GL0201 - No Analysis Tab Based On FastForward Company ✓ Solved
GL0201 - (No Analysis Tab) - Based on the FastForward Company
This problem is based on the transactions for the FastForward Company in your text. Prepare journal entries for each transaction and identify the financial statement impact of each entry. The financial statements are automatically generated based on the journal entries recorded.
Dec. 1: On December 1, Chas Taylor forms a consulting business, named FastForward. FastForward receives $30,000 cash from Chas Taylor as an owner contribution.
Dec. 2: FastForward pays $2,500 cash for supplies. The company's policy is to record all prepaid expenses in asset accounts.
Dec. 3: FastForward pays $26,000 cash for equipment.
Dec. 4: FastForward purchases $7,100 of supplies on credit from a supplier, CalTech Supply.
Dec. 5: FastForward provides consulting services and immediately collects $4,200 cash.
Dec. 6: FastForward pays $1,000 cash for December rent.
Dec. 7: FastForward pays $700 cash for employee salary.
Dec. 8: FastForward provides consulting services of $1,600 and rents its test facilities for $300. The customer is billed $1,900 for these services.
Dec. 9: FastForward receives $1,900 cash from the client billed on December 8.
Dec. 10: FastForward pays CalTech Supply $900 cash as partial payment for its December 4 $7,100 purchase of supplies.
Dec. 11: Chas Taylor withdraws $200 cash from FastForward for personal use.
Dec. 12: FastForward receives $3,000 cash in advance of providing consulting services to a customer. The company's policy is to record fees collected in advance in a balance sheet account.
Dec. 13: FastForward pays $2,400 cash (insurance premium) for a 24-month insurance policy. Coverage begins on December 1. The company's policy is to record all prepaid expenses in a balance sheet account.
Dec. 14: FastForward pays $120 cash for supplies.
Dec. 15: FastForward pays $305 cash for December utilities expense.
Dec. 16: FastForward pays $700 cash in employee salary for work performed in the latter part of December.
1. General Journal Tab - For each transaction, prepare the required journal entry on the General Journal tab. List debits before credits.
2. General Ledger Tab - One of the advantages of general ledger software is that posting is done automatically. To see the detail of all transactions that affect a specific account, or the balance in an account at a specific point in time, click on the General Ledger tab.
3. Trial Balance Tab - General ledger software also automates the preparation of trial balances. A trial balance lists each account from the General Ledger, along with its balance, either a debit or a credit. Total debits should always equal total credits.
4. Income Statement Tab - The revenue and expense balances from the trial balance appear on the income statement, along with their balance as of the date selected. Review the income statement and indicate how the income statement is linked to the other financial statements.
5. Statement of Owner's Equity Tab - Owner investments and withdrawals, as reported on the trial balance, appear on the statement of owner's equity. Review the statement of owner's equity and indicate how the statement of owner's equity is linked to the other financial statements.
6. Balance Sheet Tab - Each asset and liability account balance, as reported on the trial balance, appears on the balance sheet, along with the ending capital balance. Review the balance sheet and then indicate how the balance sheet is linked to the other financial statements.
Paper For Above Instructions
The accounting process is essential for any business as it provides a systematic approach to record, classify, and summarize financial data. In this paper, I will prepare journal entries based on transactions for the FastForward Company and determine the financial statement impacts of each transaction. This will involve creating the full general journal for each transaction, identifying the effects on the financial statements, and linking them appropriately across various reports such as the trial balance, income statement, statement of owner's equity, and balance sheet.
Journal Entries
December 1:
Debit: Cash $30,000
Credit: Owner's Equity $30,000
Chas Taylor forms FastForward by contributing $30,000, increasing company cash and owner's equity. This entry increases both the cash account on the balance sheet and the equity account, reflecting the owner's investment.
December 2:
Debit: Supplies $2,500
Credit: Cash $2,500
FastForward pays cash for supplies, converting cash into an asset. This increases the supplies asset account and decreases cash by the same amount.
December 3:
Debit: Equipment $26,000
Credit: Cash $26,000
The company purchases equipment, impacting the cash and equipment accounts. This transaction increases the equipment asset on the balance sheet.
December 4:
Debit: Supplies $7,100
Credit: Accounts Payable $7,100
FastForward purchases supplies on credit, increasing supplies and creating a liability (accounts payable), affecting future cash outflows when the debt is settled.
December 5:
Debit: Cash $4,200
Credit: Service Revenue $4,200
By providing consulting services, FastForward records revenue, increasing cash and service revenue, which feeds into the income statement positively.
December 6:
Debit: Rent Expense $1,000
Credit: Cash $1,000
Paying rent affects the cash balance negatively while increasing expenses, thus impacting the income statement and decreasing owner's equity.
December 7:
Debit: Salary Expense $700
Credit: Cash $700
The payment of salary reduces cash and increases expense, which reduces net income on the income statement.
December 8:
Debit: Accounts Receivable $1,900
Credit: Service Revenue $1,900
This entry indicates that the company has provided services billed to a customer, increasing revenue and accounts receivable.
December 9:
Debit: Cash $1,900
Credit: Accounts Receivable $1,900
The company collects cash on accounts receivable, which boosts cash while reducing receivables on the balance sheet.
December 10:
Debit: Accounts Payable $900
Credit: Cash $900
Partial payment of the payable reduces both cash and accounts payable, balancing liabilities.
December 11:
Debit: Owner's Draw $200
Credit: Cash $200
Owner withdraws cash, reducing owner's equity and cash in the business.
December 12:
Debit: Cash $3,000
Credit: Unearned Revenue $3,000
The advance payment indicates future revenue earning, increasing cash and creating a liability until earned.
December 13:
Debit: Prepaid Insurance $2,400
Credit: Cash $2,400
Paying for insurance in advance increases prepaid expenses and decreases cash.
December 14:
Debit: Supplies $120
Credit: Cash $120
Another supply purchase decreases cash while increasing supplies.
December 15:
Debit: Utilities Expense $305
Credit: Cash $305
Paying for utilities reflects as an expense, impacting overall net income.
December 16:
Debit: Salary Expense $700
Credit: Cash $700
The entry indicates more salary payments, further increasing expenses and reducing cash.
Financial Statement Impacts
1. The general journal entries directly impact the income statement through recognized revenues and expenses. For example, the revenues from consulting services increase total revenue, while expenses like rent and utilities reduce net income.
2. The statement of owner's equity reflects changes in owner's contributions and withdrawals, showing how Taylor’s investment and draw affect equity.
3. The balance sheet reflects the financial position: cash reserves, supplies, equipment, accounts payable, and owner's equity, showing the company's financial health.
4. The trial balance ensures that total debits equal credits, thus affirming that the accounts are balanced and accurate.
References
- Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2020). Financial Accounting. Wiley.
- Spiceland, J. D., Nelson, J. A., & Thomas, D. W. (2019). Intermediate Accounting. McGraw-Hill Education.
- Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2018). Introduction to Financial Accounting. Pearson.
- Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2019). Financial Accounting: Tools for Business Decision-Making. Wiley.
- Libby, T., Libby, R., & Short, D. G. (2018). Financial Accounting. McGraw-Hill Education.
- Jones, S. (2019). Accounting Principles. Cengage Learning.
- Wild, J. J., & Acito, F. (2019). Financial Accounting. McGraw-Hill Education.
- Needles, B. E., & Powers, M. (2016). Principles of Accounting. Cengage Learning.
- FASB. (2020). Financial Accounting Standards Board: Statements of Financial Accounting Concepts.
- IFRS Foundation. (2020). International Financial Reporting Standards.