Barry’s Steroids Company has $1,000 par value bonds outstanding at 13 percent interest. The bonds will mature in 40 years.

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Barry’s Steroids Company has $1,000 par value bonds outstanding at 13 percent interest. The bonds will mature in 40 years.
 
If the percent yield to maturity is 10 percent, what percent of the total bond value does the repayment of principal represent? Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.)

 

Principal as a percentage of bond price %

2.

value: 2.00 points

 

Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 20 percent to 10 percent.

 

a. What is the bond price at 20 percent?

 

  Bond price $

 

b. What is the bond price at 10 percent?

 

  Bond price $

 

c. What would be your percentage return on investment if you bought when rates were 20 percent and sold when rates were 10 percent? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Enter the value as a positive amount.)

 

  Return on investment  %  

3.

value: 1.00 points

 

Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 20-year life when issued and the annual interest payment was then 13 percent. This return was in line with the required returns by bondholders at that point as described below:

 

     
  Real rate of return 4 %
  Inflation premium 5  
  Risk premium 4  
 
     Total return 13 %
 

 

Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 years remaining until maturity.

 

Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.)

 

  New price of the bond $

 

4.

value: 2.00 points

 

Katie Pairy Fruits Inc. has a $2,400, 16-year bond outstanding with a nominal yield of 17 percent (coupon equals 17% × $2,400 = $408 per year). Assume that the current market-required interest rate on similar bonds is now only 12 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

 

a. Compute the current price of the bond. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.)

 

  Current price of the bond $

 

b. Find the present value of 5 percent × $2,400 (or $120) for 16 years at 12 percent. The $120 is assumed to be an annual payment. Add this value to $2,400. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.)

 

  Present value $

eBook: Valuation of Bonds

5.

value: 2.00 points

 

Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond pays 8 percent annual interest and has 17 years remaining to maturity. The current yield to maturity on similar bonds is 13 percent.

 

a. What is the current price of the bonds? Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.)

 

  Current price of the bond $

 

b. By what percent will the price of the bonds increase between now and maturity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

 

  Price increases by  %

6.

value: 2.00 points

 

You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 8 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annual interest. There are 20 years to maturity. Use Appendix B andAppendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

 

a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  Bond price $

 

b. With 15 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  New bond price $

rev: 02_11_2015_QC_CS-7555

7.

value: 1.00 points

 

BioScience Inc. will pay a common stock dividend of $7.10 at the end of the year (D1). The required return on common stock (Ke) is 18 percent. The firm has a constant growth rate (g) of 8 percent.
Compute the current price of the stock (P0). (Do not round intermediate calculations. Round your answer to 2 decimal places.)
  Current price $

8.

value: 2.00 points

 

Justin Cement Company has had the following pattern of earnings per share over the last five years:

 

  Year Earnings Per Share
  2006 $ 8.00  
  2007   8.40  
  2008   8.82  
  2009   9.26  
  2010   9.72  

 

The earnings per share have grown at a constant rate (on a rounded basis) and will continue to do so in the future. Dividends represent 40 percent of earnings.

 

a. Project earnings and dividends for the next year (2011). (Round the growth rate to the nearest whole percent. Do not round any other intermediate calculations. Round your answers to 2 decimal places.)

 

  2011
  Earnings $  
  Dividend $  

 

b. If the required rate of return (Ke) is 13 percent, what is the anticipated stock price (P0) at the beginning of 2011? (Round the growth rate to the nearest whole percent. Do not round any other intermediate calculations. Round your answer to 2 decimal places.)

 

  Anticipated stock price $

9.

value: 4.00 points

 

Beasley Ball Bearings paid a dividend of $4 last year. The dividend is expected to grow at a constant rate of 3 percent over the next five years. The required rate of return is 12 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

 

a. Compute the anticipated value of the dividends for the next four years. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

 

     Anticipated Value
  D1 $
  D2 $
  D3 $
  D4 $

 

b. Calculate the present value of each of the anticipated dividends at a discount rate of 12 percent. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

 

        PV of Dividends
  D1 $
  D2  
  D3  
  D4  
 
  Total $
 

 

c. Compute the price of the stock at the end of the fourth year (P4). (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  Stock price at Year 4 $

 

d. Calculate the present value of the year 4 stock price at a discount rate of 12 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  Present value of Year 4 stock price $

 

e. Compute the current value of the stock. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  Current value $

 

f. Use the formula given below to show that it will provide approximately the same answer as part e. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

P0 = D1
Ke − g

 

  Current value $

 

g. If current EPS were equal to $5.15 and the P/E ratio is 1.2 times higher than the industry average of 8, what would the stock price be? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  Stock price $

 

h. By what dollar amount is the stock price in part g different from the stock price in part f? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  Amount $

 

i. In regard to the stock price in part f, indicate which direction it would move if:

 

     
(1)   D1 increases  
(2)   Ke increases  
(3)   g increases  

10.

value: 2.00 points

 

Ecology Labs, Inc., will pay a dividend of $7.10 per share in the next 12 months (D1). The required rate of return (Ke) is 18 percent and the constant growth rate is 8 percent. (Each question is independent of the others.)

 

a. Compute the price of Ecology Labs’ common stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Price $

 

b. Assume Ke, the required rate of return, goes up to 21 percent. what will be the new price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  New price $

 

c. Assume the growth rate (g) goes up to 11 percent. what will be the new price? Ke goes back to its original value of 18 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  New price $

 

d. Assume D1 is $7.90. what will be the new price? Assume Ke is at its original value of 18 percent and g goes back to its original value of 8 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Homework Assignment 5

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Homework Assignment 5

20 Points

Due on Monday, October 10, 2016 AT THE BEGINNING OF CLASS

Be careful to follow the Guidelines for Homework Document located in the Course

Documents Section of Blackboard. You will lose points for not following proper format.

This homework assignment has to be typed and submitted to Safe Assign.

1. Amazon.com, owns trucks used for cargo shipment. In the course of their

activities, Amazon sustains losses in the form of property damages to their

trucks. Assume that the Amazon owns a truck station located in Pennsylvania

(PA) and also another station in New Jersey (NJ).

The PA station has 250 trucks. The Amazon has the following data for the

number of accidents per truck in the PA station.

# of accidents per truck per year

# of trucks of having this # of accidents

0 136

1 63

2 51

a. What is the random variable illustrated here? [1 point]

b. Derive the probability distribution based on this data. Be careful to label

exactly what you are defining as the probability distribution. [2 points]

c. Calculate the expected value of frequency per truck. What are the units

of measurement? [2 points]

d. Amazon has calculated the variance for the PA station frequency

distribution to be equal to 0.6324. How much risk is present? What are the

units of measurement? [3 points]

P a g e 2 | 3

2. Amazon also has the following data for the number of accidents per truck in the

NJ station. The NJ station has 180 trucks. It is known that the variance of

frequency per truck in NJ is 0.57.

# of accidents per truck per year

# of trucks of having this # of accidents

0 62

1 75

2 43

Which truck station is riskier, PA station or NJ station? Show all calculations and

explain your numerical results. [4 points]

3. Assume initially that when accidents do occur, they are non-random and equal

to $2500.

a. Calculate the expected loss per truck for PA truck station. [2 points]

b. Calculate the expected loss for ALL trucks in PA truck station. [2 points]

4. Now based on the information in PA station, Amazon has constructed

information related to the dollar amount of losses for 25 reported accidents. This

information can be found on page 3.

a. Calculate the expected value of severity per truck. [2 points]

b. Calculated the expected loss per truck. [2 points]

P a g e 3 | 3

$ amount of losses

# of accidents of having this $ amount of losses

$300 2

$500 2

$900 1

$1,000 2

$1,500 1

$1,800 2

$2,000 1

$2,500 2

$2,800 1

$3,000 2

$3,500 2

$3,700 1

$4,000 1

$4,300 2

$4,500 1

$5,000 1

$5,500 1

FIN 571 Final Exam August 2017

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FIN 571 Final Exam August 2017

1

Which one of the following is an example of a nondiversifiable risk?​

· Correct Answer

​A well-respected chairman of the Federal Reserve Bank suddenly resigns

· Correct Answer

​A poorly managed firm suddenly goes out of business due to lack of sales

· Correct Answer

​A well-respected president of a firm suddenly resigns

· Correct Answer

​A key employee suddenly resigns and accepts employment with a key competitor

· Correct Answer

​A well-managed firm reduces its work force and automates several jobs

question2

A firm has a debt-equity ratio of .64, a pretax cost of debt of 8.5 percent, and a required return on assets of 12.6 percent. What is the cost of equity if you ignore taxes?​

· Correct Answer

​15.22%

· Correct Answer

​16.38%

· Correct Answer

​8.06%

· Correct Answer

​11.12%

· Correct Answer

​8.55%

question3

Which term defines the tax rate that applies to the next dollar of taxable income earned?​

· Correct Answer

​Deductible

· Correct Answer

​Marginal

· Correct Answer

​Average

· Correct Answer

​Total

· Correct Answer

​Residual

question4

All else held constant, interest rate risk will increase when the time to maturity:​

· Correct Answer

​Increases or the coupon rate decreases.

· Correct Answer

​Decreases or the coupon rate increases.

· Correct Answer

​Increases or the coupon rate increases.

· Correct Answer

​Decreases or the coupon rate decreases.

· Correct Answer

​Decreases and the coupon rate equals zero.

question5

Under the _______ method, the underwriter buys the securities for less than the offering price and accepts the risk of not selling the issue, while under the _______ method, the underwriter does not purchase the shares but merely acts as an agent.​

· Correct Answer

​Negotiated offer; competitive offer

· Correct Answer

​Firm commitment; best efforts

· Correct Answer

​Competitive offer; negotiated offer

· Correct Answer

​Best efforts; firm commitment

· Correct Answer

​Seasoned; unseasoned

question6

The underlying assumption of the dividend growth model is that a stock is worth:​

· Correct Answer

​An amount computed as the next annual dividend divided by the market rate of return.

· Correct Answer

​The present value of the future income that the stock is expected to generate.

· Correct Answer

​The same amount to every investor regardless of their desired rate of return.

· Correct Answer

​The same amount as any other stock that pays the same current dividend and has the same required rate of return.

· Correct Answer

​An amount computed as the next annual dividend divided by the required rate of return.

question7

The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the:​

· Correct Answer

​Inflation premium.

· Correct Answer

​Risk premium.

· Correct Answer

​Arithmetic average return.

· Correct Answer

​Time premium.

· Correct Answer

​Geometric average return.

question8

Which one of these statements is correct concerning the cash cycle?​

· Correct Answer

​A positive cash cycle is preferable to a negative cash cycle.

· Correct Answer

​Increasing the accounts payable period increases the cash cycle.

· Correct Answer

​The longer the cash cycle, the more likely a firm will need external financing.

· Correct Answer

​The cash cycle can exceed the operating cycle if the payables period is equal to zero.

· Correct Answer

​Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.

question9

​Which one of the following statements about preferred stock is true?

· Correct Answer

​If preferred dividends are non-cumulative, then preferred dividends not paid in a particular year will be carried forward to the next year.

· Correct Answer

​Preferred stock usually has a stated liquidating value of $100 per share.

· Correct Answer

​Unlike dividends paid on common stock, dividends paid on preferred stock are a tax-deductible expense.

· Correct Answer

​There is no significant difference in the voting rights granted to preferred and common shareholders.

· Correct Answer

​Dividends on preferred stock payable during the next twelve months are considered to be a corporate liability.

question10

​What is the present value of $6,811 to be received in one year if the discount rate is 6.5 percent?

· Correct Answer

​$6,023.58

· Correct Answer

​$6,671.13

· Correct Answer

​$6,395.31

· Correct Answer

​$6,643.29

· Correct Answer

​$7,253.72

question11

The market price of a bond increases when the:​

· Correct Answer

​Coupon rate decreases.

· Correct Answer

​Par value decreases.

· Correct Answer

​Face value decreases.

· Correct Answer

​Discount rate decreases.

· Correct Answer

​Coupon is paid annually rather than semiannually.

question12

​The process of planning and managing a firm’s long-term assets is called:

· Correct Answer

​Capital structure.

· Correct Answer

​Financial depreciation.

· Correct Answer

​Working capital management.

· Correct Answer

​Agency cost analysis.

· Correct Answer

​Capital budgeting.

question13

The discount rate that makes the net present value of an investment exactly equal to zero is called the:​

· Correct Answer

​Profitability index.

· Correct Answer

​Average accounting return.

· Correct Answer

​External rate of return.

· Correct Answer

​Internal rate of return.

· Correct Answer

​Equalizer.

question14

The cash flow resulting from a firm’s ongoing, normal business activities is referred to as the:​

· Correct Answer

​Cash flow to investors.

· Correct Answer

​Operating cash flow.

· Correct Answer

​Additions to net working capital.

· Correct Answer

​Cash flow to retained earnings.

· Correct Answer

​Net capital spending.

question15

Lois is purchasing an annuity that will pay $5,000 annually for 20 years, with the first annuity payment made on the date of purchase. What is the value of the annuity on the purchase date given a discount rate of 7 percent?​

· Correct Answer

​$66,916.21

· Correct Answer

​$54,282.98

· Correct Answer

​$56,191.91

· Correct Answer

​$52,970.07

· Correct Answer

​$56,677.98

question16

Which one of the following statements is false?​

· Correct Answer

​An aging schedule includes only overdue accounts.

· Correct Answer

​Investments in accounts receivable equal average daily sales times average collection period.

· Correct Answer

​Collection efforts may involve legal action.

· Correct Answer

​Aging schedules are used to monitor accounts receivable.

· Correct Answer

​If sales are seasonal, the percentages shown on an aging schedule will vary during the year.

question17

The primary goal of financial management is to:​

· Correct Answer

​Minimize operational costs and maximize firm efficiency.

· Correct Answer

​Maximize current dividends per share of the existing stock.

· Correct Answer

​Avoid financial distress.

· Correct Answer

​Maximize the current value per share of the existing stock.

· Correct Answer

​Maintain steady growth in both sales and net earnings.

question18

A project has an initial cost of $2,250. The cash inflows are $0, $500, $900, and $700 for Years 1 to 4, respectively. What is the payback period?​

· Correct Answer

​3.92 years

· Correct Answer

​2.97 years

· Correct Answer

​2.84 years

· Correct Answer

​3.98 years

· Correct Answer

​never

question19

Futures contracts contrast with forward contracts by:​

· Correct Answer

​Marking to the market on a weekly basis.

· Correct Answer

​Providing an option for the buyer rather than an obligation.

· Correct Answer

​Allowing the parties to negotiate the contract size.

· Correct Answer

​Requiring contract fulfillment by the two originating parties.

· Correct Answer

​Allowing the seller to deliver any day during the delivery month.

question20

All else equal, the contribution margin must increase as:​

· Correct Answer

​The variable cost per unit declines.

· Correct Answer

​The sales price minus the fixed cost per unit increases.

· Correct Answer

​Sales price per unit declines.

· Correct Answer

​The fixed cost per unit declines.

· Correct Answer

​Both the sales price and variable cost per unit increase.

question21

Ratios that measure a firm’s ability to pay its bills over the short run without undue stress are known as:​

· Correct Answer

​Market value ratios.

· Correct Answer

​Asset management ratios.

· Correct Answer

​Liquidity measures.

· Correct Answer

​Profitability ratios.

· Correct Answer

​Long-term solvency measures.

question22

The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as _____ costs.​

· Correct Answer

​Flotation

· Correct Answer

​Capital structure

· Correct Answer

​Financial solvency

· Correct Answer

​Direct bankruptcy

· Correct Answer

​Indirect bankruptcy

question23

An interest rate that is compounded monthly, but is expressed as if the rate were compounded annually, is called the _____ rate.​

· Correct Answer

​Daily interest

· Correct Answer

​Compound interest

· Correct Answer

​Effective annual

· Correct Answer

​Periodic interest

· Correct Answer

​Stated interest

question24

The higher the inventory turnover, the:​

· Correct Answer

​Lesser the amount of inventory held by a firm.

· Correct Answer

​Longer it takes a firm to sell its inventory.

· Correct Answer

​Higher the inventory as a percentage of total assets.

· Correct Answer

​Greater the amount of inventory held by a firm.

· Correct Answer

​Less time inventory items remain on the shelf.

question25

You plan to invest $6,500 for three years at 4 percent simple interest. What will your investment be worth at the end of the three years?​

· Correct Answer

​$6,760.00

· Correct Answer

​$6,941.11

· Correct Answer

​$7,311.62

· Correct Answer

​$7,250.00

· Correct Answer

​$7,280.00

question26

​Which one of these is a correct definition?

· Correct Answer

​Tangible assets are fixed assets such as patents.

· Correct Answer

​Net working capital equals current assets plus current liabilities.

· Correct Answer

​Current assets are assets with short lives, such as inventory.

· Correct Answer

​Current liabilities are debts that must be repaid in 18 months or less.

· Correct Answer

​Long-term debt is defined as a residual claim on a firm’s assets.

question27

One disadvantage of the corporate form of business ownership is the:​

· Correct Answer

​Double taxation of profits.

· Correct Answer

​Difficulties encountered when changing ownership.

· Correct Answer

​Firms ability to raise cash.

· Correct Answer

​Limited liability protection provided for all owners.

· Correct Answer

​Unlimited life of the firm.

question28

​A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:

· Correct Answer

​$1 in current assets.

· Correct Answer

​$1 in fixed assets.

· Correct Answer

​$.53 in total equity.

· Correct Answer

​$.53 in total assets.

· Correct Answer

​$1 in total equity.

question29

Book value:​

· Correct Answer

​Generally tends to exceed market value when fixed assets are included.

· Correct Answer

​Is based on historical cost.

· Correct Answer

​Is more of a financial than an accounting valuation.

· Correct Answer

​Is equivalent to market value for firms with fixed assets.

· Correct Answer

​Is adjusted to market value whenever the market value exceeds the stated book value.

question30

An efficient capital market is one in which:​

· Correct Answer

​All investments earn the market rate of return.

· Correct Answer

​Securities always offer a positive NPV.

· Correct Answer

​Security prices reflect all available information.

· Correct Answer

​Taxes are irrelevant.

· Correct Answer

​Brokerage commissions are zero.

A. You have just won the Strayer Lottery jackpot of $11,000,000. You will be paid in 26 equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest. What is the present value of the payments you will receive?

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Homework Set #2: Chapters 4 & 5 Due Week 4 and worth 100 points

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above.

A. You have just won the Strayer Lottery jackpot of $11,000,000. You will be paid in 26 equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest. What is the present value of the payments you will receive?

B. In your own words and using various bond websites, please locate one of each of the following bond ratings: AAA, BBB, CCC, and D. Please describe the differences between the bond ratings. Identify the strengths and weaknesses of each rating.

rubric.

  Unacceptable Fair Proficient Exemplary
1. You have just won the Strayer Lottery jackpot of $11,000,000. You will be paid in 26 equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest. What is the present value of the payments you will receive?

 Points Range:0 (0%) – 31.05 (31.05%)

Did not submit or incompletely calculated the present value of the payments that would be received.

 Points Range:31.5 (31.5%) – 35.55 (35.55%)

Partially calculated the present value of the payments that would be received.

 Points Range:36 (36%) – 40.05 (40.05%)

Satisfactorily calculated the present value of the payments that would be received.

 Points Range:40.5 (40.5%) – 45 (45%)

Thoroughly calculated the present value of the payments that would be received.
2. In your own words and using various bond websites, please locate one of each of the following bond ratings: AAA, BBB, CCC, and D. Please describe the differences between the bond ratings. Identify the strengths and weaknesses of each rating. Points Range:0 (0%) – 31.05 (31.05%)

Did not submit or incompletely located one of the following bond ratings: AAA, BBB, CCC, and D. Did not submit or incompletely described the differences between the bond ratings. Did not submit of incompletely identified the strengths and weaknesses of each rating.

 Points Range:31.5 (31.5%) – 35.55 (35.55%)

Partially located one of the following bond ratings: AAA, BBB, CCC, and D. Did not submit or incompletely described the differences between the bond ratings. Partially identified the strengths and weaknesses of each rating.

 Points Range:36 (36%) – 40.05 (40.05%)

Satisfactorily located one of the following bond ratings: AAA, BBB, CCC, and D. Did not submit or incompletely described the differences between the bond ratings. Satisfactorily identified the strengths and weaknesses of each rating.

 Points Range:40.5 (40.5%) – 45 (45%)

Thoroughly located one of the following bond ratings: AAA, BBB, CCC, and D. Did not submit or incompletely described the differences between the bond ratings. Thoroughly identified the strengths and weaknesses of each rating.
3. Clarity, writing mechanics, and formatting requirements Points Range:0 (0%) – 6.9 (6.9%)

More than 6 errors present

 Points Range:7 (7%) – 7.9 (7.9%)

5-6 errors present

 Points Range:8 (8%) – 8.9 (8.9%)

3-4 errors present

 Points Range:9 (9%) – 10 (10%)

0-2 errors present

Name:Homework Set #2: Chapters 4 and 5

Description:Grading for this assignment will be based on answer quality, logic/organization of the paper, and language and writing skills, using the following rubric.

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ACCT 212: Course Project
Requirement Requirement Description Worksheet Name
1 Prepare the Journal Entries in the General Journal 1 – Journal Entries
2 Post Journal Entries to the General Ledger 2 – General Ledger
3 Prepare a Trial Balance 3 – Trial Balance
4 Prepare the Adjusting Entries 4 &5 – Adjusting Entries
5 Post Adjusting Entries to the General Ledger 4 &5 -Adjusting Entries ( Use worksheet #2)
6 Prepare an Adjusted Trial Balance 6- Adjusted TB
7 Prepare the Financial Statements 7 – Financial Statements
8 Prepare the Closing Entries 8&9 – Closing Entries ( use worksheet #2)
9 Post Closing Entries to the General Ledger 8&9- General Ledger
10 Prepare the Post Closing Trial Balance 10 – Post Closing Trial Balance
11 Compute Ratios 11-Ratios
12 Interpret the Ratios 12-Interpretation of Ratios

Project Instructions

Course Project Overview
The Course Project consists of 10 Requirements for you to complete. The Course Project is due at the end of Week 6. See the Syllabus section ”Due Dates for Assignments & Exams” for due date information. All of the information you need to complete the Course Project is located in this Workbook. • There are eight worksheets in the workbook you will need to complete. • A list of March transactions • A Chart of Accounts reference sheet • A Grading Rubric to help explain what is expected. • Each worksheet has the Check Figures embedded as a comment.
Scenario
You’ve just secured a new client in your accounting practice, Bethany’s Bicycle Corporation (BBC), a brand new small business specializing in bicycle repair. The owner, Bethany Beck, is a terrific cyclist and bike repair specialist, but definitely not an accountant. Your job is to helpBethany put his affairs in order. Luckily Bethany has only been in operation for a month and things have not gotten too out of hand yet! Bethany has to submit his financial statements to her investors and doesn’t know where to begin. It’s your job to go through the complete Accounting cycle to prepare the financial statements for the BBC.
Requirements
Guidelines
Use the embedded assistance in the template, guidance in your textbook, and examples in the weekly lectures to complete this project. Should you have any questions contact your professor.
Milestone 1 is due in Week 3 – This includes project requirements 1-3.
Milestone 2 is due in Week 5 – This includes project requirements 4-10.
Milestone 3 is due in Week 7 – This includes project requirements 11-12.

Before You Begin:  Review the Week 2 Lecture prior to starting work on this project.  Print the Chart of Accounts and October Transactions worksheets for your reference. You will need to refer to both throughout the project.  Review the Grading Criteria.  SAVE your work frequently in this workbook.

March Transactions

During its first month of operation, the Bethany’s Bicycle Corporation, which specializes in bicycle repairs, completed the following transactions.
March Transactions
Date Transaction Description
March 1 Began business by making a deposit in a company bank account of $20,000, in exchange for 2,000 shares of $10 par value common stock.
March 1 Paid the premium on a 1-year insurance policy, $2,400.
March 1 Paid the current month’s store rent expense, $1,900.
March 3 Purchased repair equipment from Andrew Company, $5,800. Paid $1,000 down and the balance was placed on account. Payments will be $400.00 per month for 12 months. The first payment is due 4/1. Note: Use Accounts Payable for the Balance Due.
March 8 Purchased repair supplies from Jackson Company on credit, $650.
March 10 Paid telephone bill for March, $340.
March 11 Cash bicycle repair revenue for the first third of March, $1,650.
March 18 Made payment to Jackson Company, $400.
March 20 Cash bicycle repair revenue for the second third of March, $2,450.
March 31 Cash bicycle repair revenue for the last third of March, $1,250.
March 31 Paid the current month’s electice bill, $250.
March 31 Declared and paid cash dividend of $1,000.

Chart of Accounts

Use the following account descriptions for journal entries.
Chart of Accounts
Account Type Account Number Account Title Normal Balance
Assets
111 Cash Debit
117 Prepaid Insurance Debit
119 Repair Supplies Debit
144 Repair Equipment Debit
145 Accum Dep -Repair Equipment Credit
Liabilities
212 Accounts Payable Credit
213 Income Tax Payable Credit
Stockholders Equity
311 Common Stock Credit
312 Retained Earnings Credit
313 Dividends Debit
Revenue
411 Bicycle Repair Revenue Credit
Expenses
511 Store Rent Expense Debit
512 Telephone Expense Debit
513 Insurance Expense Debit
514 Repair Supplies Expense Debit
515 Dep Expense – Repair Equipment Debit
516 Income Tax Expense Debit
517 Electric Expense Debit

1 – Journal Entries

REQUIREMENT #1: Prepare journal entries to record the March transactions in the General Journal below. Remember that Debits must equal Credits—All of your Journal Entries should balance.
General Journal
Date Account Number from Chart of Accounts tab Account Title from Chart of Accounts tab Debit Credit
March 1st 111 Cash 20,000
311 Common Stock 20,000
March 1st 117 Prepaid Insurance 2,400
111 Cash 2,400
March 1st 511 Store rent expenses 1,900
111 Cash 1,900
March 3rd 144 Repair Equipment 5,800
111 Cash 1,000
212 Account Payable to Andrew Company 4,800
March 8th 119 Repair Supplies 650
212 Account Payable to Jackson Company 650
March 10th 512 Telephone Expenses 340
111 Cash 340
March 11th 111 Cash 1,650
411 Bicycle Repair Revenue 1,650
March 18th 212 Account Payable to Jackson Company 400
111 Cash 400
March 20th 111 Cash 2,450
411 Bicycle Repair Revenue 2,450
March 31st 111 Cash 1,250
411 Bicycle Repair Revenue 1,250
March 31st 517 Electric Expenses 250
111 Cash 250
March 31st 313 Dividends 1,000
111 Cash 1,000
38,090
Harris, Nicole: Debits = $38,090		 38,090
Harris, Nicole: Credits = $38,090

Journal Entries

Once you’ve completed this requirement print your General Journal to complete Requirement #2 on the General Ledger worksheet.

2 – General Ledger

REQUIREMENT #2: Post the March journal entries to the following T-Accounts and compute ending balances.
Date Cash (111)
DeVry: The balance of the Cash account after posting journal entries for Part A should be $18,060 .		 Date Bicycle Repair Revenue (411)
1-Mar 20,000 11-Mar 1,650
1-Mar 2,400 20-Mar 2,400
1-Mar 1,900 20-Mar 1,250
3-Mar 1,000
10-Mar 340
11-Mar 1,650 Bal 5,300
18-Mar 400
20-Mar 2,450
31-Mar 1,250 250
31-Mar 1,000
bal 18,060
Prepaid Insurance (117) Store Rent Expense (511)
1-Mar 2,400 1-Mar 1,900
31-Mar 200 1,900
bal 1,900
bal 2,200
Repair Supplies (119) Telephone Expense (512)
8-Mar 650 10-Mar 340
31-Mar 450 10-Mar 340
bal 200 bal 0
Repair Equipment (144) Insurance Expense (513)
3-Mar 5,800 31-Mar 200
31-Mar 120 31-Mar 200
bal 5,680 bal 0
Accum. Depr.-Repair Equipment (145) Repair Supplies Expense (514)
31-Mar 120 31-Mar 450
31-Mar 450
Bal 120 bal 0
Accounts Payable (212) Depr. Exp.-Repair Equipment (515)
3-Mar 4,800 31-Mar 120
8-Mar 650 31-Mar 120
18-Mar 400 bal 0
Bal 5,050
Income Taxes Payable (213) Income Taxes Expense (516)
31-Mar 65 31-Mar 65
31-Mar 65
Bal 65 bal 0
Common Stock (311) Electric Expense (517)
1-Mar 20,000 31-Mar 250
31-Mar 250
bal 0
Bal 20,000
Retained Earnings (312)
31-Mar 5,350
31-Mar 3,325
31-Mar 1,000
bal 1,025
Dividends (313)
31-Mar 1,000
31-Mar 1,000
bal 0

This worksheet will be used to complete Requirements #2, #5 and #9. Instructions for #5 can be found on the Adjusting Entries Worksheet. Instructions for #9 can be found on the Closing Entries Worksheet.

3 – Trial Balance

REQUIREMENT #3: Prepare a trial balance for March in the space below.
Bethany’s Bicycle Corporation Trial Balance March 31
Account Account Balance
Number Title Debit Credit
111 Cash 18,060
117 Prepaid Insurance 2,400
119 repair Service 650
144 repair eqipment 5,800
212 Accounts Payable 5,050
311 Common stocks 20,000
313 Dividends 1,000
411 Bicycle repair revenue 5,350
511 Store rent Expense 1,900
512 Telephone Expense 340
517 Electric Expense 250
30,400
User: Debit Balance = $30,400		 30,400
User: Credit Balance = $30,400

Journal Entries

Only enter accounts that have a balance.

4&5 Adjusting Entries

Requirement #4: Prepare adjusting entries using the following information in the General Journal below. Show your calculations! a) One month’s insurance has expired. b) The remaining inventory of repair supplies is $200. c) The estimated depreciation on repair equipment is $120. d) The estimated income taxes are $65.
Requirement #5: Post the adjusting entries on March 31 below to the General Ledger T-accounts (Step 2) and compute adjusted balances. Just add to the balances that are already listed.
Requirement #4
Date Account Number from Chart of Accounts tab Account Title from Chart of Accounts tab Debit Credit
31-Mar 513 Insurance Expense (2,400/12) 200
517 Prepaid Insurance 200
31-Mar 514 Repair Supplies Expense 450
119 Repair Supplies 450
To record one month repair supplies used (650-200)
31-Mar 515 Dep Expense -Repair Equipment 120
145 Accum Dep -Repair Equipment 120
To record depreciation of repair equipment for 1 month
31-Mar 516 Income Tax Expense 65
213 Income Tax Payable 65
To record Income Tax payable
835
Bruce: Balance $ 835.00		 835
Bruce: Balance $835.00

Journal Entries

6 – Adjusted TB

REQUIREMENT #6: Prepare an Adjusted Trial Balance in the space below.
Bethany’s BicycleCorporation Adjusted Trial Balance March 31
Account Account Balance
Number Title Debit Credit
111 Cash 18,060
117 Prepaid Insurance 2,200
119 Repair Supplies 200
144 Repair Equipment 5,800
145 Accum Dep -Repair Equipment 120
212 Accounts Payable 5,050
213 Income Tax Payable 65
311 Common Stock 20,000
313 Dividends 1,000
411 Bicycle Repair Revenue 5,350
511 Store Rent Expense 1,900
512 Telephone Expense 340
513 Insurance Expense 200
514 Repair Supplies Expense 450
515 Dep Expense – Repair Equipment 120
516 Income Tax Expense 65
517 Electric Expense 250
30,585
User: Debit Balance = $30,585		 30,585
User: Credit Balance = $30,585

Journal Entries

Only enter accounts that have a balance.

7 – Financial Statements

Requirement #7: Prepare the financial statements for Bethany’s Bicycle Corporation as of March 31 in the space below. You will only be preparing the Income Statement, Statement of Retained Earning, and the Balance Sheet. The Statement of Cash Flows is a required Financial Statement, but is not required for this project.
Bethany’s Bicycle Corporation Bethany’s Bicycle Corporation Bethany’s Bicycle Corporation
Income Statement Statement of Retained Earnings Balance Sheet
For the Month Ending March 31 For the Month Ending March 31 March 31
Revenues: Retained Earnings, March 1 $0 Assets:
Bicycle Repair Revenue $5,350 Add: Net Income 2,025 Cash $18,060
Total Revenue 5,350 Subtotal 2,025 Prepaid Insurance 2,200
Less: Dividends (1,000) Repair Supplies 200
Expenses: Retained Earnings, March 31 $1,025
User: Retained Earnings = $1,025		 Repair Equipment 5,920
Store Rent Expense 1,900 Less: Accum. Depr. (120)
Telephone Expense 340 Total Assets $26,260
User: $26,140
Insurance Expense 250
Repair Supplies Exp. 200 Liabilities and Stockholders’ Equity
Depreciation Exp. 450 Liabilities:
Income Taxes Expense 120 Accounts Payable $5,050
Electric Expense 65 Income Taxes Payable 65
Total Expenses 3,325 Total Liabilities 5,115
Net Income 2,025
User: Net Income = $2,025		 Stockholders’ Equity:
Common Stock 20,000
Retained Earnings 1,025
Total Stockholders’ Equity
21,025
Total Liabilities & Stockholders’ Equity $26,140
User: $26,140

8&9- Closing Entries

Requirement #8: Prepare the closing entries at March 31 in the General Journal below. Hint:Use the balances for each account which appear on the Adjusted Trial Balance for your closing entries.
Requirement #9: Post the closing entries to the T-Accounts on the General Ledger ( Step 2) worksheet and compute ending balances. Just add to the adjusted balances already listed.
General Journal
Date Account Number from Chart of Accounts tab Account Title from Chart of Accounts tab Debit Credit
31-Mar 411 Bicycle Repair Revenue 5,350
312 Retained Earnings 5,350
(To Record closing of Income Account)
31-Mar 312 Retained Earnings 3,325
511 Store Rent Expenses 1,900
513 Telephone Expenses 340
517 Electric Expenses 200
513 Insurance Expenses 450
514 Repair Supplies Expenses 120
515 Depreciation Expenses – Repair Equipment 65
516 Income Tax Expenses 250
(To Record closing of all Expenses Account)
31-Mar 312 Retained Earnings 1,000
313 Dividends 1,000
(To Record closing of Dividend Account)
9,675
Bruce: Debit $9,675		 9,675
Bruce: Credit $9,675

Journal Entries

See the Week 2 Lecture for examples of how to complete closing entries.

10- Post Closing Trial Balance

Requirement #10: Prepare a post-closing trial balance as of March 31 in the space below.
Bethany’s Bicycle Corporation Post-Closing Trial Balance March 31
Account Account Balance
Number Title Debit Credit
111 Cash 18,060
117 Prepaid Insurance 2,200
119 Repair Supplies 200
144 Repair Equipment 5,800
145 Accumulated dep repair equip. 120
212 Accounts Payable 5,050
213 Income Taxes Payable 65
311 Common Stock 20,000
312 Retained Earnings 1,025
26,260
User: Debits = $26,260		 26,260
User: Credits = 26,260

Journal Entries

11- Ratios

Requirement #11: Ratios
Using the data from Income Statement and Balance Sheet prepared by you in step 7 compute the following ratios.
Current Ratio
Formula Computation
Leverage Ratio
Formula Computation
Assets Turnover Ratio
Formula Computation
Net Profit Margin Ratios
Formula Computation
Rate of Return on Total Assets
Formula Computation

12- Interpretation of Ratios

Requirement #12: Interpret the ratios computed in step 11. Your interpretation should include the definition of the ratio,its managerial use and how does it reflect the operating performance and financial health of the company.
Liquidity Ratios
Solvency Ratios
Profitability Ratios
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ACCT 212: Course Project
Requirement Requirement Description Worksheet Name
1 Prepare the Journal Entries in the General Journal 1 – Journal Entries
2 Post Journal Entries to the General Ledger 2 – General Ledger
3 Prepare a Trial Balance 3 – Trial Balance
4 Prepare the Adjusting Entries 4 &5 – Adjusting Entries
5 Post Adjusting Entries to the General Ledger 4 &5 -Adjusting Entries ( Use worksheet #2)
6 Prepare an Adjusted Trial Balance 6- Adjusted TB
7 Prepare the Financial Statements 7 – Financial Statements
8 Prepare the Closing Entries 8&9 – Closing Entries ( use worksheet #2)
9 Post Closing Entries to the General Ledger 8&9- General Ledger
10 Prepare the Post Closing Trial Balance 10 – Post Closing Trial Balance
11 Compute Ratios 11-Ratios
12 Interpret the Ratios 12-Interpretation of Ratios

Project Instructions

Course Project Overview
The Course Project consists of 10 Requirements for you to complete. The Course Project is due at the end of Week 6. See the Syllabus section ”Due Dates for Assignments & Exams” for due date information. All of the information you need to complete the Course Project is located in this Workbook. • There are eight worksheets in the workbook you will need to complete. • A list of March transactions • A Chart of Accounts reference sheet • A Grading Rubric to help explain what is expected. • Each worksheet has the Check Figures embedded as a comment.
Scenario
You’ve just secured a new client in your accounting practice, Bethany’s Bicycle Corporation (BBC), a brand new small business specializing in bicycle repair. The owner, Bethany Beck, is a terrific cyclist and bike repair specialist, but definitely not an accountant. Your job is to helpBethany put his affairs in order. Luckily Bethany has only been in operation for a month and things have not gotten too out of hand yet! Bethany has to submit his financial statements to her investors and doesn’t know where to begin. It’s your job to go through the complete Accounting cycle to prepare the financial statements for the BBC.
Requirements
Guidelines
Use the embedded assistance in the template, guidance in your textbook, and examples in the weekly lectures to complete this project. Should you have any questions contact your professor.
Milestone 1 is due in Week 3 – This includes project requirements 1-3.
Milestone 2 is due in Week 5 – This includes project requirements 4-10.
Milestone 3 is due in Week 7 – This includes project requirements 11-12.

Before You Begin:  Review the Week 2 Lecture prior to starting work on this project.  Print the Chart of Accounts and October Transactions worksheets for your reference. You will need to refer to both throughout the project.  Review the Grading Criteria.  SAVE your work frequently in this workbook.

March Transactions

During its first month of operation, the Bethany’s Bicycle Corporation, which specializes in bicycle repairs, completed the following transactions.
March Transactions
Date Transaction Description
March 1 Began business by making a deposit in a company bank account of $20,000, in exchange for 2,000 shares of $10 par value common stock.
March 1 Paid the premium on a 1-year insurance policy, $2,400.
March 1 Paid the current month’s store rent expense, $1,900.
March 3 Purchased repair equipment from Andrew Company, $5,800. Paid $1,000 down and the balance was placed on account. Payments will be $400.00 per month for 12 months. The first payment is due 4/1. Note: Use Accounts Payable for the Balance Due.
March 8 Purchased repair supplies from Jackson Company on credit, $650.
March 10 Paid telephone bill for March, $340.
March 11 Cash bicycle repair revenue for the first third of March, $1,650.
March 18 Made payment to Jackson Company, $400.
March 20 Cash bicycle repair revenue for the second third of March, $2,450.
March 31 Cash bicycle repair revenue for the last third of March, $1,250.
March 31 Paid the current month’s electice bill, $250.
March 31 Declared and paid cash dividend of $1,000.

Chart of Accounts

Use the following account descriptions for journal entries.
Chart of Accounts
Account Type Account Number Account Title Normal Balance
Assets
111 Cash Debit
117 Prepaid Insurance Debit
119 Repair Supplies Debit
144 Repair Equipment Debit
145 Accum Dep -Repair Equipment Credit
Liabilities
212 Accounts Payable Credit
213 Income Tax Payable Credit
Stockholders Equity
311 Common Stock Credit
312 Retained Earnings Credit
313 Dividends Debit
Revenue
411 Bicycle Repair Revenue Credit
Expenses
511 Store Rent Expense Debit
512 Telephone Expense Debit
513 Insurance Expense Debit
514 Repair Supplies Expense Debit
515 Dep Expense – Repair Equipment Debit
516 Income Tax Expense Debit
517 Electric Expense Debit

1 – Journal Entries

REQUIREMENT #1: Prepare journal entries to record the March transactions in the General Journal below. Remember that Debits must equal Credits—All of your Journal Entries should balance.
General Journal
Date Account Number from Chart of Accounts tab Account Title from Chart of Accounts tab Debit Credit
March 1st 111 Cash 20,000
311 Common Stock 20,000
March 1st 117 Prepaid Insurance 2,400
111 Cash 2,400
March 1st 511 Store rent expenses 1,900
111 Cash 1,900
March 3rd 144 Repair Equipment 5,800
111 Cash 1,000
212 Account Payable to Andrew Company 4,800
March 8th 119 Repair Supplies 650
212 Account Payable to Jackson Company 650
March 10th 512 Telephone Expenses 340
111 Cash 340
March 11th 111 Cash 1,650
411 Bicycle Repair Revenue 1,650
March 18th 212 Account Payable to Jackson Company 400
111 Cash 400
March 20th 111 Cash 2,450
411 Bicycle Repair Revenue 2,450
March 31st 111 Cash 1,250
411 Bicycle Repair Revenue 1,250
March 31st 517 Electric Expenses 250
111 Cash 250
March 31st 313 Dividends 1,000
111 Cash 1,000
38,090
Harris, Nicole: Debits = $38,090		 38,090
Harris, Nicole: Credits = $38,090

Journal Entries

Once you’ve completed this requirement print your General Journal to complete Requirement #2 on the General Ledger worksheet.

2 – General Ledger

REQUIREMENT #2: Post the March journal entries to the following T-Accounts and compute ending balances.
Date Cash (111)
DeVry: The balance of the Cash account after posting journal entries for Part A should be $18,060 .		 Date Bicycle Repair Revenue (411)
1-Mar 20,000 11-Mar 1,650
1-Mar 2,400 20-Mar 2,400
1-Mar 1,900 20-Mar 1,250
3-Mar 1,000
10-Mar 340
11-Mar 1,650 Bal 5,300
18-Mar 400
20-Mar 2,450
31-Mar 1,250 250
31-Mar 1,000
bal 18,060
Prepaid Insurance (117) Store Rent Expense (511)
1-Mar 2,400 1-Mar 1,900
31-Mar 200 1,900
bal 1,900
bal 2,200
Repair Supplies (119) Telephone Expense (512)
8-Mar 650 10-Mar 340
31-Mar 450 10-Mar 340
bal 200 bal 0
Repair Equipment (144) Insurance Expense (513)
3-Mar 5,800 31-Mar 200
31-Mar 120 31-Mar 200
bal 5,680 bal 0
Accum. Depr.-Repair Equipment (145) Repair Supplies Expense (514)
31-Mar 120 31-Mar 450
31-Mar 450
Bal 120 bal 0
Accounts Payable (212) Depr. Exp.-Repair Equipment (515)
3-Mar 4,800 31-Mar 120
8-Mar 650 31-Mar 120
18-Mar 400 bal 0
Bal 5,050
Income Taxes Payable (213) Income Taxes Expense (516)
31-Mar 65 31-Mar 65
31-Mar 65
Bal 65 bal 0
Common Stock (311) Electric Expense (517)
1-Mar 20,000 31-Mar 250
31-Mar 250
bal 0
Bal 20,000
Retained Earnings (312)
31-Mar 5,350
31-Mar 3,325
31-Mar 1,000
bal 1,025
Dividends (313)
31-Mar 1,000
31-Mar 1,000
bal 0

This worksheet will be used to complete Requirements #2, #5 and #9. Instructions for #5 can be found on the Adjusting Entries Worksheet. Instructions for #9 can be found on the Closing Entries Worksheet.

3 – Trial Balance

REQUIREMENT #3: Prepare a trial balance for March in the space below.
Bethany’s Bicycle Corporation Trial Balance March 31
Account Account Balance
Number Title Debit Credit
111 Cash 18,060
117 Prepaid Insurance 2,400
119 repair Service 650
144 repair eqipment 5,800
212 Accounts Payable 5,050
311 Common stocks 20,000
313 Dividends 1,000
411 Bicycle repair revenue 5,350
511 Store rent Expense 1,900
512 Telephone Expense 340
517 Electric Expense 250
30,400
User: Debit Balance = $30,400		 30,400
User: Credit Balance = $30,400

Journal Entries

Only enter accounts that have a balance.

4&5 Adjusting Entries

Requirement #4: Prepare adjusting entries using the following information in the General Journal below. Show your calculations! a) One month’s insurance has expired. b) The remaining inventory of repair supplies is $200. c) The estimated depreciation on repair equipment is $120. d) The estimated income taxes are $65.
Requirement #5: Post the adjusting entries on March 31 below to the General Ledger T-accounts (Step 2) and compute adjusted balances. Just add to the balances that are already listed.
Requirement #4
Date Account Number from Chart of Accounts tab Account Title from Chart of Accounts tab Debit Credit
31-Mar 513 Insurance Expense (2,400/12) 200
517 Prepaid Insurance 200
31-Mar 514 Repair Supplies Expense 450
119 Repair Supplies 450
To record one month repair supplies used (650-200)
31-Mar 515 Dep Expense -Repair Equipment 120
145 Accum Dep -Repair Equipment 120
To record depreciation of repair equipment for 1 month
31-Mar 516 Income Tax Expense 65
213 Income Tax Payable 65
To record Income Tax payable
835
Bruce: Balance $ 835.00		 835
Bruce: Balance $835.00

Journal Entries

6 – Adjusted TB

REQUIREMENT #6: Prepare an Adjusted Trial Balance in the space below.
Bethany’s BicycleCorporation Adjusted Trial Balance March 31
Account Account Balance
Number Title Debit Credit
111 Cash 18,060
117 Prepaid Insurance 2,200
119 Repair Supplies 200
144 Repair Equipment 5,800
145 Accum Dep -Repair Equipment 120
212 Accounts Payable 5,050
213 Income Tax Payable 65
311 Common Stock 20,000
313 Dividends 1,000
411 Bicycle Repair Revenue 5,350
511 Store Rent Expense 1,900
512 Telephone Expense 340
513 Insurance Expense 200
514 Repair Supplies Expense 450
515 Dep Expense – Repair Equipment 120
516 Income Tax Expense 65
517 Electric Expense 250
30,585
User: Debit Balance = $30,585		 30,585
User: Credit Balance = $30,585

Journal Entries

Only enter accounts that have a balance.

7 – Financial Statements

Requirement #7: Prepare the financial statements for Bethany’s Bicycle Corporation as of March 31 in the space below. You will only be preparing the Income Statement, Statement of Retained Earning, and the Balance Sheet. The Statement of Cash Flows is a required Financial Statement, but is not required for this project.
Bethany’s Bicycle Corporation Bethany’s Bicycle Corporation Bethany’s Bicycle Corporation
Income Statement Statement of Retained Earnings Balance Sheet
For the Month Ending March 31 For the Month Ending March 31 March 31
Revenues: Retained Earnings, March 1 $0 Assets:
Bicycle Repair Revenue $5,350 Add: Net Income 2,025 Cash $18,060
Total Revenue 5,350 Subtotal 2,025 Prepaid Insurance 2,200
Less: Dividends (1,000) Repair Supplies 200
Expenses: Retained Earnings, March 31 $1,025
User: Retained Earnings = $1,025		 Repair Equipment 5,920
Store Rent Expense 1,900 Less: Accum. Depr. (120)
Telephone Expense 340 Total Assets $26,260
User: $26,140
Insurance Expense 250
Repair Supplies Exp. 200 Liabilities and Stockholders’ Equity
Depreciation Exp. 450 Liabilities:
Income Taxes Expense 120 Accounts Payable $5,050
Electric Expense 65 Income Taxes Payable 65
Total Expenses 3,325 Total Liabilities 5,115
Net Income 2,025
User: Net Income = $2,025		 Stockholders’ Equity:
Common Stock 20,000
Retained Earnings 1,025
Total Stockholders’ Equity
21,025
Total Liabilities & Stockholders’ Equity $26,140
User: $26,140

8&9- Closing Entries

Requirement #8: Prepare the closing entries at March 31 in the General Journal below. Hint:Use the balances for each account which appear on the Adjusted Trial Balance for your closing entries.
Requirement #9: Post the closing entries to the T-Accounts on the General Ledger ( Step 2) worksheet and compute ending balances. Just add to the adjusted balances already listed.
General Journal
Date Account Number from Chart of Accounts tab Account Title from Chart of Accounts tab Debit Credit
31-Mar 411 Bicycle Repair Revenue 5,350
312 Retained Earnings 5,350
(To Record closing of Income Account)
31-Mar 312 Retained Earnings 3,325
511 Store Rent Expenses 1,900
513 Telephone Expenses 340
517 Electric Expenses 200
513 Insurance Expenses 450
514 Repair Supplies Expenses 120
515 Depreciation Expenses – Repair Equipment 65
516 Income Tax Expenses 250
(To Record closing of all Expenses Account)
31-Mar 312 Retained Earnings 1,000
313 Dividends 1,000
(To Record closing of Dividend Account)
9,675
Bruce: Debit $9,675		 9,675
Bruce: Credit $9,675

Journal Entries

See the Week 2 Lecture for examples of how to complete closing entries.

10- Post Closing Trial Balance

Requirement #10: Prepare a post-closing trial balance as of March 31 in the space below.
Bethany’s Bicycle Corporation Post-Closing Trial Balance March 31
Account Account Balance
Number Title Debit Credit
111 Cash 18,060
117 Prepaid Insurance 2,200
119 Repair Supplies 200
144 Repair Equipment 5,800
145 Accumulated dep repair equip. 120
212 Accounts Payable 5,050
213 Income Taxes Payable 65
311 Common Stock 20,000
312 Retained Earnings 1,025
26,260
User: Debits = $26,260		 26,260
User: Credits = 26,260

Journal Entries

11- Ratios

Requirement #11: Ratios
Using the data from Income Statement and Balance Sheet prepared by you in step 7 compute the following ratios.
Current Ratio
Formula Computation
Leverage Ratio
Formula Computation
Assets Turnover Ratio
Formula Computation
Net Profit Margin Ratios
Formula Computation
Rate of Return on Total Assets
Formula Computation

12- Interpretation of Ratios

Requirement #12: Interpret the ratios computed in step 11. Your interpretation should include the definition of the ratio,its managerial use and how does it reflect the operating performance and financial health of the company.
Liquidity Ratios
Solvency Ratios
Profitability Ratios

Grading Rubric (2)

Course Project Grading Rubric – Students
Criteria Excellent Good Fair Poor Unacceptable Points Available
Milestone 1 Step 1 —Journal Entries Journal entries use accurate accounts and amounts; and debits and credits are used correctly. Journal entries mostly use accurate accounts and amounts; and debits and credits are used correctly. Journal entries have some errors in use of accounts and amounts; and debits and credits are only somewhat used correctly. Journal entries have some errors in use of accounts and amounts; and debits and credits are not used correctly. The submission does not meet this requirement.
Step 1 Grading Scale 20-18 17-16 15-14 13-12 11-0 20
Milestone 1 Step 2 Ledger Posting and Balancing 1.Posting is done in the correct accounts and at the correct side (Dr./Cr.) and balances are correct. Posting is done mostly in the correct accounts and mostly at the correct side(Dr./Cr.) and balances are mostly correct. Posting has errors with incorrect accounts and incorrect debits/credits and incorrect balances. Listing of accounts is mostly incorrect with most incorrect accounts and incorrect Dr./Cr. Most ledger balances are incorrect. Or posting is not done at all. The submission does not meet this requirement.
Step 2 Grading Scale 16-14 13-12 11-10 9 8-0 16
Milestone 1 Steps 3 – Unadjusted Trial Balance 1.Accounts are listed correctly leading to an accurate trial balance. 1.Most accounts are listed correctly leading to a mostly correct trial balance. 2. Few errors in Voice Thread or narrated power point presentation and average presentation skills. Listing of accounts has several errors leading to incorrect trial balance. 2.Several errors in Voice Thread or narrated power point presentation and below average presentation skills. 1.Listing of accounts is done poorly or not at all, leading to inaccurate or no trial balance.2.Very poor or no Voice Thread or narrated power point presentation The submission does not meet this requirement.
Step 3 Grading Scale 10-9 8 7 6 5-0 10
Milestone 1 CO2 – Given economic transactions and events, analyze and record them leading to the development and analysis of a trial balance and reports important for decision-making. The student’s submission fully analyzes and records all transactions, and provides a complete and accurate trial balance. The student’s submission properly analyzes and records the given transactions, and provides a trial balance that is accurate based on the entries recorded. The student’s submission demonstrates analysis and recording of transactions, although several analysis errors exist, leading to a trial balance that is somewhat inaccurate. The student’s submission demonstrates limited analysis and recording of transactions, and significant errors exist, leading to an inaccurate or incomplete trial balance. The student’s submission does not meet the criteria of the outcome.
CO 2 Grading Scale 4 3 2 1 0 4
Milestone 2 Step 4 —Adjusting Journal Entries Journal entries use accurate accounts and amounts; and debits and credits are used correctly. Journal entries mostly use accurate accounts and amounts; and debits and credits are used correctly. Journal entries have some errors in use of accounts and amounts; and debits and credits are only somewhat used correctly. Journal entries have some errors in use of accounts and amounts; and debits and credits are not used correctly. The submission does not meet this requirement.
Step 4 Grading Scale 16-15 14-13 12-11 10-9 8-0 20
Milestone 2 Steps 5 and 6 —Posted and Adjusted Trial Balance. Posting is correct leading to an accurate trial balance. Posting is mostly correct leading to a mostly correct trial balance. Posting has several errors leading to a trial balance with several errors. Posting is done poorly or not at all, leading to inaccurate or no trial balance. The submission does not meet this requirement.
Steps 5/6 Grading Scale 20-18 17-16 15-14 13-12 11-0 10
Milestone 2 Step 7.1 – Income Statement The income statement is prepared accurately and in an appropriate format. The income statement is prepared accurately and mostly in an appropriate format, but may have some minor errors. The income statement is prepared with several errors, but is prepared in an appropriate format. The income statement is prepared with significant errors, using an inappropriate format. The submission does not meet this requirement.
Step 7.1 Grading Scale 10-9 8 7 6 5-0 10
Milestone 2 Step 7.2 -Retained Earnings Statement The retained earnings statement is prepared accurately and in an appropriate format. The retained earnings statement is prepared accurately and mostly in an appropriate format, but may have some minor errors. The retained earnings statement is prepared with several errors, but is prepared in an appropriate format. The retained earnings statement is prepared with significant errors, using an inappropriate format. The submission does not meet this requirement.
Step 7.2 Grading Scale 6 5 4 3 2-0 6
Milestone 2 Step 7.3 – Balance Sheet The balance sheet is prepared accurately and in an appropriate format. The balance sheet is prepared accurately and mostly in an appropriate format, but may have some minor errors. The balance sheet is prepared with several errors, but is prepared in an appropriate format. The balance sheet is prepared with significant errors, using an inappropriate format. The submission does not meet this requirement.
Step 7.3 Grading Scale 10-9 8 7 6 5-0 10
Milestone 2 Step 8 —Closing Journal Entries Journal entries use accurate accounts and amounts; and debits and credits are used correctly. Journal entries mostly use accurate accounts and amounts; and debits and credits are used correctly. Journal entries have some errors in use of accounts and amounts; and debits and credits are only somewhat used correctly. Journal entries have some errors in use of accounts and amounts; and debits and credits are not used correctly. The submission does not meet this requirement.
Step 8 Grading Scale 20-18 17-16 15-14 13-12 11-0 20
Milestone 2 Steps 9 and 10 —Posted and Post-closingTrial Balance Posting is correct leading to an accurate trial balance. Posting is mostly correct leading to a mostly correct trial balance. Posting has several errors leading to a trial balance with several errors. Posting is done poorly or not at all, leading to inaccurate or no trial balance. The submission does not meet this requirement.
Steps 9-10 Grading Scale 20-18 17-16 15-14 13-12 11-0 20
Milestone 2 CO 3 – Given a trial balance sheet and economic financial information, analyze and record adjusting and closing journal entries leading to the creation and analysis of financial statements using the accrual accounting method. The student’s submission fully and properly analyzes the adjusting information, resulting in an accurate adjusted trial balance and financial statements. The submission also contains closing entries that are fully and accurately prepared, resulting in an accurate post-closing trial balance. The student’s submission analyzes the adjusting information, resulting in a mostly accurate adjusted trial balance and financial statements. The submission also contains closing entries that are accurately prepared, resulting in a mostly accurate post-closing trial balance. The student’s submission demonstrates analysis of the adjusting information and the preparation of an adjusted trial balance and financial statemetns, althought several errors esit. The closing entries are prepared with several errors, resulting in the completion of a post-closing trial balance, that has limited accuracy. The student’s submission demonstrates limited analysis of the adjusting information and the prepration of an adjusted trial balance and financial statements, however significant errors exist. The closing entries are prepared with significant errors, resulting in an inaccurate post-closing trial balance. The student’s submission does not meet the criteria of the outcome.
CO 3 Grading Scale 4 3 2 1 0 4
Milestone 3 Step 11 Computation of Ratios (21 points) All ratios computed are correct as to the formula used and the amounts Ratios computed are mostly correct as to the formula used and amounts Several ratios are computed incorrectly as to the formula and amounts used. Most ratios are computed incorrectly as to the formula and amounts used.Or no ratios computed. The submission does not meet this requirement.
Step 11 Grading Scale 21-19 18-17 16-15 14-13 12-0 21
Milestone 3 Step 12 Interpretation of Ratios Good interpreation of all ratios and 2.Good demonstration of presentation skills with Voice Thread or narrated power point slides. Good interpreation of most of the ratios and 2. Few errors in Voice Thread or narrated power point presentation and average presentation skills. Interpreation of ratios lacks clarity and basic understanding of ratios is not visible. 2.Several errors in Voice Thread or narrated power point presentation and below average presentation skills. Interpreation of ratios is mostly incorrect or no interpretation of ratios is done. 2.Very poor or no Voice Thread or narrated power point presentation The submission does not meet this requirement.
Step 12 Grading Scale 25-23 22-20 19-17 16-15 14-0 25
Milestone 3 CO 3 – Given a trial balance sheet and economic financial information, analyze and record adjusting and closing journal entries leading to the creation and analysis of financial statements using the accrual accounting method. The student’s submission fully and properly calculates the appropriate ratios, and provides substantial analysis to support the evaluation of company performance. The student’s submission properly calculates the appropriate ratios, and provides analysis that supports the evaluation of company performance. The student’s submission calculates the appropriate ratios, although several errors exist in the calculations, leading to an evaluation of the company that has limited accuracy. The student’s submission calculates the requested ratios, although significant errors exist in the calculations, leading to an inaccurate evaluation of the company’s performance. The student’s submission does not meet the criteria of the outcome.
CO 3 Grading Scale 4 3 2 1 0 4

RequirementRequirement DescriptionWorksheet Name

1

Prepare the Journal Entries in the General Journal1 – Journal Entries

2

Post Journal Entries to the General Ledger2 – General Ledger

3

Prepare a Trial Balance3 – Trial Balance

4

Prepare the Adjusting Entries4 &5 – Adjusting Entries

5

Post Adjusting Entries to the General Ledger4 &5 -Adjusting Entries ( Use worksheet #2)

6

Prepare an Adjusted Trial Balance6- Adjusted TB

7

Prepare the Financial Statements7 – Financial Statements

8

Prepare the Closing Entries8&9 – Closing Entries ( use worksheet #2)

9

Post Closing Entries to the General Ledger8&9- General Ledger

10

Prepare the Post Closing Trial Balance10 – Post Closing Trial Balance

11

Compute Ratios11-Ratios

12

Interpret the Ratios12-Interpretation of Ratios

ACCT 212: Course Project