Question

Grid Iron Prep Inc. (GIPI) is a service business incorporated in January of the current year to provide personal training for athletes aspiring to play college football. The following transactions occurred during the month ended January 31.

1.	GIPI issued stock in exchange for $100,000 cash on 1/01.
2.	GIPI purchased a gymnasium building and gym equipment on 1/02 for $50,000, 80% of which related to the gymnasium and 20% to the equipment.
3.	GIPI paid $260 cash on 1/03 to have the gym equipment refurbished before it could be used.
4.	GIPI provided $4,000 in training on 1/04 and expected collection in February.
5.	GIPI collected $36,000 cash in training fees on 1/10, of which $34,000 was earned in January and $2,000 would be earned in February.
6.	GIPI paid $23,000 of wages and $7,000 in utilities on 1/30.
7.	GIPI will depreciate the gymnasium building using the straight-line method over 20 years with a residual value of $2,000. Gym equipment will be depreciated using the double-declining-balance method, with an estimated residual value of $2,250 at the end of its four-year useful life. Record depreciation on 1/31 equal to one-twelfth the yearly amount.
8.	GIPI received a bill on 1/31 for $350 for advertising done on 1/31. The bill has not been paid or recorded.
9.	GIPI uses the aging method for estimating doubtful accounts and, on 1/31, will record an estimated 3 percent of its under 30 day-old accounts as not collectible.
10.	GIPI’s income tax rate is 30%. Assume depreciation for tax is the same amount as depreciation for financial reporting purposes.

Post General Jornal Tab, General Ledger Tab, Trial Balance Tab, Income Statement Tab, Statement of Retained Earnings Tab, Balance Sheet Tab.

Answer 1

1. In the books of Grid Iron Prep Inc ( GIPI) :

Transaction/ Event	Date	Account Titles	Debit	Credit
			$	$
1.	1/01	Cash	100,000
		Common Stock		100,000
2.	1/02	Building	40,000
		Equipment	10,000
		Cash		50,000
3.	1/03	Equipment	260
		Cash		260
4.	1/04	Accounts Receivable	4,000
		Training Fees Earned		4,000
5.	1/10	Cash	36,000
		Training Fees Earned		34,000
		Unearned Training Fees		2,000
6.	1/30	Wages Expense	23,000
		Utilities Expense	7,000
		Cash		30,000
7.	1/31	Depreciation Expense	325
		Accumulated Depreciation : Building $ ( 40,000 - 2,000 ) / ( 20 x 12)		158
		Accumulated Depreciation : Equipment $ ( 10,260 - 2,250 ) / ( 4 x 12 )		167
8.	1/31	Advertising Expense	350
		Accounts Payable		350
9.	1/31	Bad Debt Expense ( $ 4,000 x 3 % )	120
		Allowance for Doubtful Accounts		120
10.	1/31	Income Tax Expense	2,162
		Incomes Taxes Payable		2,162

Grid Iron Prep Inc. Adjusted Trial Balance January 31
Account Titles	Debit	Credit
	$	$
Cash	55,740
Accounts Receivable	4,000
Allowance for Doubtful Accounts		120
Building	40,000
Accumulated Depreciation		158
Equipment	10,260
Accumulated Depreciation		167
Accounts Payable		350
Unearned Training Fees		2,000
Income Taxes Payable		2,162
Common Stock		100,000
Training Fees Earned		38,000
Wages Expense	23,000
Utilities Expense	7,000
Advertising Expense	350
Depreciation Expense	325
Bad Debt Expense	120
Income Tax Expense	2,162
Totals	$ 142,957	$ 142,957

Grid Iron Prep Inc. Income Statement For the month ended January 31
	$	$
Training Fees Earned		38,000
Operating Expenses
Wages Expense	23,000
Utilities Expense	7,000
Advertising Expense	350
Bad Debt Expense	120
Depreciation Expense	325
Total Operating Expense		30,795
Income before Taxes		7,205
Income Tax Expense ( 30 % )		2,162
Net Income		5,043