No Analysis Tab Based On Fastforward Company

Gl0201 No Analysis Tab Based On The Fastforward Company Lo A1 C

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.

Sample Paper For Above instruction

FastForward Company was established on December 1 under the ownership of Chas Taylor, who contributed $30,000 in cash to start the business. This initial cash contribution is recorded as a capital investment, increasing both the Cash asset account and the Owner’s Equity account. Subsequent transactions over December involve a series of asset acquisitions, service revenues, expenses, and owner withdrawals, each impacting the company’s financial statements.

December 2: The company paid $2,500 in cash for supplies, which are recorded as an asset (Supplies). Since the policy considers all prepaid expenses as assets, this expenditure increases Supplies (asset) and decreases Cash (asset). There is no immediate impact on the income statement at this stage because supplies are classified as assets until used.

December 3: Cash was used to purchase equipment valued at $26,000. This asset acquisition increases Equipment (asset) and decreases Cash (asset). Equipment is a long-term asset on the balance sheet, and this transaction does not immediately affect net income.

December 4: The company purchased supplies on credit from CalTech Supply for $7,100. This creates an increase in Supplies (asset) and a liability in Accounts Payable, reflecting an obligation to pay in the future. The transaction does not affect cash or income immediately.

December 5: Consulting services were provided, with immediate cash collection of $4,200. This increases Cash (asset) and records revenue on the income statement, thereby increasing net income.

December 6: The company paid $1,000 in cash for rent, which is recognized as a Rent Expense. This reduces Cash and increases Rent Expense on the income statement, lowering net income.

December 7: Payment of $700 cash for employee wages decreases Cash and records Wage Expense on the income statement, impacting net income.

December 8: The company provided consulting services of $1,600 and rented test facilities for $300. The total billed is $1,900. The service revenue of $1,600 is recognized immediately upon service completion, increasing Accounts Receivable and Revenue. The $300 rent is considered rent revenue, increasing revenue upon billing.

December 9: The company collected $1,900 cash from the client billed on December 8. This increases Cash and decreases Accounts Receivable, with no immediate impact on income.

December 10: Partial payment of $900 cash made to CalTech Supply reduces Cash and Accounts Payable. The remaining balance of supplies owed remains on the balance sheet.

December 11: Owner Chas Taylor withdrew $200 cash for personal use, decreasing Cash and Owner’s Equity. This withdrawal is recorded as a drawing, which reduces owner’s capital account.

December 12: The company received $3,000 in advance for services to be provided later. This increases Cash and creates a liability account (Unearned Revenue) since the revenue has not yet been earned.

December 13: Payment of $2,400 for a 24-month insurance policy lease is recorded as Prepaid Insurance (asset). The expense will be recognized over the coverage period.

December 14: Supplies purchased for $120 cash increases Supplies (asset) and decreases Cash.

December 15: Utilities expense of $305 paid in cash decreases Cash and recognizes Utilities Expense, impacting net income.

December 16: Employee wages paid of $700 reduces Cash and is recorded as Wage Expense, affecting net income.

Each journal entry impacts the respective asset, liability, revenue, or expense accounts, which then feed into the financial statements through subsequent records in the general ledger and trial balance. The income statement aggregates revenues and expenses to determine net income, which affects owner’s equity in the Statement of Owner’s Equity, ultimately linking to the Balance Sheet as the ending retained earnings and owner’s capital. The Balance Sheet summarizes assets, liabilities, and owner's equity at a specific date, reflecting the company's financial position based on all prior journal entries and account balances.

References

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