Credit will be awarded based on the students’ ability to prepare flawless financial statements for the month ended January 31, 2015 . Supporting information is required as follows: Journalize the following transactions, post to T-accounts, balance the T-accounts, Prepare a trial balance, journalize adjusting entries, prepare adjusted trial balance, journalize closing entries, and finally prepare Income Statement, Statement of Retained Earnings, Balance Sheet,and Statement of Cash Flows. Please use the following Chart of accounts. 101 Cash 230 Interest Payable 106 Accounts Receivable 301 Common Stock 126 Inventory 350 Retained Earnings 128 Prepaid Insurance 405 Sales Revenue 131 Prepaid Rent 406 Sales Discounts and Allowance 135 Prepaid Advertising 501 Cost of Goods Sold 163 Office Equipment 520 Utility Expense 164 Mixing Barrels 525 Wage Expense 165 Factory Equipment 530 Interest Expense 190 Accumulated Depreciation 535 Rent expense 201 Accounts Payable 545 Insurance Expense 215 Notes Payable 560 Depreciation Expense 220 Line of Credit 565 Advertising Expense Additional information: · Grandpa’s Cough Inc. (GCI) sells a uniquely flavored cough syrup either wholesale or through its own storefront. · Cases contain 24 bottles. Each bottle costs the company $2 to make and the company sells bottles for $4.5. Each case is sold for $90 the cost to ship is paid for by the customer. Customers pay at the last minute of their terms unless otherwise noted. · Gene has a revolving line of credit with a local bank, if the cash balance drops below $15,000 then Gene will draw money against the line of credit in $5,000 increments, until the balance is above $25,000. Simple interest rate on the line is 3.4%.Interest accruesdaily and paid at the end of each month. · The company maintains inventory at $72,000, and will purchase materials every time the inventory drops below that amount in $4,000 increments, vendor pays shipping. Terms are N/15. Gene pays all bills at the last minute. · All depreciation is straight-line with no residual value. o Office equipment is expected to last 5 years o Factory Equipment is expected to last 4 years o Mixing barrels are expected to last 10 years. · Round all answers to the nearest dollar Grandpa's Cough Inc. Balance Sheet As of December 31, 2014 Assets Current Assets Cash $ 20,000 Accounts Receivable 10,000 Inventory 50,000 Prepaid Insurance 375 Prepaid Rent 1,400 Total Current Assets $ 81,775 Fixed Assets Office Equipment $ 3,500 Mixing Barrels 4,500 Factory Equipment 15,000 Less: Accumulated Depreciation (19,860) Total Fixed Assets $ 3,140 Total Assets $ 84,915 Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 25,000 Current Portion of Long Term Debt 1,600 Total Current Liabilities $ 26,600 Long Term Debt Notes Payable .

1. Credit will be awarded based on the students’ ability to prepare
flawless financial statements for the month ended January 31,
2015
. Supporting information is required as follows: Journalize the
following transactions, post to T-accounts, balance the T-
accounts, Prepare a trial balance, journalize adjusting entries,
prepare adjusted trial balance, journalize closing entries, and
finally prepare Income Statement, Statement of Retained
Earnings, Balance Sheet,and Statement of Cash Flows. Please
use the following Chart of accounts.
101
Cash
230
Interest Payable
106
Accounts Receivable
301
Common Stock
126
Inventory
350
Retained Earnings
128
Prepaid Insurance
405
Sales Revenue
131
Prepaid Rent
406
Sales Discounts and Allowance
135
Prepaid Advertising
501
Cost of Goods Sold

2. 163
Office Equipment
520
Utility Expense
164
Mixing Barrels
525
Wage Expense
165
Factory Equipment
530
Interest Expense
190
Accumulated Depreciation
535
Rent expense
201
Accounts Payable
545
Insurance Expense
215
Notes Payable
560
Depreciation Expense
220
Line of Credit
565
Advertising Expense
Additional information:
·
Grandpa’s Cough Inc. (GCI) sells a uniquely flavored cough
syrup either wholesale or through its own storefront.
·

3. Cases contain 24 bottles. Each bottle costs the company $2 to
make and the company sells bottles for $4.5. Each case is sold
for $90 the cost to ship is paid for by the customer. Customers
pay at the last minute of their terms unless otherwise noted.
·
Gene has a revolving line of credit with a local bank, if the cash
balance drops below $15,000 then Gene will draw money
against the line of credit in $5,000 increments, until the balance
is above $25,000. Simple interest rate on the line is
3.4%.Interest accruesdaily and paid at the end of each month.
·
The company maintains inventory at $72,000, and will purchase
materials every time the inventory drops below that amount in
$4,000 increments, vendor pays shipping. Terms are N/15. Gene
pays all bills at the last minute.
·
All depreciation is straight-line with no residual value.
o
Office equipment is expected to last 5 years
o
Factory Equipment is expected to last 4 years
o
Mixing barrels are expected to last 10 years.
·
Round all answers to the nearest dollar
Grandpa's Cough Inc.
Balance Sheet

4. As of December 31, 2014
Assets
Current Assets
Cash
$
20,000
Accounts Receivable

5. 10,000
Inventory
50,000
Prepaid Insurance
375
Prepaid Rent
1,400
Total Current Assets
$

6. 81,775
Fixed Assets
Office Equipment
$
3,500
Mixing Barrels
4,500
Factory Equipment

7. 15,000
Less: Accumulated Depreciation
(19,860)
Total Fixed Assets
$
3,140
Total Assets
$
84,915

8. Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable
$
25,000
Current Portion of Long Term Debt
1,600
Total Current Liabilities
$
26,600

9. Long Term Debt
Notes Payable
16,000
Total Long Term Debt
16,000
Total Liabilities
$

10. 42,600
Stockholders' Equity
Retained Earnings
$
28,210
Common Stock
14,105
Total Stockholders' Equity

11. 42,315
Total Liabilities and Stockholders' Equity
$
84,915
·
Date
Transaction
January 1, 2015
Gene Autry invested $25,000 Cash and office equipment worth
$6,000 in return for common stock of Grandpa’s Cough Inc.
1
Purchased Mixing Barrels worth $3,000 and Other Factory
Equipment worth $600 on credit, N/30
1
Purchased Inventory on credit for $72,000with terms N/15
1
Paid Vendor $15,000 for prior month purchases
2
Paid $4,500 for annual premium on insurance coverage starts at

12. the end of the month.
3
During the grand opening of the store GCI sold 256 Bottles of
Cough Syrup.
4
A wholesale customer ordered 100 cases, GCI shipped the order
and billed the customer 2/5 N/10
5
Received payment from customer from prior month sale $5,000.
6
Sold 300 Bottles of Cough Syrup through the store.
7
Received half the payment for sale of goods on January 4
10
Paid $4,200 for three months’ rent for store front starting on
January 1, 2015.
13
Sold 400 Bottles of Cough Syrup through the store
15
Shipped order for another wholesale customer 500 cases N/10
15
Received and paid Utility Bill for $500
18
Shipped order of 300 Cases to a wholesale customer N/10
20
Sold 625 Bottles of Cough Syrup through the store
25
Shipped order to wholesale customer 1,000 cases 2/10 N/30
26
Paid for mixing barrels and equipment purchased on January 1
27
Sold 1,000 bottles of Cough Syrup through the store
30
Paid wages under the table to employees of $15,000
31
Paid $2,000 for 12 month advertising campaign through local

13. radio stations
Additional information:
Prior Period Prepaid Rent was for the factory as of December
31, 2013 the balance had two months remaining.
Prior Period Prepaid Insurance was for an annual policy that
expires at the end of January.
The Note was borrowed on December 31, 2014 and holds
interest of 3%. Interest is accrued at the end of the month. The
first principle payment is due in the month of March.