Accounting 301 Project_Zippy Lines, Inc._Financial statement

$21.00

Description

Accounting 301 Project

Due December 5, 2013

Zippy
Lines, Inc. is a small company based in Colorado. Zippy Lines, Inc. sells specialty outdoor
sporting goods and equipment used by mountain climbers. Zippy
Lines sells its goods to outdoor adventure firms and holds instructional
classes. It is in its second year of
operation.

Kirk
Krazen, the accountant for the company was hurt in a climbing accident and the
company has requested that you prepare the monthly close for January 2013,
including preparation of the monthly financial statements. The company’s fiscal year coincides with the
calendar year. The monthly financial statements should include a balance sheet,
income statement and cash flow statement for the month.

The
company’s president, Al Titude, has provided you with access to all of the
company’s books and records and you have gathered the information that is
discussed below.

The
company has one bank account in which all of its operating expenses are paid
and all of its cash receipts are deposited.
The company’s general ledger records the cash disbursement transactions,
and reflects the cash receipts. Exhibit
1 is a list of accounts and balances as of January 31, 2013 taken from the
general ledger.

Exhibit
2 is a list of all of the transactions shown on the general ledger account for
cash (Account 1010001).

A copy of the company’s bank statement for January
is provided in Exhibit 3.

The
company maintains a subsidiary ledger for accounts receivable. All of the company’s accounts receivable balances
have been updated to reflect the cash receipt, and a journal entry to the cash
account and the accounts receivable has been made. There are 20 outdoor adventure firms that
have accounts with Zippy with terms N30, 10 of these firms had an open balance
as of January. A copy of the accounts
receivable subsidiary ledger is provided in Exhibit 4. The allowance for doubtful accounts was $1,500
as of December 31, 2012. The allowance
is based on estimated default rates and set at 1% of balances currently due and
balances past due less than 30 days, 2% on balances past due 30 to 60 days, 15%
on balances past due over 60 but less than 90 days, and 30% of balances past
due more than 90 days.

The
company uses lower of cost or market to value its inventory. The company uses a periodic inventory system
and applies FIFO cost flow assumption.
Exhibit 5 contains information on its inventory.

The
monthly adjusting entries have not been prepared. The following information has been gathered
to support the closing process. The
staff has done a physical count of inventory and supplies and found the
following balances as of January 31, 2013:


Supplies – $17,250


Inventory – items shown in Exhibit 5 (valued at Lower of Cost or Market,
FIFO) (see Exhibit 5)

Below are other items to consider for
adjusting entries:


The company has a note with TP Bank for $250,000 that is due on July 1,
2016. The note has an interest rate of
10%, which is payable on June 30th of each year.


Employees earn $1,024 per day and have received payment through January
28th, so they are owed 3 days wages.
There was no salary accrued as of December 31, 2012.


The payment for health and all other benefits is $6,125 every two
months. In December, the company issued
the payment and it cleared in January.
No payment was made in January.


The prepaid insurance balance is for an annual property and liability
policy with an annual cost of $36,000, which was purchased on July 1, 2012 and
expires on June 30, 2013.


The company visited Big Corporation on January 31st and held
an instructional course for a team-building activity for Big Corporation. Zippy charges $10,000 for the class, but has
not been paid, prepared the invoice or recorded the revenue.


The accrued expense of $2,125 on December 31, 2012 represented unpaid
consulting bills. The company paid the
consultant $1,575 on January 14th and has an estimated balance of
$3,250 open as of January 31, 2013.


The company uses straight-line depreciation. The depreciation periods are 20 years for the
building, 10 for the equipment and 5 for office equipment. There is no salvage value for any of the
property, plant and equipment assets.

Requirements

1. Prepare a bank
reconciliation and any journal entries.

2. Prepare a trial balances as
of January 31, 2013

3. Calculate the allowance for
doubtful accounts, inventory, monthly depreciation, interest, cost of goods
sold etc., and prepare all necessary adjusting entries for the month of
January.

4. Prepare an adjusted trial
balance for the month of January.

5. Prepare the financial
statements for the month of January (income statement, statement of retained
earnings, balance sheet and statement of cash flow (either direct or indirect
basis).

EXHIBIT
1

Below
is a list of accounts with their balances as of January 31, 2013 and December
31, 2012:

Account Number

Account Name

January 31, 2013

December 31, 2012

1000001

Cash

60,660

$45,125

1000002

Accounts receivable

27,200

17,500

1000003

Allowance for doubtful accounts

1,500 CR

1,500 CR

1000004

Inventory

33,150

33,150

1000005

Supplies

21,300

21,300

1000006

Prepaid insurance

18,000

18,000

1010001

P,P & E –Store Equipment

178,000

178,000

1010002

Accumulated depreciation – Store Equipment

17,800 CR

17,800 CR

1010003

P,P & E –Office Equipment

25,000

25,000

1010004

Accumulated depreciation – Office Equipment

5,000 CR

5,000 CR

1010005

P,P & E – Building

617,500

617,500

1010006

Accumulated depreciation – building

30,875CR

30,875 CR

2000001

Accounts payable

34,410 CR

31,525 CR

2000002

Accrued expenses

2,125 CR

2,125 CR

2000003

Salaries payable

0 CR

0 CR

2000004

Interest payable

12,500 CR

12,500 CR

2010001

Notes payable

250,000 CR

250,000 CR

3000001

Common stock

100,000 CR

100,000 CR

3000002

Capital in excess of par

400,000 CR

400,000 CR

3000003

Retained earnings

104,250 CR

104,250 CR

3000004

Dividends

0

$0

4000001

Sales Revenue

121,000 CR


$0 –

5000001

Purchases

75,000

$0

5000002

Cost of goods sold

0

$0

5010001

Salary expense

20,480

$0

5010002

Benefits expense

0

$0

5010003

Supplies expense

0

$0

5010004

Insurance expense

0

$0

5010005

Utilities expense

895

$0

5010006

Travel expenses

275

$0

5010007

Advertising expenses

425

$0

5010008

Interest expense

0

$0

5010009

Bank fees

0

$0

5010010

Consulting expenses

1,575

$0

5010011

Depreciation expense

0

$0

5010012

Bad debt expense

0

$0

Exhibit
2 – Detail of transactions on ACCT 100001, Cash.

Date

Description

Amount

DR/CR

Balance

DR/CR

12/31/12

Beginning Balance

DR

$45,125

DR

1/4/13

Cash receipts

$61,500

DR

$106,625

DR

1/4/13

Payment for inventory

$62,115

CR

$44,510

DR

1/7/13

Payment for salaries

$5,120

CR

$39,390

DR

1/11/13

Payment for utilities

$895

CR

$38,495

DR

1/14/13

Payment for salaries

$5,120

CR

$33,375

DR

1/14/13

Payment for consulting

$1,575

CR

$31,800

DR

1/14/13

Cash receipts

$26,525

DR

$58,325

DR

1/21/13

Payment for salaries

$5,120

CR

$53,205

DR

1/27/13

Cash receipts

$13,275

DR

$66,480

DR

1/28/13

Payment for salaries

$5,120

CR

$61,360

DR

1/28/13

Payment for travel

$275

CR

$61,085

DR

1/28/13

Payment for advertising

$425

CR

$60,660

DR

Note:
Entries for cash receipts on accounts receivables have not been made for
January. The outstanding checks as of
December 31, 2012 was $6,125. There were
no outstanding deposits.

Exhibit
3 – Summary of Bank statement

TDC
Bank

Denver,
CO

Beginning
balance…………………….$51,250

Deposits
…………………………………..$61,300

Checks cleared…………………………
(51,890)

Bank fees………………………………… (600)

Ending balance………………………..$60,060

Exhibit
4 – Accounts receivable subsidiary ledger

Name

Balance

12/31/12

New Sales

Cash
Receipts

Balance
3/31/13

Aging Schedule

Due or < 30

31-60

61-90

>90

Johnson
Guides

$1,200

35,000

33,850

$2,350

$2,350

Adirondack
Adventures

$4,000

8,500

7,000

$5,500

$4,500

$1,000

Colorado
Climbers

$2,000

12,500

12,000

$2,500

$2,500

Outdoor
Ways

$3,150

$6,000

$3,000

$6,150

$3,150

Kincade
Climbers

$650

950

600

$1,000

$950

$50

Spartan
Adventures

$500

3,250

500

$3,200

$3,200

Nature’s
Highway

$750

500

$1,250

$500

$750

Billings
Mountains

$2,250

$2,250

$250

$2,000

Sky
Adventures

$2,000

4,350

4,350

$2,000

$2,000

Spirit
Adventures

$1,000

$1,000

$1,000

Total

$17,500

$71,000

$61,300

$28,100

$20,400

$4,000

$2,000

$800

Exhibit
5 – Inventory

I.
Ending Counts:

Item Name

Units

Replacement Cost

Selling Price

Selling Costs

Normal Profit %

Ropes

100

10

25

5

30%

Climbing
shoes

800

35

60

5

25%

Climbing
Hardware

100

20

35

5

20%

Helmets

600

25

40

5

30%

II.
Ropes

Date

Units

Unit Cost

Total

Beginning
inventory

1/1/13

50

9

450

Purchase

1/11/13

100

9.5

950

Purchase

1/18/13

200

10

2000

Purchase

1/25/13

200

10

2000

End

1/31/13

100

III.
Climbing Shoes

Date

Units

Unit Cost

Total

Beginning
inventory

1/1/13

600

32

19,200

Purchase

1/11/13

1000

33

33,000

Purchase

1/18/13

200

34

6,400

Purchase

1/25/13

1000

35

35,000

End

1/31/13

800

IV.
Climbing Hardware

Date

Units

Unit Cost

Total

Beginning
inventory

1/1/13

50

18

900

Purchase

1/11/13

100

19

1,900

Purchase

1/18/13

200

20

4,000

Purchase

1/25/13

200

20

4,000

End

1/31/13

100

V.
Helmets

Date

Units

Unit Cost

Total

Beginning
inventory

1/1/13

500

24

12,000

Purchase

1/11/13

1,000

24

24,000

Purchase

1/18/13

800

25

20,000

Purchase

1/25/13

1,000

25

25,000

End

1/31/13

600

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