Comprehensive ProblemPatricia Allison began an engineering consulting business on January 1, 2011,...

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Comprehensive ProblemPatricia Allison began an engineering consulting business on January 1, 2011, organized as a corporation (PA Engineering, Inc.) under the laws of Delaware. The annual reporting period ends December 31, 2011. The trial balance on January 1, 2012, is provided in the following table:PA Engineering Trial Balance, January 1, 2012						Account Titles			Debit			Credit									Cash			$10,000										Accounts Receivable													Office Supplies			$20,000										Land													Computers			$80,000										Accumulated Depreciation (on computers)													Miscellaneous Other Assets			$5,000										Accounts Payable													Salaries and Wages Payable													Interest Payable													Income Taxes Payable													Long-Term Notes Payable													Contributed Capital (100,000 shares)						$115,000							Retained Earnings													Service Revenue													Depreciation Expense													Supplies Expense													Wages Expense													Interest Expense													Income Tax Expense													Remaining Expenses (not detailed to simplify)													Totals							$115,000										$115,000						Transactions during 2012 are as follows:	a. Borrowed $20,000 cash on a five-year, 10 percent note payable, dated July 1, 2012.	b. Purchased land for a future building site; paid cash, $10,000.	c. Earned $200,000 in revenues for 2012, including $60,000 on credit and the rest in cash.	d. Sold 4,000 additional shares of capital stock for cash at $1.15 market value per share on January 3, 2012.	e. Incurred $120,000 in remaining expenses for 2012, including $20,000 on credit and the rest paid in cash.	f. Collected accounts receivable, $40,000.	g. Purchased other assets for $8,000 cash.	h. Paid accounts payable, $18,000.	i. Purchased office supplies on account for future use, $25,000.	j. Signed a three-year, $33,000 service contract to start February 1, 2013.	k. Declared and paid cash dividends, $10,000.Data for adjusting entries:	l. Supplies counted on December 31, 2012, $18,000.	m. Depreciation for the year on the equipment, $21,000.	n. Interest accrued on notes payable (to be computed).	o. Wages earned by employees since the December 24 payroll but not yet paid, $15,000.	p. Income tax expense, $10,000, payable in 2013.Complete the following for this problem:					Set up T-accounts for the accounts on the trial balance and enter beginning balances.	Prepare journal entries for transactions (a) through (k) and post them to the T-accounts.	Journal and post the adjusting entries (l) through (p).	Prepare an income statement (including earnings per share), statement of stockholders' equity, balance sheet, and statement of cash flows.	Journal closing entries.	Compute the following ratios for 2012 and explain what the results suggest about the company.					Current ratio. (Industry average is 2.2 to 1.0.)			Total asset turnover. (Industry average is 3 times a year.)			Net profit margin. (Industry average is 5.00%.)

Aarti J · Accepted Answer

Assessment 4, Comprehensive Problem Template
T-Accounts Beg
	Worksheet 1 of 9. Template for requirement 1: Set up T-accounts for the accounts on the trial balance and enter beginning balances.
	Learner:
	PA Engineering, Inc.
		Cash					Accounts Receivable					Office Supplies
	B. Bal	10,000.00									B. Bal	20,000.00
							- 0	- 0				20,000.00	- 0
							- 0					20,000.00
		10,000.00	- 0
		10,000.00				Prepaid Expenses	Computers					Miscellaneous Other Assets
						B. Bal	80,000.00				B. Bal	5,000.00
		Land
												5,000.00
							Accounts Payable
												Notes Payable
		Interest Payable
							- 0	- 0
								- 0
												Supplies Expense
		Income Tax Payable					Salaries and Wages Payable
												Wages Expense
		Contributed Capital					Accumulated Depreciation
			115,000.00	B. Bal
			115,000.00									Depreciation Expense
		Dividends Declared					Service Revenue
		Remaining Expenses					Interest  Expense					Income Tax Expense
							Retained Earnings
	End of worksheet
Journal Entries
	Worksheet 2 of 9. Template for requirements 2 and 3, journal entries: Prepare journal entries for transactions (a) through (k) in columns A through D. Journal the adjusting entries (l) through (p) in columns G through I.
	Learner:
	PA Engineering, Inc.
		Transactions during 2012	DR	CR			Adjusting entries	DR	CR
		Debit is always first and credit is indented
	a.	Cash	20,000.00			l.	Supplies expense	27,000.00
		Note Payable		20,000.00			Prepaid Office Supplies		27,000.00
		Borrowed cash					(20000+25000-18000)
	b.	Land	10,000.00			m.	Depreciation expense	21,000.00
		Cash		10,000.00			Accumulated depreciation		21,000.00
		Purchased land
	c.	Cash	140,000.00			n.	Interest expense	1,000.00
		Accounts Receviable	60,000.00				Accrued Interest payable		1,000.00
		Service Revenue		200,000.00			($20,000 x .1 x (6/12))
		Earned revenues for 2012
						o.	Wages expense	15,000.00
	d.	Cash	4,600.00				Salaries and Wages payable		15,000.00
		Contributed Capital		4,600.00
		(4,000 shares @1.15 - market value)
						p.	Income tax expense	10,000.00
	e.	Remaining Expenses	120,000.00				Income tax payable		10,000.00
		Cash		100,000.00
		Accounts Payable		20,000.00			Debits must equal Credits	74,000.00	74,000.00
		Incurred remaining expenses
	f.	Cash	40,000.00
		Accounts Receivable		40,000.00
		Collected on Accounts Receivable
	g.	Other Assets	8,000.00
		Cash		8,000.00
		Purchased other assets
	h.	Accounts Payable	18,000.00
		Cash		18,000.00
		Paid accounts payable
	i.	Office supplies	25,000.00
		Accounts Payable		25,000.00
		Purchased office supplies
	j.	No entry contract only
	k.	Cash Dividends	10,000.00
		Cash		10,000.00
		Declared and paid cash dividends
		Debits must equal Credits	455,600.00	455,600.

Comprehensive Problem Patricia Allison began an engineering consulting business on January 1, 2011, organized as a corporation (PA Engineering, Inc.) under the laws of Delaware. The annual reporting...

Comprehensive Problem

Answer To: Comprehensive Problem Patricia Allison began an engineering consulting business on January 1, 2011,...

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Account Titles	Debit	Credit
Cash	$10,000
Accounts Receivable
Office Supplies	$20,000
Land
Computers	$80,000
Accumulated Depreciation (on computers)
Miscellaneous Other Assets	$5,000
Accounts Payable
Salaries and Wages Payable
Interest Payable
Income Taxes Payable
Long-Term Notes Payable
Contributed Capital (100,000 shares)		$115,000
Retained Earnings
Service Revenue
Depreciation Expense
Supplies Expense
Wages Expense
Interest Expense
Income Tax Expense
Remaining Expenses (not detailed to simplify)
Totals	$115,000	$115,000