2· value 13.00 points On January 1, 2018, the general ledger of Grand Finale Fir

Question

2· value 13.00 points On January 1, 2018, the general ledger of Grand Finale Fireworks includes the following account balances unts Cash Accounts Recelvable Supplies Equipment Accumulated Depreciation Accounts Payable Common Stock, $1 par value Additional Paid-in Capital Retained Earnings 43,600 46,300 8,400 73,000 S 9,900 15,500 19,000 89,000 37,900 Totals $171,300 S171.300 During January 2018, the following transactions occur January 2 Issue an additional 2,100 shares of $1 par value common stock for $42,000 January 9 Provide services to customers on account, $16,300 January 10 Purchase additional supplies on account, $5,800 January 12 Repurchase 1,200 shares of treasury stock for $22 per share. January 15 Pay cash on accounts payable, $17,400 January 21 Provide services to customers for cash, $50,000 January 22 Receive cash on accounts receivable, $17,500 January 29 Declare a cash dividend of $0 40 per share to all shares outstanding on January 29. The dividend is payable on February 15 (Hint: Grand Finale Fireworks had 19,000 shares outstanding on January 1, 2018 and dividends are not paid on treasury stock.) January 30 Reissue 700 shares of treasury stock for $24 per share. January 31 Pay cash for salaries during January, $42 900

Explanation / Answer

In the books of Grand Finale Fireworks :

Adjusting Enties:

Income Statement

For the month ended January 31, 2018

Balance Sheet

January 31, 2018

Analysis:

a. Return on Equity = Net Income / Average Stockholders Equity = $ 4,375 / 1 /2 ( 145,900 + 174,715) = $ 4,375 / $ 160,308 = 0.0273 or 2.73 %.

The company is more profitable than other companies.

b. There are 20,600 shares of common stock are outstanding as of January 31, 2018.

c. Average shares outstanding = 1/2 ( 19,000 + 20,600) = 19,800.

Earning per share = $ 4,375 / 19,800 shares = $ 0.22

Earnings per share is better than last year's average.

Date Account Titles Debit Credit 2018 $ $ Jan 2 Cash 42,000 Common Stock 2,100 Additional Paid-in Capital : Common Stock 39,900 Jan 9 Accounts Receivable 16,300 Service Revenue 16,300 Jan 10 Supplies 5,800 Accounts Payable 5,800 Jan 12 Treasury Stock 26,400 Cash 26,400 Jan 15 Accounts Payable 17,400 Cash 17,400 Jan 21 Cash 50,000 Service Revenue 50,000 Jan 22 Cash 17,500 Accounts Receivable 17,500 Jan 29 Retained Earnings ( 19,000 + 2,100 - 1,200) shares x $ 0.40 per share 7,960 Dividends Payable 7,960 Jan 30 Cash 16,800 Treasury Stock 15,400 Additional Paid-in Capital : Treasury Stock 1,400 Jan 31 Salaries Expense 42,900 Cash 42,900

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