Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Chapter 3, Problem 1GP
Group Project
After completing his electrical technology degree program, Jason Whitmer accepted a position as an electrician’s assistant for a large electrical repair company. After working for three years, Jason earned a master electrician’s license and decided to open his own business. He had saved $10,000, which he invested in the business, transferring the money from his personal savings account. His attorney advised him to set up the business as a corporation. He received 10,000 shares of common stock in exchange for his investment.
On October 1, 2018, Jason purchased a used panel truck for $6,000 cash and some used tools for $1,200 cash. That same day, he signed a lease on a small shop building and paid $3,000 in advance for the first six months’ rent. Also on October 1, 2013, he obtained an IPhone on a two-year contract, paying a $100 deposit, which he will get back at the end of the contract term. He also placed a small advertisement on Craigslist that day. Finally, Jason opened the doors of Whitmer Electronics, Inc., on October 1, 2018. After one month of operations, he hired an assistant.
At the end of the year, prompted in part by concern about his income tax situation (corporations have to pay taxes as well as their employees) and partly by a $15,000 bank loan application for shop expansion, Jason realizes that he needs to prepare financial statements. He gathers the following information for the three months ended December 31, 2018:
- Bank account deposits for collections from customers for services totaled $33,000.
- Services billed to customers but not yet collected totaled $3,000.
- Checks written included. Jason’s salary. $5,000; his assistant’s salary. $3,500 (he still owes the assistant $500); payroll taxes, $575; supplies purchased, $9,500 (the count of supplies still on hand on December 31 is $1,000); fuel and maintenance on truck, $1,200; insurance, $700; utilities including telephone, $825; and advertising, $600 (he still owes $100).
- According to the Internal Revenue Service, the estimated life of the truck is five years and the estimated life of the tools is three years. These assets have no estimated salvage value and you recommend that Jason use the straight-line method of
depreciation . - Jason has put Whitmer Electronics’s revenue and expenses for the quarter into a spreadsheet and calculated an estimated quarterly income tax payable of $1,680.
Requirements
- 1. Analyze the paragraphs above for evidence of business transactions. As you do so, prepare an Excel spreadsheet that includes every financial statement account involved (e.g., cash accounts receivable, supplies, property & equipment, etc.). (Hint: To make sure you enter tie transactions correctly and completely, number the transactions consecutively as you recognize them.)
- 2.From the spreadsheet you created in Requirement 1, prepare the single-step income statement of Whitmer Electronics, Inc., using generally accepted accounting principles, for the three months ended December 31, 2018.
- 3.From the spreadsheet you created in Requirement 1, prepare the statement of retained earnings of Whitmer Electronics. Inc., for the three months ended December 31, 2018.
- 4. From the spreadsheet you created in Requirement 1, prepare the
balance sheet for Whitmer Electronics. Inc., as of December 31, 2018. - 5. Analyze the account “cash” that you created in Requirement 1, and prepare a statement of cash flows for Whitmer Electronics, Inc., for the three months ended December 31, 2018. Divide the various increases and decreases to the account into three categories: operating, investing and financing. What do each of these categories mean? (Challenge)
- 6. Thoroughly analyze Whitmer Electronics, Inc., s, creditworthiness for the bank loan. For this purpose, assume that the term of the loan is 5 years end that the principal balance is not due and payable until the end of the term of the loan. Only interest is payable yearly. Use all of the rates you have learned so far Consider not only Whitmer’s present position but also its position should the loan be granted. Do you think the bank will approve Whitmer’s request for the loan? Why or why not?
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Chapter 3 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Ch. 3 - If Oxbow Corporation dees not record a sale mace...Ch. 3 - Which of the following transactions would be...Ch. 3 - A physician performs medical services for a...Ch. 3 - The Animal Adventure zoo gift shop sells stuffed...Ch. 3 - According to U S GAAP, when should revenue be...Ch. 3 - Prob. 6QCCh. 3 - Prob. 7QCCh. 3 - Prob. 8QCCh. 3 - What data flows from the statement of retained...Ch. 3 - Which financial statement reports assets,...
Ch. 3 - A companys balance of retained earnings on January...Ch. 3 - Prob. 12QCCh. 3 - All of the following accounts are temporary...Ch. 3 - Prob. 14QCCh. 3 - Prob. 15QCCh. 3 - Prob. 16QCCh. 3 - Prob. 3.1ECCh. 3 - LO 1 (Learning Objective 1: Explain how accrual...Ch. 3 - LO 1 (Learning Objective 1: Explain how accrual...Ch. 3 - Prob. 3.3SCh. 3 - (Learning Objective 2: Apply the revenue and...Ch. 3 - (Learning Objective 2: Apply the revenue and...Ch. 3 - Prob. 3.6SCh. 3 - LO 3 (Learning Objective 3: Adjust the accounts)...Ch. 3 - LO 3 (Learning Objective 3: Adjust the accounts...Ch. 3 - LO 3 (Learning Objective 3: Adjust the accounts...Ch. 3 - LO 3 (Learning Objective 3: Adjust the accounts...Ch. 3 - Prob. 3.11SCh. 3 - Prob. 3.12SCh. 3 - Prob. 3.13SCh. 3 - LO 4 (Learning Objective 4: Construct the...Ch. 3 - LO 4 (Learning Objective 4: Construct the...Ch. 3 - Prob. 3.16SCh. 3 - LO 5 (Learning Objective 5: Make closing entries...Ch. 3 - Group A LO 1, 2 (Learning Objectives 1. 2: Explain...Ch. 3 - LO 1, 3 (Learning Objectives 1, 3: Explain how...Ch. 3 - Prob. 3.20AECh. 3 - LO 3 (Learning Objective 3: Adjust the accounts)...Ch. 3 - Prob. 3.22AECh. 3 - LO 4 (Learning Objective 4: Construct the...Ch. 3 - LO 3, 4 (Learning Objectives 3, 4: Adjust the...Ch. 3 - (Learning Objective 5: Close the books) Prepare...Ch. 3 - LO 3, 5 (Learning Objectives 3. 5: Adjust the...Ch. 3 - Prob. 3.27AECh. 3 - LO 6 (Learning Objective 6: Analyze and evaluate...Ch. 3 - LO 1, 2 (Learning Objectives 1, 2: Explain how...Ch. 3 - LO 1, 3 (Learning Objectives 1. 3: Explain how...Ch. 3 - LO 2, 3 (Learning Objectives 2, 3: Apply the...Ch. 3 - LO 3 (Learning Objective 3: Adjust the accounts)...Ch. 3 - LO 3, 4 (Learning Objectives 3. 4: Adjust the...Ch. 3 - LO 4 (Learning Objective 4: Construct the...Ch. 3 - LO 3,4 (Learning Objectives 3,4: Adjust the...Ch. 3 - LO 5 (Learning Objective 5: Close the books)...Ch. 3 - LO 3, 5 (Learning Objective 3, 5: Adjust the...Ch. 3 - LO 3, 5 (Learning Objective 3, 5: Adjust the...Ch. 3 - LO 6 (Learning Objective 6: Analyze and evaluate...Ch. 3 - Prob. 3.40SECh. 3 - Questions 41-43 are based on the following facts:...Ch. 3 - Prob. 3.42QCh. 3 - Prob. 3.43QCh. 3 - Using the accrual basis, in which month should...Ch. 3 - On January 1 of the current year. Oliver Company...Ch. 3 - Assume the same facts as in question 3-45....Ch. 3 - What effect does the adjusting entry in question...Ch. 3 - Prob. 3.48QCh. 3 - Prob. 3.49QCh. 3 - The Unearned Revenue account of Melrose...Ch. 3 - What is the effect on the financial statements of...Ch. 3 - For 2018. Broadview company had revenues in excess...Ch. 3 - Which of the following accounts would not be...Ch. 3 - Prob. 3.54QCh. 3 - Prob. 3.55QCh. 3 - Unadjusted net income equals 5,500. Calculate what...Ch. 3 - Salary Payable at the beginning of the month...Ch. 3 - Group A LO 1 (Learning Objective 1: Explain how...Ch. 3 - (Learning Objective 3: Adjust the accounts)...Ch. 3 - Prob. 3.60APCh. 3 - (Learning Objective 3: Adjust the accounts)...Ch. 3 - LO 4. 6 (Learning Objectives 4, 6: Construct the...Ch. 3 - LO 5 (Learning Objective 5: Close the books, and...Ch. 3 - LO 5 P3-63A (Learning Objective 5: Close the...Ch. 3 - Prob. 3.65APCh. 3 - LO 1 (Learning Objective 1: Explain how Accrual...Ch. 3 - LO 3 (Learning Objective 3: Adjust the accounts)...Ch. 3 - Prob. 3.68BPCh. 3 - LO 3 (Learning Objective 3: Adjust the accounts)...Ch. 3 - Prob. 3.70BPCh. 3 - Prob. 3.71BPCh. 3 - LO 5 (Learning Objective 5: Close the books,...Ch. 3 - Prob. 3.73BPCh. 3 - Prob. 3.74CEPCh. 3 - Prob. 3.75CEPCh. 3 - Prob. 3.76CEPCh. 3 - Prob. 3.77SCCh. 3 - LO 3, 6 (Learning Objectives 3, 6: Adjust the...Ch. 3 - Prob. 3.79DCCh. 3 - Prob. 3.80DCCh. 3 - Prob. 3.81EICCh. 3 - Prob. 3.82EICCh. 3 - Prob. 1FFCh. 3 - Prob. 1FACh. 3 - Group Project After completing his electrical...
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