In: Accounting
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 $600 per acre.
Accounts Listing:
Cash Accounts Receivable Prepaid Insurance Trucks
Land Accounts Payable Line of Credit Payable Note Payable
Common Stock Additional Paid in Capital Revenue Advertising Exp
Supplies Exp Equipment Rental Exp Office Lease Exp Fuel/Oil Exp
Insurance Exp Wages Exp
Prepare the Balance Sheet for the month of January, using proper form, calculate current ratio.
Balance Sheet as on 31st January 2013:
Assets | Amount($) |
Current assets: | |
Cash | 696,700 |
Prepaid Insurance | 10,000 |
Accounts receivable | 7,500 |
Total current assets | 714,200 |
Non Current Assets: | |
Land | 350,000 |
Truck | 50000 |
Total Non Current Assets | 400,000 |
Total assets | 1,114,200 |
Liabilities and Stockholders’ Equity | |
Current liabilities: | |
Accounts payable | 152,300 |
Note Payable | 50,000 |
Total current liabilities | 202,300 |
Long term liabilities: | |
Line of Credit Payable | 500,000 |
Stockholders’ equity: | |
Common stock(10,000*$1*2) | 20,000 |
Additional Paid in Capital (200000*2-20,000) | 380000 |
Retained earnings (11,900 from net profit) | 11,900 |
Total stockholders’ equity | 411,900 |
Total liabilities and stockholders’ equity | 1,114,200 |
Current Ratio = Current Assets / Current Liability = 714,200/202,300 = 3.53
Workings:
Income Statement:
Particulars | Amount($) |
Revenue | 92,000 |
Equipment Rental Exp | 50,000 |
Supplies Exp | 3500 |
Wages Exp | 12000 |
Fuel/Oil Exp | 5300 |
Gross profit | 21,200 |
Office Lease Exp | 2800 |
Advertising Exp | 1,500 |
Insurance Exp | 5000 |
Operating Profit | 11,900 |
Interest Exp | 0 |
Net Income before tax | 11,900 |
Tax | 0 |
Net Profit | 11,900 |
Ledger Accounts:
Cash | |||
Particulars | Amount(S) | Particulars | Amount($) |
Common Stock | 20,000 | Land | 200,000 |
Additional Paid in capital | 380,000 | Supplies Exp | 3,500 |
Line of Credit Payable | 500,000 | Equipment Rental Exp | 50,000 |
Revenue | 75,000 | Office Lease Exp | 2,800 |
Revenue | 7,500 | Fuel/Oil Exp | 3,000 |
Revenue | 2,000 | Wages Exp | 12,000 |
Advertising Exp | 1,500 | ||
Insurance Exp (15000*1/3) | 5,000 | ||
Prepaid Insurance (15000*2/3) | 10,000 | ||
Balance c/d | 696,700 | ||
984,500 | 984,500 | ||
Accounts Receivable | |||
Revenue | 7,500 | Balance c/d | 7,500 |
7,500 | 7,500 | ||
Accounts Payable | |||
Balance c/d | 152,300 | Fuel/Oil Exp | 2,300 |
Land | 150,000 | ||
152,300 | 152,300 | ||
Note Payable | |||
Balance c/d | 50,000 | Truck(25000*2) | 50,000 |
50,000 | 50,000 | ||
Common Stock | |||
Particulars | Amount(S) | Particulars | Amount($) |
Balance c/d | 400,000 | Cash | 20,000 |
400,000 | 400,000 |
Revenue = $75,000 (Sold timber) + $15,000 (Sold large rocks) + $2,000 (Sold excess top soil) = $92,000