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ACCTG 472 Final Project

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This project is worth 30% of the final grade.


Instructions: Using the background information on pages 2-4 (below), complete the following tasks. Submit your project to the “Final Project Drop Box” as directed in ANGEL.



Task 1.       Prepare journal entries for listed transactions throughout the year.


Task 2.       Prepare balances for all accounts to be used in financial statements.



Task 3.       Prepare the following financial statements:

a)Income Statement

b)      Retained Earnings Statement

c)Balance Sheet

d)      Cash Flow Statement (Indirect Method)


Task 4.       Prepare the following financial ratios using the Income Statement and      Balance Sheet:

a)       Current Ratio

b)      Quick Ratio

c)       Accounts Receivable Turnover

d)      Days Sales in Receivable

e)       Earnings Per Share

f)       Price Per Earnings Ratio (Assume Market Price = $12)




















Background: On September 30, 2012, Angie Stowe decided to open a corporation that she will call Mandalay Interiors. Instead of doing anything in September, she decides she will begin the company the next day, October 1, 2012. Assume then that all balances on December 31, 2007, are $0. She has also decided that she will sell shares of stock to the public. Furthermore, she has decided that she will use a perpetual inventory system with the FIFO method. She determines that depreciation methods will be determined based on the items purchased.


The company employs three employees. These employees earn salaries of $80,000 in total per year, paid at the end of each month. The federal income tax withheld is 15%, state taxes withheld are 3.07%, and local taxes withheld are at the rate of 1%. And of course, the company will need to remember FICA taxes of 7.65%. The state unemployment tax rate is 5.4%, and the Federal unemployment tax rate is .8%.



October 01, 2012:      Sold 100,000 shares of $5 par common stock for $7.

Sold 10,000 shares of $1 par 10% preferred stock for $10.


October 02, 2012:      Purchased inventory on account for $4,000 (200 units @ $20).


October 03, 2012:       Purchased machinery costing $500,000, paying $200,000 in cash, and the rest on account (noninterest bearing). Name payable account: Machinery Payable. (Estimated useful life of 10 years, and residual value of $30,000.) Will use double declining method of depreciation.


October 03, 2012:      Entered into a lease agreement to rent a building. (No entry needed                                              here.)


October 15, 2012:      Sold 50 units of inventory for $30 cash.


October 30, 2012:      Paid for October rent on building: $1,000.


October 30, 2012:      Paid portion of Accounts Payable due: $2,000


October 30, 2012:      Paid portion of Machinery Payable owed: $2,500


October 31, 2012:      Paid payroll for October


November 1, 2012:    Purchased inventory for cash for $5,000 (200 units @ $25)






November 1, 2012:    With extra cash available, company decides to invest into other                                       companies with the following investments:

  • 100 shares of Company A stock at $50 per share
  • 500 shares of Company B stock at $90 per share
  • 20 $1000 par value 10% bonds at par plus accrued interest
  • Interest paid June 31 and December 31
  • Investments are considered available for sale


November 3, 2012:    Purchased office supplies for cash of $1000.


November 15, 2012:  Sold 100 units of inventory for $32 cash.


November 16, 2012:  Reacquired 20,000 shares of stock for a price of $10.


November 17, 2012:   Board of directors declares 10 cents per share dividend payable December 15, 2012, for common shareholders of record on December 1, 2012. Also declares the yearly preferred dividends with the same dates.


November 25, 2012: Sold 100 units of inventory for $32.


November 30, 2012: Paid for November rent on building: $1,000.


November 30, 2012: Paid rest of A/P, $2,000.


November 30, 2012: Paid portion of Machinery Payable owed: $2,500.


November 30, 2012: Paid payroll for November.


December 1, 2012:     Purchased inventory for cash: $5000 (200 units @ $25).


December 1, 2012:     Purchased new delivery truck on account for $50,000, name         payable account: Truck Payable. (Estimated useful life 120,000  miles, residual value $5,000. Will use units of production method for depreciation.)


December 1, 2012:     Sold 50 shares of both company A & B stock for $75 and $85      respectively.


December 1, 2012:     Sold 200 units of inventory for $32, on account.


December 15, 2012:   Paid dividends owed to shareholders.


December 16, 2012:   Resold reacquired 10,000 shares for $12.


December 31, 2012:   Paid for December rent on building: $1,000.


December 31, 2012:   Paid portion of Machinery Payable owed: $2,500.


December 31, 2012:   Paid payroll for December.


December 31, 2012:   Delivery truck has been used for 10,000 miles this year.


December 31, 2012:   A count of supplies reveals we have $400 of supplies left on hand.


December 31, 2012:   Fair market values of the available for sale investments:

  • Company A: $70 per share
  • Company B: $89 per share
  • Bonds have no change in value


December 31, 2012:   We estimate that 2% of receivables will become delinquent. 

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