Harry and Ron formed Granger Company on January 1 2013 Each

Harry and Ron formed Granger Company on January 1, 2013. Each contributed $200,000 in exchange for 10,000 shares of Common Stock with a par value of $1. The following are transactions for the month of January, the first month of operations.

Company acquired 400 acres of land in South Dakota at a cost of $500 per acre, paying in full.

Company established a line of credit with Dakota National Bank in the amount of $500,000 using the land as collateral.

Purchased supplies for $3,500 cash

Paid for January’s equipment rental, cash $50,000.

Sold timber from the land for $75,000.

Signed a 1 year lease on a 2,000 sq. ft. office, paying $2,800 for the month.

Sold large rocks to a landscaping customer, receiving half of the $15,000 in cash.

Paid $3,000 for fuel and oil used in the equipment.

Sold excess topsoil to a developer, 20 dump truck loads at $100 per load, cash.

Paid employees for the month, $12,000.

ABC Sign Company installed no trespassing signs and company signage at a cost of $1,500.

Received and paid invoice for insurance premiums for months of January-March, $15,000

Received invoice for 2,300 for fuel and oil used in the equipment.

On the last day of the month purchased 2 pickup trucks from a local dealer for $25,000 each, Dakota National Bank provided the loan with a rate of 2.49%, 12 months.

Signed contract to purchase an additional 250 acres of land at a cost of $600 per acre.

Accounts Listing:

Cash                      Accounts Receivable                                       Prepaid Insurance                            Trucks

Land                      Accounts Payable                                             Line of Credit Payable                    Note Payable

Common Stock Additional Paid in Capital                              Revenue                                              Advertising Exp

Supplies Exp       Equipment Rental Exp                                    Office Lease Exp                               Fuel/Oil Exp

Insurance Exp    Wages Exp

Requirements:

Provide a journal entry for each transaction or state “no journal entry required”

Prepare the Income Statement for the month of January, using proper form, calculate EPS.

Prepare the Balance Sheet for the month of January, using proper form, calculate current ratio.

Solution

Account Title Debit Credit Cash 400000 Common stock 20000 Additional Paid in capital 380000 Land 200000 Cash 200000 No ENTRY Supplies 3500 Cash 3500 Equipment Rental Exp 50000 Cash 50000 Cash 75000 Revenue 75000 Office lease exp. 2800 Cash 2800 Cash 7500 Accounts receivable 7500 Revenue 15000 Fuel/oil exp 3000 Cash 3000 Cash 2000 Revenue 2000 Wages exp. 12000 Cash 12000 Advertising exp 1500 Cash 1500 Insurance exp. 5000 Prepaid Insuramnce 10000 Cash 15000 Fuel/Oil exp. 2300 Cash 2300 Trucks 50000 Line of credit payable 50000 Interest exp. on line of credit 104 Interest payable 104 (50000*2.49%/12) 832204 832204 LEDGER ACCOUNTS Debit Credit Debit Credit Accounts receivable 7500 7500 Additional Paid in capital 380000 380000 Advertising exp 1500 1500 Cash 400000 Cash 200000 Cash 3500 Cash 50000 Cash 75000 Cash 2800 Cash 7500 Cash 3000 Cash 2000 Cash 12000 Cash 1500 Cash 15000 Cash 2300 194400 Common stock 20000 20000 Equipment Rental Exp 50000 50000 Fuel/oil exp 3000 Fuel/Oil exp. 2300 5300 Insurance exp. 5000 5000 Interest exp. 104 104 Interest payable 104 104 Land 200000 200000 Line of credit payable 50000 50000 Office lease exp. 2800 2800 Prepaid Insurance 10000 10000 Revenue 75000 Revenue 15000 Revenue 2000 92000 Supplies 3500 3500 Trucks 50000 50000 Wages exp. 12000 12000 832204 832204 542104 542104 Trial balance for Jan. Debit Credit Cash 194400 Accounts receivable 7500 Supplies 3500 Prepaid Insurance 10000 Land 200000 Trucks 50000 Interest payable 104 Line of credit payable 50000 Common stock 20000 Additional Paid in capital 380000 Revenue 92000 Advertising exp 1500 Equipment Rental Exp 50000 Fuel/Oil exp. 5300 Insurance exp. 5000 Interest expense 104 Office lease exp. 2800 Wages exp. 12000 Total 542104 542104 Income statement For the mth.of Jan Revenue 92000 Less: Operating expenses: Advertising exp 1500 Equipment Rental Exp 50000 Fuel/Oil exp. 5300 Insurance exp. 5000 Interest expense 104 Office lease exp. 2800 Wages exp. 12000 76704 Net income 15296 No.of common stock shares 20000 Earnings per share(15296/20000) 0.765 Balance sheet As on Jan 31 Current assets Cash 194400 Accounts receivable 7500 Supplies 3500 Prepaid Insurance 10000 Total Current assets 215400 Fixed assets Land 200000 Trucks 50000 250000 Total assets 465400 Liabilities & Equity Current liabilities Interest payable 104 Line of credit payable 50000 Total current liabilities 50104 Equity Common stock 20000 Additional Paid in capital 380000 Retained earnings 15296 Total equity 415296 Total Liabilities & Equity 465400 Current ratio=Current assets/Current Liabilities 215400/50104= 4.30