Week 3 Journal Entries 1

Journal Entries 7 Week 3 Journal Entries 1

In this assignment, I have selected three companies—Apple Inc., Microsoft Inc., and General Electric Inc.—each with their current stock prices, and documented their initial capital, subsequent transactions during the first month of operations, and my portfolio allocation based on their stock prices and total investment. The task involves analyzing the detailed journal entries reflecting various financial activities such as purchases, sales, payments, receivables, and expenses, based on the provided detailed data for each company. Additionally, I have demonstrated how the total investment of $25,000 was allocated among these companies, including calculations for the number of shares purchased based on their share prices and investment percentages, considering fractional shares are not purchasable. This comprehensive understanding of journal entries, asset and liability management, and investment allocations allows me to demonstrate proficiency in recording and analyzing financial transactions essential for corporate accounting and investment decision-making.

Paper For Above instruction

Introduction

Understanding how companies record and manage their financial transactions is fundamental to grasping corporate financial analysis and investment strategies. Journal entries serve as the backbone of accounting processes, capturing every economic event within a business. This paper analyzes the journal entries of three major companies—Apple Inc., Microsoft Inc., and General Electric Inc.—during their initial month of operations, highlighting the types of transactions involved and their implications for financial statements. Furthermore, this discussion extends to portfolio diversification and allocation strategies, illustrating how investment capital is distributed among these companies based on their stock prices and calculated ownership percentages.

Analysis of Journal Entries and Financial Transactions

Apple Inc., with an initial capital stock of 15,500 shares at $177.84 per share, commenced operations with various transactions typical for a startup. Key transactions included paying advance rent of $36,000, purchasing equipment worth $80,000 (financed through a payable with a 9% interest rate), and acquiring office supplies costing $17,600. The company offered services, received cash, paid wages, settled accounts payable, and paid dividends. Expenses such as electricity and telephone bills, as well as petty cash expenses, were also recorded. These journal entries illustrate typical operational activities that impact assets, liabilities, and equity. For instance, paying for rent and equipment affects cash and prepaid expenses, while service revenue increases cash and accounts receivable, reflecting income earned during the period.

Microsoft Inc., with an initial capital of 8,250 shares at $96.44 per share, engaged in similar transactions. The company paid rent of $11,880, bought equipment costing $26,400 on credit, purchased office supplies, and provided services generating revenue of $9,405. Wages were paid, and accounts receivable increased as services were rendered. The company also paid expenses such as electricity, telephone bills, and petty cash expenses. These journal entries highlight the flow of cash, recognition of income, and expenses, emphasizing the importance of accurate record-keeping for financial integrity.

General Electric Inc. initiated operations with capital of 15,500 shares at $177.84 per share and engaged in transactions similar to the other two companies. It paid rent, purchased equipment, acquired supplies, and provided services totaling $14,425. Expenses, wages, and bills for electricity and telephone services were paid, and dividends were distributed. The journal entries of GE reflect its operational expenses and revenue recognition, further illustrating common transactional patterns among corporations.

Investment Portfolio Allocation

Based on my total available capital of $25,000, I allocated investments among these three companies proportional to their share of the total capital, considering the stock prices and their relative valuation. The allocation was as follows: 62% to Apple Inc., 33% to Microsoft Inc., and 5% to General Electric. These percentages reflect my confidence in each company's growth prospects, profitability, and stock price performance.

The actual investment amounts for each company were calculated as:

• Apple Inc.: 62% of $25,000 = $15,500
• Microsoft Inc.: 33% of $25,000 = $8,250
• General Electric Inc.: 5% of $25,000 = $1,250

Based on the stock prices and investment amounts, I calculated the number of shares purchased, accounting for the fact that fractional shares cannot be bought. For Apple Inc., with a share price of $177.84, I bought 87 shares (since $15,500 / $177.84 ≈ 87.16). For Microsoft Inc., with a stock price of $96.44, I purchased 83 shares (since $8,250 / $96.44 ≈ 85.46, but rounded to 83 to avoid fractional shares). For General Electric, with a share price of $13.66, I bought 91 shares (since $1,250 / $13.66 ≈ 91.66, rounded down to 91). This method ensures practical investment decisions aligned with share ownership constraints.

Implications of Journal Entries and Investment Strategy

The practice of recording detailed journal entries during the initial operational period provides critical insights into a company's financial health and operational efficiency. Observing payments for assets, revenues from services, and expense management encapsulates the essential elements of accrual accounting, which accurately reflects economic reality. Moreover, understanding the allocation of investment funds among different companies based on stock prices and perceived profitability assists in building a diversified portfolio that mitigates risk and maximizes returns.

Conclusion

In summary, comprehensive journal entries depict the transactional landscape companies navigate during their startup phase. They serve as vital tools for financial reporting, decision-making, and investment analysis. The allocation of capital among Apple Inc., Microsoft Inc., and General Electric Inc. demonstrates an applied investment strategy rooted in stock valuation and proportionate share ownership. Such insights underscore the importance of meticulous financial record-keeping and strategic portfolio management in fostering corporate growth and financial stability.

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