries for the transactions dated January 1-25 of the current year on the enclosed journal entry form.

-Post each of the entries to the correct T-accounts on the enclosed T-account form.

-Use the balances in the T-accounts as needed and the information given to calculate the adjusting journal entries for January 31.

-Record the adjusting journal entries dated January 31 of the current year on the enclosed journal entry form.

-Total each T-account and record the ending balance on the correct side of the T-account.

-Prepare the 3 Financial statements in good form using the final ending balances as of January 31, current year

THANK YOU!!!!

Answer 1

ANSWER:

Journal Entries

Date	Particulars	Debit	Credit
Jan 1	Prepaid Insurance	5,700
	To Cash		5,700
	(12 months insurance paid)
Jan 2	Prepaid rent	4,200
	To Cash		4,200
	(12 months rent paid)
Jan 3	Cash	30,000
	To Notes payable		30,000
	(Cash borrowed)
Jan 4	Deliver van	24,000
	To Cash		24,000
	(Delivery van purchased)
Jan 5	Cash	6,000
	To Common stock		6,000
	(Common stock issued for cash)
Jan 6	Supplies	1,000
	To Accounts payable		1,000
	(Supplies purchased on account)
Jan 7	Cash	600
	To Accounts Receivable		600
	(Cash received from debtors)
Jan 8	Accounts Payable	400
	To Cash		400
	(Creditors paid)
Jan 9	Accounts receivable	10,400
	To Service revenue		10,400
	(Services performed on account)
Jan 10	Cash	7,600
	To Service revenue		7,600
	(Services performed for cash)
Jan 16	Salaries expenses	2,200
	To Cash		2,200
	(Salaries paid)
Jan 20	Cash	3,500
	To Unearned revenue		3,500
	(Advance from client)
Jan 25	Cash	4,500
	To Accounts Receivable		4,500
	(Cash from debtors)

Adjusting Entries:

Date	Particulars	Debit	Credit
Jan 31	Utilities Expenses	1,200
	To Accounts Payable		1,200
	(Expense on account)
Jan 31	Supplies Expenses	1,150
	To Supplies		1,150
	(400 + 1,000 - 250 = 1,150)
Jan 31	Unearned revenue	2,100
	To Service revenue		2,100
	(Revenue recognized 3,500 * 60% = 2,100)
Jan 31	Interest Expense	150
	To Interest payable		150
	(Interest accrued) 30,000 * 6% * (1/2)
Jan 31	Depreciation Expense	500
	To Accumulated Depreciation		500
	(To record depreciation) 24,000 / (4 * 12)
Jan 31	Salary Expense	2,200
	To Salary payable		2,200
	(Salary accrued) 1,100 * 2
Jan 31	Insurance expense	475
	To Prepaid insurance		475
	(Prepaid insurance adjusted) 5,700 / 12
Jan 31	Rent expense	350
	To Prepaid rent		350
	(Prepaid rent adjusted) 4,200 / 12

T-Accounts

Cash

Particulars	Amount	Particulars	Amount
Opening Bal	10,900	Prepaid insurance	5,700
Notes payable	30,000	Prepaid rent	4,200
Commont stock	6,000	Delivery van	24,000
Accounts receivable	600	Accounts payable	400
Service revenue	7,600	Salaries Expense	2,200
Unearned revenue	3,500
Accounts receivable	4,500	Bal	26,600
	63,100		63,100

Unearned Revenue

Particulars	Amount	Particulars	Amount
Bal	3,500	Cash	3,500
	3,500		3,500

Notes Payable

Particulars	Amount	Particulars	Amount
Bal	30,000	Cash	30,000
	30,000		30,000

Accounts Receivable

Particulars	Amount	Particulars	Amount
Opening Bal	800	Cash	600
Service revenue	10,400	Cash	4,500
		Bal	6,100
	11,200		11,200

Common stock

Particulars	Amount	Particulars	Amount
		Opening balance	11,000
Bal	17,000	Cash	6,000
	17,000		17,000

Supplies

Particulars	Amount	Particulars	Amount
Opening Balance	400
Accounts payable	1,000	Bal	1,400
	1,400		1,400

Retained earning

Particulars	Amount	Particulars	Amount
Bal	600	Opening Bal	600
	600		600

Prepaid insurance

Particulars	Amount	Particulars	Amount
Cash	5,700	Bal	5,700
	5,700		5,700

Service Revenue

Particulars	Amount	Particulars	Amount
		Accounts Receivable	10,400
Balance	18,000	Cash	7,600
	18,000		18,000

Prepaid rent

Particulars	Amount	Particulars	Amount
Cash	4,200	Bal	4,200
	4,200		4,200

Salaries Expense

Particulars	Amount	Particulars	Amount
Cash	2,200	Bal	2,200
	2,200		2,200

Delivery van

Particulars	Amount	Particulars	Amount
Cash	24,000	Bal	24,000
	24,000		24,000

Accounts Payable

Particulars	Amount	Particulars	Amount
Cash	400	Opening Balance	500
Bal	1,100	Supplies	1,000
	1,500		1,500

Statement of income

for the period ending Jan 31

Particulars	Amount	Amount
Service revenue		20,100
Less:
Salaries Expense	(4,400)
Supplies Expense	(1,150)
Interest expense	(150)
Depreciation expense	(500)
Utility expense	(1,200)
Insurance expense	(475)
Rent Expense	(350)	(8,225)
Net Income		11,875

Statement of retained earnings

for the period ending Jan 31

Particulars	Amount
Beginning Balance	600
Net income	11,875
	12,475

Balance sheet as at April 30

Particulars	Amount
Assets
Current Asset
Cash	26,600
Accounts receivable	6,100
Supplies	250
Prepaid insurance	5,225
Prepaid rent	3,850
	42,025
Non current assets
Delivery van	24,000
Less: Accumulated Depreciation - Van	(500)
	23,500
Total Assets (42,025 + 23,500)	65,525‬
Liabilities
Current Liabilities
Accounts Payable	2,300
Salary Payable	2,200
Interest payable	150
Unearned revenue	1,400
	6,050
Non current liabilities
Notes payable	30,000
Shareholder's equity
Common stock	17,000
Retained earnings	12,475
	29,475
Total liabilities and equity (6,050 + 30,000 + 12,475)	65,525