Question

Harry and Ron formed Granger Company on January 1, 2013. Each contributed $200,000 in exchange for 10,000 shares of Common Stock with a par value of $1. The following are transactions for the month of January, the first month of operations.

Company acquired 400 acres of land in South Dakota at a cost of $500 per acre, paying in full.

Company established a line of credit with Dakota National Bank in the amount of $500,000 using the land as collateral.

Purchased supplies for $3,500 cash

Paid for January’s equipment rental, cash $50,000.

Sold timber from the land for $75,000.

Signed a 1 year lease on a 2,000 sq. ft. office, paying $2,800 for the month.

Sold large rocks to a landscaping customer, receiving half of the $15,000 in cash.

Paid $3,000 for fuel and oil used in the equipment.

Sold excess topsoil to a developer, 20 dump truck loads at $100 per load, cash.

Paid employees for the month, $12,000.

ABC Sign Company installed no trespassing signs and company signage at a cost of $1,500.

Received and paid invoice for insurance premiums for months of January-March, $15,000

Received invoice for 2,300 for fuel and oil used in the equipment.

On the last day of the month purchased 2 pickup trucks from a local dealer for $25,000 each, Dakota National Bank provided the loan with a rate of 2.49%, 12 months.

Signed contract to purchase an additional 250 acres of land at a cost of $600 per acre.

Accounts Listing:

Cash                      Accounts Receivable                                       Prepaid Insurance                            Trucks

Land                      Accounts Payable                                             Line of Credit Payable                    Note Payable

Common Stock Additional Paid in Capital                              Revenue                                              Advertising Exp

Supplies Exp       Equipment Rental Exp                                    Office Lease Exp                               Fuel/Oil Exp

Insurance Exp    Wages Exp

Requirements:

Provide a journal entry for each transaction or state “no journal entry required”

Prepare the Income Statement for the month of January, using proper form, calculate EPS.

Prepare the Balance Sheet for the month of January, using proper form, calculate current ratio.

Answer 1

Account Title	Debit	Credit
Cash	400000
Common stock		20000
Additional Paid in capital		380000
Land	200000
Cash		200000
No ENTRY
Supplies	3500
Cash		3500
Equipment Rental Exp	50000
Cash		50000
Cash	75000
Revenue		75000
Office lease exp.	2800
Cash		2800
Cash	7500
Accounts receivable	7500
Revenue		15000
Fuel/oil exp	3000
Cash		3000
Cash	2000
Revenue		2000
Wages exp.	12000
Cash		12000
Advertising exp	1500
Cash		1500
Insurance exp.	5000
Prepaid Insuramnce	10000
Cash		15000
Fuel/Oil exp.	2300
Cash		2300
Trucks	50000
Line of credit payable		50000
Interest exp. on line of credit	104
Interest payable		104
(50000*2.49%/12)
	832204	832204

LEDGER ACCOUNTS	Debit	Credit	Debit	Credit
Accounts receivable	7500		7500
Additional Paid in capital		380000		380000
Advertising exp	1500		1500
Cash	400000
Cash		200000
Cash		3500
Cash		50000
Cash	75000
Cash		2800
Cash	7500
Cash		3000
Cash	2000
Cash		12000
Cash		1500
Cash		15000
Cash		2300	194400
Common stock		20000		20000
Equipment Rental Exp	50000		50000
Fuel/oil exp	3000
Fuel/Oil exp.	2300		5300
Insurance exp.	5000		5000
Interest exp.	104		104
Interest payable		104		104
Land	200000		200000
Line of credit payable		50000		50000
Office lease exp.	2800		2800
Prepaid Insurance	10000		10000
Revenue		75000
Revenue		15000
Revenue		2000		92000
Supplies	3500		3500
Trucks	50000		50000
Wages exp.	12000		12000
	832204	832204	542104	542104

Trial balance for Jan.	Debit	Credit
Cash	194400
Accounts receivable	7500
Supplies	3500
Prepaid Insurance	10000
Land	200000
Trucks	50000
Interest payable		104
Line of credit payable		50000
Common stock		20000
Additional Paid in capital		380000
Revenue		92000
Advertising exp	1500
Equipment Rental Exp	50000
Fuel/Oil exp.	5300
Insurance exp.	5000
Interest expense	104
Office lease exp.	2800
Wages exp.	12000
Total	542104	542104

Income statement
For the mth.of Jan
Revenue		92000
Less: Operating expenses:
Advertising exp	1500
Equipment Rental Exp	50000
Fuel/Oil exp.	5300
Insurance exp.	5000
Interest expense	104
Office lease exp.	2800
Wages exp.	12000	76704
Net income		15296
No.of common stock shares		20000
Earnings per share(15296/20000)		0.765

Balance sheet
As on Jan 31
Current assets
Cash	194400
Accounts receivable	7500
Supplies	3500
Prepaid Insurance	10000
Total Current assets		215400
Fixed assets
Land	200000
Trucks	50000	250000
Total assets		465400
Liabilities & Equity
Current liabilities
Interest payable	104
Line of credit payable	50000
Total current liabilities		50104
Equity
Common stock	20000
Additional Paid in capital	380000
Retained earnings	15296
Total equity		415296
Total Liabilities & Equity		465400

Current ratio=Current assets/Current Liabilities
215400/50104=
4.30