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Project 3 Sum11

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					Name ____________________________________ Acc 2013 Spring 2011 Project 3 (20 pts) __________

                               Accounting 2013 Project 3 General Information

Notice: You are required to submit your solution in hardcopy, handwritten form on the due date. Staple
all pages together.

Introduction
Jones Widget Company (JWC) incorporated at the beginning of 2006. Below is the post closing trial balance as
of 12/31/2008.

                                           Account Title           Balance
                                    Cash                                9,490
                                    Accounts Receivable                10,225
                                    Allowance for Bad Debts               885
                                    Inventory                          10,440
                                    Prepaid Rent                        1,400
                                    Equipment                          22,500
                                    Accumulated Depreciation           10,500
                                    Accounts Payable                        0
                                    Sales Tax payable                   1,100
                                    FICA Taxes Payable                    600
                                    FIT Taxes Payable                     800
                                    Wages Payable                       1,450
                                    Unearned Revenue                    5,600
                                    Interest Payable                      540
                                    Notes Payable                      24,000
                                    Common Stock                        2,600
                                    Additional PIC                      6,800
                                    RE - December 31, 2008              2,780
                                    Treasury Stock                      3,600

Additional Information:
 JWC establishes a policy that it will sell inventory at $140 per unit. The Sales Tax rate is 5%.
   JWC will use the FIFO method and record COGS on a perpetual basis.

   Employee wages are $4,000 per month. Employees are paid on the 16th for the first half of the month and
    on the first of the following month for the second half of each month. The income taxes withheld are $400
    each paycheck, and the FICA taxes are $150 per paycheck. The income tax and FICA withholding as well
    as the employer’s matching contribution are paid monthly on the second day of the month.

   The Beginning inventory of $10,440 consists of 180 units.

   The Prepaid Rent balance is for January of 2009.

   The equipment on the books at December 31, 2008 had been purchased on July 1, 2006. It has a residual
    value of $1,500 and an expected life of five years. It is being depreciated using the straight line method.

   Unearned Revenue is for 40 units that had been ordered and paid for in advance by two customers in late
    December. One order (for 30 of the 40 units) will be filled in January, the remainder in early February.

   The Notes Payable represents a $24,000 bank loan received on October 1, 2008 at 9% annual interest.

   The par value on the common stock is $2

   The treasury stock account has 300 shares.

   Record all transactions to the nearest dollar.

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Name ____________________________________ Acc 2013 Spring 2011 Project 3 (20 pts) __________


Below are transactions for January 2009
Jan 1 Paid December 31 payroll previously accrued.

Jan 2   A $90,000 4% six year bond is issued. The effective yield is 6%.
                                                          4%               6%
        Present Value of $1 factors                      .7903            .7050
        Present Value of an Annuity of $1 factors      5.2421            4.9173

Jan 2   A truck is purchased for $14,000 cash. It is estimated the truck will be used for 60,000 miles and will
        have a salvage value of $2,000.

Jan 2   Having issued the bond, JWC pays off the 2008 9% note in full. The amount paid is $22,540. No
        additional interest was accrued.

Jan 2   Payroll taxes payable (FIT & FICA) recorded in December of 2008 are remitted to the IRS.

Jan 5   A customer’s account receivable totaling $850 is written off as uncollectible.

Jan 6   Sales on account of 170 units of inventory occur during January. Include sales tax of 5%.

Jan 10 Sales taxes of $1,100, which had been collected and recorded in December, are paid to the state.

Jan 11 An additional 80 units of inventory are purchased on account for $4,880.

Jan 12 The equipment purchased in 2006 for $22,500 is sold for $11,200.
       No additional depreciation is recorded for January.

Jan 15 A portion of the advance order from December (30 units) is delivered. There is no sales tax on this
       order.

Jan 16 Record and pay payroll for January 1-15. Record the employer’s matching share of FICA taxes
       also.

Jan 20 200 of the treasury stock shares are sold for $2,600.

Jan 21 Collections from sales on account totaled $8,050.

Jan 27 Sold the other 100 shares of treasury stock for $1,100.

Jan 28 JWC declares and distributes a 10% Stock dividend. The market price of the stock at the time is $9.50
       per share. (Hint on the statement of retained earnings, this amount will should be shown as a dividend).

Jan 31 (Adjust 1) Record one month’s depreciation on the truck. During January, the truck is driven 2,400 miles

Jan 31 (Adjust 2) It is estimated that 4% of the ending accounts receivable balance will be uncollectible.

Jan 31 (Adjust 3) Record January rent expired.

Jan 31 (Adjust 4) Accrue January 31 payroll, which will be payable on February 1. Record the employer’s
       matching share of FICA taxes also.

Jan 31` (Adjust 5) Record ONE MONTH’S interest expense and amortization of premium or discount on the
        bond. Round to the nearest dollar.




                                                                                                                  2
Name ____________________________________ Acc 2013 Spring 11 Project 3 (20 pts) __________

REQUIREMENT 1
   A Prepare all January journal entries and adjusting entries. Use Attachment A to record the entries.
   B. Post all January entries (transactions and adjustments) to the T-accounts provided in Attachment B.
   C. Prepare the financial statements at the end of January, 2009 using the formats in Attachment C.

REQUIREMENT 2 -- Answer the 11 questions on page 8.
                                                ATTACHMENT A
                                           JWC – General Journal
Date     Account Name                                            Debit                Credit
01/01

01/02



01/02

01/02



01/02



01/05

01/06




01/10

01/11

01/12




01/15




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Name ____________________________________ Acc 2013 Spring 2011 Project 3 (20 pts) __________


01/16 a




01/16 b


01/20



01/21


01/27



01/28




Adjusting Entries:

AJE 1


AJE 2


AJE 3


AJE 4a




AJE4b


AJE 5




                                                                                               4
    Name ____________________________________ Acc 2013 Spring 11 Project 3 (20 pts) __________

    ATTACHMENT B: Don’t forget to record the beginning balances.

        CASH             Accounts Receivable             Allowance                 Inventory




                              Prepaid Rent              Equipment            Accum. Depreciation




  Interest Payable          Unearned Revenue          Accounts Payable            Wages Payable




FICA Taxes Payable        FIT Taxes Payable           Sales tax payable       Notes Payable




  Bonds Payable         (Prm. or Dsc.) - Bd Pay      Common Stock              Additional PIC, CS




Additional PIC, TS       Retained Earnings             Treasury Stock



Sales Revenue             Cost of Goods Sold          Wages Expense             FICA Tax Expense




Bad Debt Expense        Depreciation Expense          Interest Expense           Rent Expense




                             Gain/Loss




                                                                                                    5
Name ____________________________________ Acc 2013 Spring 2011 Project 3 (20 pts) __________



ATTACHMENT C: Financial Statements for January, 2009:
NOTE: Prepare the income statement in multiple step format..

                                                   JWC, Inc.
                                               Income Statement
                                  For the period January 1 – January 31, 2009




       Net income




                                                   JWC, Inc.
                                        Statement of Retained Earnings
                                  For the period January 1 – January 31, 2009
       Retained earnings, beginning of period
       Add:
       Less:
       Retained earnings, end of period




                                                                                               6
Name ____________________________________ Acc 2013 Spring 11 2010 Project 3 (20 pts) __________



                                            JWC, Inc.
                                         Balance Sheet
                                     as of January 31, 2009
                 ASSETS                                             LIABILITIES




                                           Total Liabilities
                                                               STOCKHOLDERS’ EQUITY




                                           Total stockholders’ equity
Total assets                               Total liabilities and stockholders’ equity




                                                                                                  7
Name ____________________________________ Acc 2013 Spring 2011 Project 3 (20 pts) __________

REQUIREMENT 2
Questions:

   1. Did the carrying value of the bond increase or decrease after the recording of interest expense? Check
      one Increase ________ Decrease ________

   2. What is the interest payment JWC will need to pay annually? $ _____________________

   3. What will be the carrying value of JWC’s bond at the end of 2009? (12/31/09) $ ______________

   4. What will the annual bond interest expense be for 2009? $ ______________________

   5. What was the gain or loss recognized on the January 12 sale of equipment? $ _______________

   6. What was the gain or loss recognized on the sale of Treasury stock on Jan. 20? $____________

   7. What was JWC’s total compensation expense for January, 2009? $ ___________________

   8. What was the average issue price per share for the common stock on 1/1/09? $ _____________

   9. How many shares were issued by JWC by the end of January, 2009? _______________ shares

   10. Assume JWC had distributed a 50% stock dividend, instead of the 10% dividend. Prepare JWC’s
       journal entry under that assumption below.




   11. JWC’s issuance of the bonds in January of 2009 generated a large amount of cash at a low
       effective rate. Most of this cash will be used to purchase new Widget manufacturing equipment in the
       future. But the equipment purchases are not expected to occur until January of 2012. JWC expects to
       need $90,000 for the purchases in three years.

       Below are the PV and FV Factors for 7% three years
                 FV (Table C.1)    PV (Table C.2)      FVA (Table C.3)      PVA (Table C4)
                     1.225             .8163              3.2149               2.6243

       a. How much cash should be set aside and invested now if JWC can earn 7% compounded annually
          for the three-year period? $ ___________________

       b. How much cash would need to be invested equally over the next 3 years to have $90,000 at the
          end of three years?____________________________

       c.   If JWC decided to invest $60,000 today, how much would they have in 3 years?________________

       d. If JWC decided to invest $25,000 each year for the next 3 years, how much would they have in 3
          years? ____________________




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