ACG 201-002,004,005,006 – Extra Credit Project – due at the Final Exam

| February 14, 2018

ACG 201-002,004,005,006 – Extra Credit Project – due at the Final Exam

COMPREHENSIVE PROJECT

Increasingly harsh winters in the Cape Fear area led to an idea for Fred Porter and Angela Owens. They

met at their local hardware store when they were both seeking wood fuel pellets, and they complained to each other

about how the store consistently runs out of them. They determined that there was a significant market for wood

fuel pellets in home heating during winter months. The clean, efficient method of heating is especially useful for

residents of North Carolina because wood fuel pellets are often made from the discarded materials of furniture

manufacturers and because of the abundance of pine trees within the State. As such, Fred and Angela decided to

open Cape Fear Wood Pellet Distributors, Inc.

The idea is simple. They could arrange with various wholesale suppliers of wood pellets who place the

pellets into 40 lb. bags and ship them off. Since the wood pellets are essentially identical, Fred and Angela can label

the bags and resell them to retail customers.

On October 1, 2018, Fred and Angela contributed $10,000 each to the creation of the new business.

Angela will be the President and CEO while Fred will be Vice-President and Secretary/Treasurer. Each will receive

10,000 shares of stock out of an authorized 50,000 shares of $1 par value common stock. Understanding that the

$20,000 may not be sufficient to get operations moving, the corporation obtained a loan from BB&T also on

October 1, in the amount of $10,000 at 6 % interest.

Once the pieces were in place, it was time for Fred and Angela to get moving. The following transactions

occurred subsequent to the initial startup of the business (prepare appropriate journal entries):

10/1 Signed a month-to-month lease for retail showroom/warehouse/office facilities in Dutch Square in the

amount of $1500 per month paying a $1000 security deposit and paying 3 months’ rent in advance.

10/1 Paid cash to have web page and logo designed and implemented $3,000. Web page hosting and email

addresses will cost $55 per month.

10/1 Purchased computers, printers, fax machine and telephones for $2,880. Equipment will last approximately

3 years with no salvage value.

10/1 Purchased used forklift for moving pallets with cash. Purchase price $4,860 with an estimated useful life of

6 years with no salvage value.

10/1 Purchased 3 year General Liability Insurance Policy including automobile liability for $7,200 cash.

10/2 Purchased 10 tons (500 bags) of pellets at $2.10 per bag from Western Carolina Wood Recycling in

Hickory, NC terms 2/10, n/30 fob shipping point.

10/3 Paid shipping cost for pellets from Western Carolina Wood Recycling – $200

10/3 Purchased used delivery flatbed truck for $10,000. The seller agreed to finance the purchase for 3 years

with 10% interest. The truck will have an estimated 5 year useful life with a salvage value of $2,000.

10/4 Paid cash to have a fresh paint and logo imprinted on the side of the truck for $820.

10/5 Sold 300 bags of pellets to Wilmington Hardware for $4.85 per bag terms 3/15 n/30, fob destination.

10/6 Hired 2 employees (warehouse worker/delivery driver). Pay – $15.00 per hour.

10/7 Delivered pellets to Wilmington Hardware.

10/7 Sold 55 bags to retail customers who came in to the store for cash. Price – $6.25 per bag.

10/8 Sold 15 bags to retail customers who came in to the store for cash. Price – $6.25 per bag.

ACG 201-002,004,005,006 – Extra Credit Project – due at the Final Exam

10/9 Purchased 5 tons (250 bags) of pellets at $2.15 per bag from Asheville Wood Products terms 1/10, n/30 fob

destination.

10/10 Paid Duke Power bill – $115, CFPUA Water bill for $120, and Phone/Internet to Time Warner Cable for

$95. Paid Western Carolina Wood Recycling for 10/2 purchase.

10/12 Sold 250 bags of pellets to Holly Ridge Hardware for $5.00 per bag terms 2/10 n/30, fob destination.

10/12 Sold 40 bags to retail customers who came in to the store for cash. Price – $6.25 per bag.

10/13 Received payment from Wilmington Hardware for 10/5 purchase.

10/13 Sold 20 bags to retail customers who came in to the store for cash. Price – $6.25 per bag.

10/14 Purchased 10 tons (500 bags) of pellets at $2.20 per bag from Western Carolina Wood Recycling in

Hickory, NC terms 2/10, n/30 fob shipping point.

10/14 Sold 30 bags to retail customers who came in to the store for cash. Price – $6.25 per bag.

10/15 Sold 300 bags of pellets to Wilmington Hardware for $4.95 per bag terms 3/10 n/30, fob destination.

Delivered same day.

10/15 Sold 18 bags to retail customers who came in to the store for cash. Price – $6.25 per bag.

10/16 Paid fuel costs for delivery truck $78.00.

10/16 Sold 5 bags to retail customers who came in to the store for cash. Price – $6.25 per bag.

10/17 Sold 200 bags of pellets to Ogden Hardware for $4.95 per bag terms 3/10 n/30, fob destination. Delivered

same day.

10/17 Paid Internet Hosting for the month. Paid Asheville Wood Products for 10/9 purchase. Paid employees

for 64 hours of work each (the previous 8 working days x 8 hrs per day). State Income Tax Rate – 2%,

Federal Income Tax Rate – 5%, FICA – 7.65% total. State Unemployment Tax Rate – 1.2%. Paid

Dividend to shareholders of $500 each.

10/19 Received payment from Holly Ridge Hardware for 10/12 sale.

10/19 Purchased 20 tons (1,000 bags) of pellets at $2.30 per bag from Asheville Wood Products terms 1/10, n/30

fob destination.

10/19 Sold 500 bags of pellets to Wilmington Hardware for $4.95 per bag terms 3/10 n/30, fob destination.

Delivered same day.

10/20 Sold 50 bags to retail customers who came in to the store for cash. Price – $6.25 per bag.

10/21 Sold 300 bags of pellets to Ogden Hardware for $4.95 per bag terms 3/10 n/30, fob destination. Delivered

same day.

10/21 Sold 42 bags to retail customers who came into the store for cash. Price – $6.25 per bag.

10/22 Sold 100 bags of pellets to Carolina Beach Hardware for $4.90 per bag terms 3/10 n/30, fob destination.

Delivered same day.

ACG 201-002,004,005,006 – Extra Credit Project – due at the Final Exam

10/22 Purchased 20 tons (1,000 bags) of pellets at $2.37 per bag from Asheville Wood Products terms 1/10, n/30

fob destination.

10/22 Sold 39 bags to retail customers who came into the store for cash. Price – $6.25 per bag.

10/23 Sold 300 bags of pellets to Leland Hardware for $4.95 per bag terms 2/10 n/30, fob destination. Delivered

same day.

10/23 Received payment from Ogden Hardware for 10/17 sale.

10/25 Paid Western Carolina Wood Recycling for 10/14 purchase.

10/26 Sold 28 bags to retail customers who came into the store for cash. Price – $6.25 per bag.

10/27 Sold 200 bags of pellets to Leland Hardware for $4.95 per bag terms 2/10 n/30, fob destination. Delivered

same day.

10/27 Purchased 20 tons (1,000 bags) of pellets at $2.39 per bag from Asheville Wood Products terms 1/10, n/30

fob destination.

10/27 Received payment from Carolina Beach Hardware for 10/22 sale.

10/28 Sold 400 bags of pellets to Wilmington Hardware for $4.95 per bag terms 3/10 n/30, fob destination.

Delivered same day.

10/29 Sold 10 bags to retail customers who came into the store for cash. Price – $6.25 per bag.

10/30 Received payment from Wilmington Hardware for 10/19 sale.

10/30 Received payment from Ogden Hardware for 10/21 sale.

10/30 Sold 30 bags to retail customers who came into the store for cash. Price – $6.25 per bag.

10/30 Sold 300 bags of pellets to Ogden Hardware for $4.95 per bag terms 2/10 n/30, fob destination. Delivered

same day.

10/30 Paid Employees for previous 2 weeks work. 160 hours total. Same rates for withholding and taxes apply

as before. Paid Dividend to shareholders of $500 each

10/31 Sold 18 bags to retail customers who came into the store for cash. Price – $6.25 per bag.

10/31 Received Bank Statement – check from Carolina Beach Hardware was returned NSF. Bank charges $20

monthly fee, and $120 for check printing charges.

10/31 Paid all employment related taxes due.

End of Month – prepare ALL adjusting entries. The company uses the FIFO inventory system and depreciates

assets using the straight line method. Prepare an adjusted trial balance and the appropriate financial

statements (Income Statement, Statement of Ret Earnings, and Balance Sheet). Prepare all closing entries

and prepare for the next month.

Prepare the following Ratios –

 Working Capital

 Current Ratio

 Profit Margin

 Debt to Total Assets Rate

 Gross Profit Rate

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