ACCOUNTING-This project has 2 distinct parts. The first part is the creation

QUESTION

Project #2
This project has 2 distinct parts. The first part is the
creation of journal entries, Income Statement and Balance Sheet. No T-accounts
are required to be turned in. The second part is using ratios to evaluate two
public companies and making conclusions.
Grading:
The project will be graded on the following scale:

Requirement

Points

Part 1:

Journal Entries: Accounts used, Type included and Amount

60

Income Statement and Balance Sheet: Accounts correctly summarized and
correct presentation

10

Strategic Question

10

Part 2:

Ratios: Correct formula and Ratio

10

Strategic Question

5

Both Parts:

Overall Presentation: Professional, clear and typed – no electronic
submissions

5

TOTAL

100

Due Date:
Part 1 is due on November 20th
Part 2 is due on December 4th
However, both parts can be turned in together and anytime
earlier.
Part 1:
You start your own business, “Float Your Boat.” Your new
company manufactures and sells white water rafts and related equipment. Most of
the rafts and equipment you purchase and sell but you want to expand to manufacturing
what you sell. You currently manufacture yourself most of the paddles you sell
out of specially treated wood.
You want to create an accurate set of accounting records so
you are able to get funding from other people and/or banks. So, even though you
are not a public company yet, you want to create the same financial statements
that you would if you were a public company. Below are economic events that may
impact your accounting records. Create journal entries for those events and
complete the Income Statement and Balance Sheet for the period ending July 31th.
Remember, you may need to create adjusting journal entries. You record journal entries as the events occur
but no adjusting entries are needed each month, only for the period ending July
31st. The business is new so there are no opening balances.

Event

Date

Event

Amount

1

May 15

You contribute your own money to the corporate bank account

100,000

2

May 15

You file incorporation papers and pay cash for the fee. Your Articles
of incorporation provide that “Float Your Boat” authorize (can issue) 1,000
shares of common stock (par value $1 per share). You own 100% of these via
your contribution made on the same day.

100

3

May 21

Acquire office supplies on account

900

4

May 22

Acquire inventory that includes rafts and equipment on account

5,000

5

June 1

Rented store space and paid cash for 6 months’ rent in advance

18,000

6

June 1

Purchased on account furniture and racks for store. These items are expected to last 5 years
with no residual value

20,000

7

June 5

First sale! Sold a basic raft
(no warranty) on account

600

8

June 5

Paid cash for website and advertising

400

9

June 6

Bought wood to make paddles that you will sell

200

10

June 10

Paid cash to lower amount due for previously purchased office
supplies

300

11

June 10

Sold rafting equipment on account

400

12

June 11

Collected cash from account receivables

200

13

June 20

A customer special ordered and paid cash for 2 paddles with
engravings to match his tattoos. These will be completed and delivered
mid-July

2,000

14

June 30

You realized you have used half of your supplies

450

15

July 1

Hired a sales person for the store and gave them a hiring bonus. The
salary is 2,000 a month, paid monthly on the last day of each month

500

16

July 1

Borrowed money from the bank at a 6% annual interest rate. You expect
to pay 10% of this off during this year.

100,000

17

July 5

Sold a high-end raft that comes with a 5 year warranty. You expect
that claims will come in each year that equals 1% of the selling price of
rafts that come with the warranty.

1,500

18

July 10

Delivered the special order paddles from June 20 and charged a
delivery fee

50

19

July 15

Customer returned some rafting equipment purchased on June 2nd
and you gave them a refund

80

20

July 15

Bought more wood for paddles with the terms of 2/10, n/30 and you pay
for them the same day with cash

800 before any discount

21

July 15

Paid freight to ship the wood for paddles to you (freight-in)

60

22

July 20

Sold one of the pieces of furniture that was in your store that you
paid $300 for and had purchased on June 1

200

23

July 22

Declared a dividend

.25 per share

24

July 28

Sold two raft (his and hers) to a couple that just got married. You
gave them a 2% discount.

1,000 before any discount

25

July 30

Paid the dividend

.25 per share

Part 1 Continued:
Strategic Question:
Since “Float Your Boat” is new, there are many decisions the owner will have to
make as his/her business grows. If you were the accountant instead of the
business owner, what advice or recommendations would you give the owner for improvement
or for future consideration? This can be anything that we have covered in
class: compensation of employees, inventory method, etc…

Part 2:
Find and copy the Income Statement and Balance Sheet of two
publically traded companies that are in the same industry. You must include
these copies with your turned in project. Calculate the following ratios:

Ratio

Found
in Chapter:

1

Current Ratio

4

2

Quick Ratio

4

3

Total Debt to Total Assets

9

4

Total Debt to Total Equity

9

5

Return on Stockholder’s Equity

4

6

Gross Profit Rate or Percentage

4

7

Return on Sale or Profit margin

4

8

Return on Assets

4

9

Earnings Per Share

2

10

Price to Earnings (P to E)

2

Strategic Question:
Which of the two companies would you invest in and why?

 

ANSWER:

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