Project Assignment
This project may be completed individually or as a team. Team submissions should have names of all group members clearly identified on the project. Projects must be completed by Monday April
18 th at 4:00pm
Formalite Company completed these transactions during December 2004. NOTE: Terms of all credit sales are 2/10, n/30.
Assume opening balances as follows: Cash $10,000, Merchandise Inventory $38,000, Truck,
$12,000, Accumulated Amortization Truck, $10,000, Capital $50,000 and Allowance for Doubtful
Accounts $0.
Dec. 1 Purchased office equipment on account from Jett Supply, invoice dated December 1, terms n/10, EOM, $5,062.
1
Formalite estimates that $2,450 of it’s accounts receivables will become uncollectible in the future and records the necessary adjustment.
1 Bought a $2,400 two-year insurance policy for cash (cheque #136). The policy came into effect today.
1 Borrowed $56,000 by giving Jefferson Bank a long-term note payable at an annual interest rate of 6%. Principle is due in two-years and interest is payable at the first of each month.
1 Paid rent of $1000 (#137) consisting of one month’s deposit on new office space and one month for the current rent.
4 Received merchandise and an invoice dated December 3, terms 2/10, n/30, from Defore
Industries, $11,400.
5 Purchased store supplies on credit from Arnot Company, $1,020. Invoice dated
December 5, terms n/10 EOM.
5 Paid $200 (#138) freight on the December 4 th purchase.
5 Paid $400 (#139) for new tires for our truck.
6 Purchased merchandise for $2,500 cash (#140)
8 Sold merchandise on credit to Hazard Inc. for $6,350. Cost of this merchandise was
$4,500. Note terms above.
10 Sold merchandise on credit to Sam Segura for $12,500. Cost of this merchandise was
$8,000.
10 Paid $50 (#141) freight on the Sam Segura sale.
10 Purchased an automobile for sales manager for $15,000. Paid $5,000 in cash (#142) and financed the remainder at 10%. The expected life of the car is six years with a salvage value of $3,000.
11 Received merchandise and an invoice dated December 10, terms 2/10, n/30, from The
Welch Company, $2,887.
11 Received a $4,000 cash deposit from Tom Moore for consulting services to be provided in the future.

12 Sent Defore Industries payment of its December 3 rd invoice less the discount.
12 Received refund from supplier for returned merchandise on December 6 th cash purchase, $450.
15 Accepted a $6,000 three-month 8% note from Conquest Corp. in settlement of a pastdue balance of account. Interest is due at maturity.
15 Paid sales salaries for the first half of the month, $8,435.
15 Cash sales for the first half of the month were $17,170. (Normally, cash sales are recorded daily; however, they are recorded only twice in this problem to reduce the number of repetitive entries.) Cost of the merchandise sold was $12,000.
15 Sold merchandise on credit to Marjorie Cobb, $4,250. Cost of this merchandise was
$3,000.
16 Made cash refunds to customers for returned merchandise, $220. The returned merchandise had a cost of $105 and was restored to inventory.
16 Purchased office supplies on credit from Arnot Company, $559. Invoice dated December
16, terms n/10 EOM.
17 Paid $250 (#143) for weekend advertisement in local paper.
17 Received a credit memorandum from The Welch Company for unsatisfactory merchandise received on December 11 and returned for credit, $487.
18 Accepted Hazard Inc’s $6,350, three-month 8% note in settlement of account. Interest is due at maturity.
19 Received payment from Sam Segura for the December 10 sale less the discount.
19 Paid The Welch Company in payment of its invoice of December 10 less the return and the discount. (#144)
20 Provided consulting services to customer for $3,000 in cash.
22 Sold merchandise on credit to Sam Segura, $2,595. Cost of this merchandise was
$1700.
24 Sold merchandise on credit to Marjorie Cobb, $3,240. Cost of this merchandise was
$2,500.
25 Received payment from Marjorie Cobb for the sale of December 15 less the discount.
26 Received a credit memorandum from Jett Supply for office equipment received on
December 1 and returned for credit, $922.
30 Paid sales salaries for the last half of the month, $8,435 (#144).
30 Cash sales for the last half of the month were $25,703. Cost of the merchandise sold was $18,000.
30 Made credit card sales (service fee, 2%) totalling $4,500 in December. Cost of the merchandise was $3,100.
30 Paid utilities bill for December, $225 (#145).
30 Hazard Inc’s note was dishonoured. Hazard is bankrupt and future payment is not expected.
30 Retired the company truck. There is unrecorded amortization of $400. The truck was sold for $250 scrap.

Required:
1. Prepare opening T accounts
2. Journalize the above transactions
3. Post all transactions into your T accounts - create and open new accounts as required.
4. Prepare a trial balance.
5. Journalize the following adjusting entries
 accrue interest revenue on all notes receivables
 accrue car interest expense as well as bank note interest
 account for the expired portion of the insurance policy
 amortize our car using the straight-line method
 a physical count of office supplies reveals that $125 of supplies are still on hand
 we expect to pay $1,800 in income taxes for the month of December
 have completed half of the work contracted by Tom Moore
 other consulting fees earned but not received amount to $4,800
6. Prepare an adjusted trial balance.
7. Prepare a multiple-step statement of earnings for the month of December.
8. Calculate the gross profit margin and profit margin.
9. Journalize closing entries and complete the closing process.
10. Prepare a post-closing trial balance as of December 31 st .
11. Prepare a classified balance sheet as of December 31 st .
12. Finally, comment on Formalite in terms of its liquidity and solvency.