Acct 2210 Zeigler - P3-32A Comprehensive Cycle Problem (Pg 180)
Acct 2210 Zeigler - P3-32A – Comprehensive Cycle Problem (Pg 180)
Boykin CorporationGeneral Journal, 2013
Date / Account Titles / Debit / Credit
Jan. 1 / Cash / 25,000
Common Stock / 25,000
Mar. 1 / Prepaid Rent / 8,400
Cash / 8,400
Apr. 14 / Supplies / 400
Accounts Payable / 400
June 30 / Cash / 12,000
Unearned Revenue / 12,000
July 5 / Accounts Payable / 300
Cash / 300
Aug. 1 / Accounts Receivable / 4,800
Service Revenue / 4,800
Aug. 8 / Cash / 1,600
Service Revenue / 1,600
Sept. 1 / Salaries Expense / 18,000
Cash / 18,000
Sept. 9 / Cash / 4,250
Accounts Receivable / 4,250
Oct. 5 / Accounts Receivable / 17,000
Service Revenue / 17,000
Nov. 2 / Dividends / 500
Cash / 500
Adjusting Entries at 12/31 Year-End
Dec. 31 / Unearned Revenue ($12,000 x 6/12) / 6,000
Service Revenue / 6,000
Dec. 31 / Salaries Expense / 1,100
Salaries Payable / 1,100
Dec. 31 / Rent Expense ($8,400 x 10/24) / 3,500
Prepaid Rent / 3,500
Dec. 31 / Supplies Expense ($400 $50) / 350
Supplies / 350
PROBLEM 3-32A (cont.) b.
Boykin Corporation T-AccountsAssets / = / Liabilities / + / Stockholders’ Equity
Cash / Accounts Payable / Common Stock
1/1 25,000 / 3/1 8,400 / 7/5 300 / 4/14 400 / 1/1 25,000
6/30 12,000 / 7/5 300 / Bal. 100 / Bal. 25,000
8/8 1,600 / 9/1 18,000
9/9 4,250 / 11/2 500 / Retained Earnings
Bal. 15,650 / Unearned Revenue / Bal. -0-
12/31 6,000 / 6/30 12,000
Accounts Receivable / Bal. 6,000 / Dividends
8/1 4,800 / 9/9 4,250 / 11/2 500
10/5 17,000 / Bal. 500
Bal. 17,550 / Salaries Payable
12/31 1,100 / Service Revenue
Supplies / Bal. 1,100 / 8/1 4,800
4/14 400 / 12/31 350 / 8/8 1,600
Bal. 50 / 10/5 17,000
12/31 6,000
Prepaid Rent / Bal. 29,400
3/1 8,400 / 12/31 3,500
Bal. 4,900 / Rent Expense
12/31 3,500
Bal. 3,500
Salaries Expense
9/1 18,000
12/31 1,100
Bal. 19,100
Supplies Expense
12/31 350
Bal. 350
PROBLEM 3-32A (cont.) Parts c & d
Boykin CorporationADJUSTED Trial Balance
December 31, 2013
Account Titles / Debit / Credit
Cash / $15,650
Accounts Receivable / 17,550
Supplies / 50
Prepaid Rent / 4,900
Accounts Payable / $ 100
Unearned Revenue / 6,000
Salaries Payable / 1,100
Common Stock / 25,000
Dividends / 500
Service Revenue / 29,400
Rent Expense / 3,500
Salaries Expense / 19,100
Supplies Expense / 350
Totals / $61,600 / $61,600
Boykin Corporation
Financial Statements
For the Year Ended December 31, 2013
Income Statement
Service Revenue / $29,400
Expenses
Salaries Expense / $19,100
Rent Expense / 3,500
Supplies Expense / 350
Total Expenses / (22,950)
Net Income / $ 6,450
Statement of Changes in Stockholders’ Equity
Beginning Common Stock / $ -0-
Plus: Stock Issued / 25,000
Ending Common Stock / $25,000
Beginning Retained Earnings / $ -0-
Plus: Net Income / 6,450
Less: Dividends / (500)
Ending Retained Earnings / 5,950
Total Stockholders’ Equity / $30,950
PROBLEM 3-32A d. (cont.)
Boykin CorporationBalance Sheet
As of December 31, 2013
Assets
Cash / $15,650
Accounts Receivable / 17,550
Supplies / 50
Prepaid Rent / 4,900
Total Assets / $38,150
Liabilities
Accounts Payable / $ 100
Unearned Revenue / 6,000
Salaries Payable / 1,100
Total Liabilities / $ 7,200
Stockholders’ Equity
Common Stock / $25,000
Retained Earnings / 5,950
Total Stockholders’ Equity / 30,950
Total Liabilities and Stockholders’ Equity / $38,150
Boykin Corporation
Statement of Cash Flows
For the Year Ended December 31, 2013
Cash Flows From Operating Activities:
Inflow from Customers* / $17,850
Outflow for Expenses** / (26,700)
Net Cash Flow from Operating Activities / $( 8,850)
Cash Flows From Investing Activities / -0-
Cash Flows From Financing Activities:
Inflow from Stock Issue / $25,000
Outflow for Dividends / (500)
Net Cash Flow from Financing Activities / 24,500
Net Change in Cash / 15,650
Plus: Beginning Cash Balance / -0-
Ending Cash Balance / $15,650
*(6/30) $12,000 + (8/8) $1,600 + (9/9) $4,250 = $17,850
**(3/1) $8,400 + (7/5) $300 + (9/1) $18,000 = $26,700
PROBLEM 3-32A (cont.)e.
Date / Account Titles / Debit / CreditClosing Entries
Dec. 31 / Service Revenue / 29,400
Retained Earnings / 29,400
Dec. 31 / Retained Earnings / 22,950
Salaries Expense / 19,100
Rent Expense / 3,500
Supplies Expense / 350
Dec. 31 / Retained Earnings / 500
Dividends / 500
Boykin Corporation
T-Accounts for Closing Entries, 2013
Assets / = / Liabilities / + / Stockholders’ Equity
Cash / Accounts Payable / Common Stock
Bal. 15,650 / Bal. 100 / Bal. 25,000
Unearned Revenue / Retained Earnings
Accounts Receivable / Bal. 6,000 / cl 22,950 / cl 29,400
Bal. 17,550 / cl 500
Salaries Payable / Bal. 5,950
Bal. 1,100
Supplies / Dividends
Bal. 50 / Bal. 500 / cl 500
Bal. -0-
Prepaid Rent / Service Revenue
Bal. 4,900 / cl 29,400 / Bal. 29,400
Bal. -0-
Rent Expense
Bal. 3,500 / cl 3,500
Bal. -0-
Salaries Expense
Bal. 19,100 / cl 19,100
Bal. -0-
Supplies Expense
Bal. 350 / cl 350
Bal. -0-
PROBLEM 3-32A (cont.)
f.
Boykin CorporationPost-Closing Trial Balance
December 31, 2013
Account Titles / Debit / Credit
NOTE: The Post-Closing Trial Balance contains only Balance Sheet (Permanent) Accounts.
Cash / $ 15,650
Accounts Receivable / 17,550
Supplies / 50
Prepaid Rent / 4,900
Accounts Payable / $ 100
Unearned Revenue / 6,000
Salaries Payable / 1,100
Common Stock / 25,000
Retained Earnings
(Updated Balance after closing all of the temporary accounts) / 5,950
Totals / $38,150 / $38,150
We are now ready to begin the next accounting period.
Chp 3 Ratio Computations – See next page
P3-32A: Three Ratios for Boykin, Inc. (pg 157-160)
1) ROA: Assessing the Effective Use of Assets.
In essence, how well did management “manage” the asset base available or provided?
ROA = Net Income / Total Assets:
$6,450 / $38,150 = 16.91% (from pg 157)
------
2) Debt to Assets Ratio: Assessing Debt Risk.
In essence, how much financial risk does the company have? How leveraged is the company?
Total Debt / Total Assets:
$7,200 / $38,150 = 18.87% (from pg 158)
------
3) ROE: What is the Stockholder’s Return?
In essence, what profit was earned relative to the investment by the owner’s of the company?
ROE = Net Income / Total Stockholder’s Equity:
$6,450 / $30,950 = 20.84% (from pg 158)
------
Question:
Why is ROE higher than ROA?