Group Project 1
Assignment instructions:
▪ This is a group assignment (2-3 students per group);
▪ It’s worth 20% of your overall course assessments;
▪ You should submit your solution by the end of Thursday, November 30 on the Blackboard;
▪ Please use Excel spreadsheets in the preparation of financial statements.
Simulation
You started a mobile street cart business “(Create a company name using your first names”) at the
beginning of December. During December, the following business activities occurred.

1. 100 shares of common stock were issued at $10 per share for cash on December 1.
2. On December 1, your company borrowed $9,000 from a local bank, on a 10% note for 5 years.
   The interest and principal would be paid semi-annually on each May 1 and December 1.
3. On December 1, your company paid $750 fees to local government agencies for business
   licenses and permits, for a period of one year.
4. On December 1, your company acquired a mobile cart, a business sign, and other equipment for
   a total of $4,200 (all paid in cash). You estimated that the life of these PP&E items was 2 years
   with a residual value (salvage) of $300.
5. On December 1, your company paid $1,200 for its annual insurance; the policy started on
   December 1.
6. During December (choose a date), your company acquired merchandise, totaling $___________
   (provided by your simulation). At the time of purchase, 70% of the merchandise was acquired on
   account. Your company promised to pay the remaining balances in 20 days.
7. For the merchandise purchases in Transaction 6, toward the end of December (choose a date)
   your company paid an additional 20% of the total merchandise price in cash to its suppliers.
8. During December (choose a date), your company delivered merchandise and earned
   $___________ sales revenue (provided by your simulation), of which 30% was on credit. The
   cost, to your company, of the merchandise sold, was $___________ (provided by your simulation).
9. On December 28, your company signed a sales contract with a customer, Mini-Soda Company,
   to deliver a total of $5,000 in merchandise on January 7. Your company collected $2,000 cash in
   advance from this customer on December 28.
10. By the end of December (choose a date), your company collected 50% of its accounts
    receivable from various customers from Transaction 8.
    ACCT3311 Intermediate Accounting 1 Instructor: Ms. Olga Frangie
11. By the end of December, your company incurred and paid a total of $___________ (provided
    by your simulation) in cash for its other selling expenses (including advertising, marketing,
    payroll, cart transportation, trailer rental, etc.).
    The following information was also available during December for your company.

• At the end of December, your company incurred monthly interest expense on its debt
  borrowing as described in Transaction 2.
• At the end of December, your prepayment, from Transaction 3, on business licenses and
  permits expired for the month.
• As described in Transaction 4, your company’s PP&E had an estimated life of two years
  with a $300 residual (salvage) value. Your company used the straight-line depreciation
  method.
• At the end of December, your prepayment, from Transaction 5, on insurance expired for
  the month.
• At the end of December, your company estimated 10% of its outstanding accounts
  receivable as possibly uncollectible.
• The income tax rate was 20% for your company. Accrue income tax expense. Taxes would
  be paid in January.
• The beginning balance of all accounts were zero (0) as of December 1, 2022.
• No dividends were declared. Beginning balance of Retained Earnings account is zero (0).
  By the end of December, changes in Retained Earnings account will be at the amount of
  Net Income.
  Tasks:

1. Journalize and post transactions during December;
2. Prepare an unadjusted trial balance at the end of December;
3. Journalize and post adjusting entries. Prepare an adjusted trial balance.
4. Prepare a balance sheet on December 31, 2022. Beginning balance of Retained Earnings
   account is zero (0). By the end of December, changes in Retained Earnings account will be
   at the amount of Net Income.
5. Prepare a multiple-step income statement with basic earnings per share disclosure for the
   year ended December 31, 2022.
6. Prepare a statement of cash flows for the year ended December 31, 2022. Use the indirect
   method to present cash flows from operating activities, assuming that the company
   classifies interest as an operating cash flow.