Jones Surf Shop is ready to expand their operations and wants to buy some equipment to per
equipment. Help Jeremy make some decisions about how to record the purchases and calcula
On April 1 Jeremy has placed an order for a surf board repair machine that will be housed in t
shop. He paid cash for the machine and it cost $15,000. He expects that the machine will hav
that he should be able to sell it at the end for about $2500. Complete the journal entry for the
JOURNAL
Date Description Debit
April 1, 2024 Equipment $ 15,000
Cash
Purshase of Surf Board repair machine
After talking with Jeremy about the uses of the machine you have decided that straight line d
sense. Calculate what the annual depreciation for the machine will be under the straight line
Straight Line Deprecation Schedule
Book Value $ 15,000
Useful Life (in years) 5
Salvage (Residual) Value $ 2,500
Depreciable Base $ 12,500
Depreciation Amount per year $ 2,500
Depreciation Amount per Month $ 208.33
As of April 30, journalize the depreciation entry for April, the first month the asset is put into s
JOURNAL
Date Description Debit
April 30, 2024 Depreciation Expense $ 208.33
Accumulated Depreciation
Depreciation Expense of surboard machine
Sally's Surf Pros has reached out to Jeremy about setting up some prepaid repair work for her
would like to prepay for ten tune-ups to get a discounted rate. Jeremy agrees to a price of $20
On April 15 Sally pays cash for the $2000 prepaid tuneups.
Journalize the receipt of the prepaid revenue
JOURNAL
Date Description Debit
April 15, 2024 Cash $ 2,000
Unearned Revenue
Purchase of surfboard repair machine
One of Sally's pros comes in on April 25 to use one of the prepaid tuneups. Record the journa
JOURNAL
Date Description Debit
April 25, 2024 Unearned Revenue $ 200
Unearned Revenue
Revenue to the service
With the increase in operations Jeremy has decided to take out some debt to help finance the
to Valley Bank and they have agreed to a bank loan in the amount of $100,000 on April 1. The
repayment of principal at the end of 5 years. The annual interest rate on the loan is 8%, recog
Journalize the receipt of the cash from the loan
JOURNAL
Date Description Debit
April 1, 2024 Cash $ 100,000
Notes Payable
Receipt of cash from loan
Calculate the interest recognized monthly.
Principal (Amount Borrowed) $ 100,000
Interest Rate 8%
Period of Time (in months) 1/60
Monthly Interest Rate $ 11.11
Create the journal to record the interest for the first month of interest
JOURNAL
Date Description Debit
April 30, 2024 Interest Expense $ 11
Interest Payable
First Month of internet
Below are the end of period statements for Jones Surf Shop - Help Jeremy do some financial statement analysis on t
Jones Surf Shop
Multi-Step Income Statement
For Month Ended April 30
Service Sales $40,000
Retail Sales $25,000
Total Sales (Revenue) $65,000
Less:
Sales Discount $1,500
Net Sales $63,500
Cost of Goods Sold $15,250
Gross Margin $48,250
Operating Expenses (Record Accounts Alphabetically)
Advertising Expense $1,500
Depreciation Expense $208
Rent Expense $1,500
Utilities Expense $1,300
Salaries Expense $10,575
Supplies Expense $100
Total Operating Expenses $15,183
Earnings before Interest and Taxes $33,067
Interest Expense $667
Income Tax Expense $2,500
Net Income $29,900
Jones Surf Shop
Balance Sheet
As of End of Month 1, Year 1
Assets
Cash $153,350
Accounts Receivable $25,350
Inventory $12,975
Supplies $150
Prepaid Rent $1,500
Office Furniture $2,500
Equipment $15,000
Accumulated Depreciation -$208
Total Assets $210,617
Liabilities
Accounts Payable $27,325
Interest Payable $667
Salaries Payable $925
Unearned Revenue $1,800
Notes Payable (Principal due in 5 years) $100,000
Total Liabilities $130,717
Stockholder's Equity
Common Stock (10,000 shares of $5 par stock) $50,000
Ending Retained Earnings $29,900
Total Stockholder's Equity $79,900
Total Liabilities & Stockholder's Equity $210,617
*Beginning Accounts Receivable = $15,350
*Beginning Inventory = $9,750
*Beginning Total Assets = $169,500
*Beginning Stockholder's Equity = $65,300
*Current Market Price of Common Stock = $7.50
Calculate the following ratios for Jeremy to consider where Jones Surf Shop is at after a few months of operations
LIQUIDITY RATIOS
A Working Capital
Working Capital = Current Assets - Current Liabilities
Current Assets $ 193,325
Current Liabilities $ 30,717
Working Capital $ 162,608
B Current Ratio
Current Ratio = Current Assets / Current Liabilities
Current Assets $ 193,325
Current Liabilities $ 30,717
Current Ratio 6.29:1
C Quick Ratio
Quick Ratio = Cash + Short-Term Investments +
/ Current Liabilities
Cash
Short-Term Investments
Current Liabilities
Current Liabilities
Quick Ratio #DIV/0!
D Accounts Receivable Turnover (A/R Turnover)
A/R Turnover = /
Average Accounts
Receivable = + / 2
0 +
0
Average A/R $ -
0 /
Average A/R $ -
A/R Turnover #DIV/0!
E Inventory Turnover
Inventory Turnover = /
Average Inventory = /
/2
0
0
Average Inventory $ -
0
0 $ -
Inventory Turnover #DIV/0!
F Average Days to Sell Inventory
Days' Sales in Inventory = / x
0
0
/ 365
Days' Sales in Inventory #DIV/0!
SOLVENCY RATIOS
G Debt to Equity Ratio
Debt to Equity Ratio = /
0
0
Debt to Equity Ratio #DIV/0!
H Times Interest Earned
Times Interest Earned = /
0
0
Times Interst Earned #DIV/0!
EFFICIENCY RATIO
I Profit Margin
Profit Margin = /
0
0
Profit Margin #DIV/0! or #DIV/0!
J Asset Turnover
Total Asset Turnover = /
Average Total Assets = +
/2
0
0
/2
Average Total Assets $ -
0
0 $ -
Total Asset Turnover #DIV/0!
K Return on Total Assets
Return on Total Assets = /
0
0
#DIV/0! or #DIV/0!
L Return on Equity
Return on Equity = /
Average Stockholder
Equity = +
/2
0
0
/2
Average Stockholder Equity = $ -
0
Average Stockholder Equity $ -
Return on Equity #DIV/0! or #DIV/0!
EFFICIENCY RATIO
M Earnings Per Share
Earnings per Share = /
0
0
Earnings per Share #DIV/0!
N Price-Earnings Ratio (PE Ratio)
Price-Earnings Ratio = /
0
0 #DIV/0!
Price-Earnings Ratio #DIV/0!
Now that you have calculated the financial ratios please choose three of them that seem significant and write up an
those ratios mean and how it might effect the company.
e equipment to perform repairs on damaged
chases and calculate depreciation as necessary.
will be housed in the backroom of the retail
e machine will have a useful life of 5 years and
ournal entry for the purchase of the machine.
Credit
$ 15,000
that straight line depreciation makes the most
er the straight line depreciation method.
e asset is put into service.
Credit
$ 208.33
repair work for her competitive surf clients. She
es to a price of $200 per tune up for the bundle.
Credit
$ 2,000
Record the journal for completing this work
Credit
$ 200
to help finance the growth. He has reached out
,000 on April 1. The terms of the loan include a
he loan is 8%, recognized monthly.
Credit
$ 10,000
Credit
$ 11
statement analysis on these statements
months of operations
Current Liabilities
Turnover)
ory
365
tio)
nificant and write up an email to Jeremy interpreting what
