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Accounts Case Study 3-3

Peter Hynes created an improved paint sprayer and incorporated Dispensers of California with $200,000 in capital from investors. In its first year of operations, the company had $5,98,500 in sales and $84,000 in profit before interest, depreciation, and taxes. Expenses included $85,000 for equipment, $25,000 for labor and development, $2,12,100 for component purchases, and $3,17,500 total for manufacturing, selling, administration and other costs.

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6K views10 pages

Accounts Case Study 3-3

Peter Hynes created an improved paint sprayer and incorporated Dispensers of California with $200,000 in capital from investors. In its first year of operations, the company had $5,98,500 in sales and $84,000 in profit before interest, depreciation, and taxes. Expenses included $85,000 for equipment, $25,000 for labor and development, $2,12,100 for component purchases, and $3,17,500 total for manufacturing, selling, administration and other costs.

Uploaded by

monudinu
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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ACCOUNTS CASE STUDY 3-3

DISPENSERS
OF CALIFORNIA,Inc.

PREPARED BY:
ANKIT AGRAWAL
VINAY SHARMA
CASE STUDY: DISPENSERS OF CALIFORNIA,
INC.
 Peter Hynes created new improved model of
commercial paint spray.
 His friends offered to invest capital of $2,00,000.

 The incorporation cost being $ 2,500

 Equipment costs $85,000

 Labor & development cost $25,000

 Component part purchases $2,12,100

 Short term loan $30,000 with repayment $500


interest at end of year.
 Manufacturing payroll costs $1,45,000
 Other Mfg. costs $62,000

 Selling & admin. expenses cost $63,000

 Inventory costs $15,100

 Sales in cash $5,98,500

 Depreciation cost$8,500

 Cash dividends $5,000

 Income tax expenses $22,500


INCOME STATEMENT
F OR THE YEAR ENDING 31 ST MARCH 2010

PARTICULARS AMT. ($) TOTAL


SALES 5,98,500
Cost of goods sold
PURCHASES $2,12,100
(-)CLOSING STOCK $ 15,100 1,97,000 4,01,500
GROSS PROFIT ON SALES 4,01,500
(-) OPERATING EXPENSES
INCORPORATION COST 2,500
MFG. PAYROLL 1,45,000
OTHER MFG.EXPENSES 62,000
SELLING &ADMIN.COST 63,000
LABOR & DEVELOPMENT/REDISIGN 25,000
COST
PATENTS 20,000 (3,17500)
TOTAL EXPENSES 3,17,500
Profit before Int,Dep. &Tax 84,000
INTEREST 500
DEPRECIATION 8,500 (31,500)
TAX 22,500
BALANCE SHEET
FOR THE YEAR ENDED 31ST MARCH ,2010

LIABILITIES AMT ($) ASSETS AMT($)


OWNER’S FUND EQUIPMENT 85,000 76,500
Less: Dep. 8,500
SH.CAPITAL HYNES- $ 1,20,000 2,00,000 Inventory 15,100
OTHERS- $ 80,000
Retained earnings 47,500 Patent 20,000
Net income $ 52,500
(-) dividend $ 5,000
Income tax payable 22,500 Cash 1,74,800
Bank 30,000
SHORT TERM LOAN 30,000 (16400)
TOTAL 3,00,000 TOTAL 3,00,000
JOURNAL ENTRIES FOR DISPENSERS OF CLIFORNIA ,INC
 CASH A/C DR. 2,00,000
TO, CAPITAL A/C 2,00,000
(BEING CAPITAL INTRODUCED TO START A NEW CORPORATION)

 PRELIMINARY EXPENSES A/C DR. 2500


TO, CASH A/C 2500
(BEING INCORPORATION COST USED)

 EQUIPMENTS A/C DR. 85000


TO,CASH A/C 85000
(BEING EQUIPMENT PURCHASED )
 WAGES A/C DR. 25,000
TO,CASH A/C 25,000
(BEING WAGES PAID TO LABOUR)

 PURCHASE A/C DR. 2,12,100


TO, CASH A/C 2,12,100
(BEING COMPONENT PART PURCHASED)

 BANK A/C DR. 30,000


TO,LOAN A/C 30,000
(BEING SHORT TERM LOAN TAKEN FROM BANK)

 SALARIES A/C DR. 1,45,000


TO,CASH A/C 1,45,000
(BEING MANF. PAYOLL PAID)
 MANUFACTURING COST A/C DR. 62,000
TO, CASH A/C 62,000
(BEING OTHER MFG. COST INCURRED)

 SELLING EXPENSES A/C DR. 63,000


TO, CASH A/C 63,000
(BEING SELLING AND ADMIN.COST INCURRED )

 MISCELLANEOUS EXPENSES A/C DR.15,100


TO,CASH A/C 15,100
(BEING ENDING COMPONENTS COSTS INCURRED)

 CASH A/C DR. 5,98,500


TO, SALES A/C 5,98,500
(BEING CASH RECEIVED ON SALES)
 DEPRECIATION A/C DR. 8,500
TO, CASH A/C 8,500
(BEING DEP. CHARGED)

 DIVIDEND A/C DR. 5,000


TO, CASH A/C 5,000
(BEING DIVIDEND PAID)

 INTEREST A/C DR. 500


TO, CASH A/C 500
(BEING CASH PAID FOR INTEREST)
LEDGER ACCOUNTS
CASH A/C
Particulars Amt($) Particulars Amt($)
To, Capital A/c 2,00,000 By,Prel. expenses 2,500
To, Sales 5,98,500 By, Equipment 85,000
By, Wages 25,000
By, Purchase 2,12,100
By, Salary 1,45,000
By,Mfg. Cost 62,000
By, Selling expenses 63,000
By,Misc. Expenses 15,100
By, Depreciation 8,500
ByDividend 5,000
By, Interest 500

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