|Accounting 301 Project_Zippy Lines, Inc._Financial statement|
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.
Below is a list of accounts with their balances as of January 31, 2013 and December 31, 2012:
Exhibit 2 Detail of transactions on ACCT 100001, Cash.
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
Beginning balance .$51,250
Checks cleared (51,890)
Bank fees (600)
Ending balance ..$60,060
Exhibit 4 Accounts receivable subsidiary ledger
Exhibit 5 Inventory