Question

Francine’s Fast Deliveries, Inc. (FFD) was organized in December of 2011. It had limited activity in 2011. The resulting balance sheet at the beginning of 2012 is provided below:

Francine’s Fast Deliveries, Inc. Balance Sheet at January 1, 2012
Assets:				Liabilities:
Cash	$	950		Accounts Payable	$	400
Accounts Receivable		500		Stockholders’ Equity:
Supplies		300		Contributed Capital	$	1,000
				Retained Earnings		350
Total Assets	$	1,750		Total Liabilities & Stk. Equity	$	1,750

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

Date
1	Owners invest $19,000 of additional cash in the business.
2a	Supplies are purchased for $600 on account.
2b	Insurance is paid for 12 months beginning January 1: $6,240 (Record as an asset)
2c	Rent is paid for 3 months beginning in January: $2,700 (Record as an asset)
2d	Two employees are hired. Each employee will be paid $940 per month
3	FFD borrows $22,000 from 1st State Bank at 6% annual interest.
6	A delivery van is purchased for cash. Including tax the total cost was $31,200. It will be used for 4 years and will be depreciated monthly using straight-line with no salvage value. A full month of depreciation will be charged in January.
7	$350 of the receivables from December’s sales are collected.
8	$320 of the accounts payable from December are paid.
9	Performed services for customers on account. Mailed invoices totaling $8,400.
10	Services are performed for cash customers: $5,880.
16	Wages for the first half of the month are paid on January 16: $940.
20	The company receives $2,300 from a customer for an advance order for services to be provided in January and February.
25	Collections from customers on account (see January 9 transaction): $3,360
30a	The last 2 weeks wages earned by employees are $470 per employee and will be paid on February 3.
30b	A $590 utility bill for January arrived. It is due on February 15.

Additional Information for adjusting entries at January 31:

a.	Supplies on hand on January 31 total $180.
b.	The company completed 60% of the deliveries for the customer who paid in advance on January 20.
c.	Interest is accrued for the bank loan. (Assume a full month for the 1st State Bank loan.)
d.	Record January depreciation.
e.	Adjust the prepaid asset (Rent and Insurance) accounts as needed.

Prepare end-of-January financial statements. (Balance Sheet only, items to be deducted must be indicated with a negative amount.)

Answer 1

Calculations

Part 1

Fast Deliveries Inc.
Income statement
For the year ended January 31, 2012
Service revenue			15,660
Less: expenses
Wages Expense (940+940)		1,880
Supplies Expense		720
Depreciation Expense (31200/48)		650
Interest Expense		110
Utilities Expense		590
Insurance Expense		520
Rent expense		900	5,370
Net income			10,290

Part 2

Fast Deliveries Inc.
Statement of retained earnings
For the year ended January 31, 2012
Retained earnings, beginning			350
Add: net income			10,290
LesS: dividends [if any]
Retained earnings, ending			10,640

Part 3

Fast Deliveries Inc.
Balance sheet
January 31, 2012
Assets
Current assets
Cash		12,440
Accounts receivable		5,190
Supplies		180
Prepaid insurance		5,720
Prepaid rent		1,800
Total Current assets			25,330
Property, plant and equipment
Equipment		31,200
Accumulated Depreciation—Equipment		(650)	30,550
Total assets			55,880
Liabilities and Stockholder's equity
Current liabilities
Accounts Payable		1,270
Unearned revenue		920
Notes payable [considered short term]		22,000
Wages payable		940
Interest payable		110
Total Current liabilities			25,240
Stockholder's equity
Contributed capital		20,000
Retained earnings		10,640	30,640
Total Liabilities and Stockholder's equity			55,880