Comprehensive 2

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You have been hired as the staff accountant for Johnstone Company. Johnstone Company is in their second year of business and has dramatically increased its business activities. In addition, the company is applying for a loan and is required to prepare and submit financial statements and financial
ratios to their bank in order to obtain financing. They previously had a bookkeeper who recorded all of the company’s activities up through November (the information is posted correctly in the T-accounts that follow).

On the following tabs you will find the information you need to complete your assignment:
chart of accounts, opening trial balance, transactions, T-accounts, December 31 bank statement.

Your assignment is:
1) For each of the December business transactions listed:
a) prepare journal entries
b) post the journal entries to the T-accounts

2) Prepare a Trial Balance as of 12/31/11

3) For each of the 12/31/11 adjusting entry transactions listed:
a) prepare adjusting journal entries
b) post the adjusting journal entries to the T-accounts

4) Prepare the December Bank Reconciliation
a) prepare adjusting journal entry
b) post the adjusting journal entry to the T-accounts

5) Prepare an Adjusted Trial Balance as of 12/31/11

6) Prepare the following Financial Statements for the year 2011
a) Income Statement
b) Retained Earnings Statement
c) Balance Sheet
d) Cash Flows Statement

7) Prepare closing entries as of 12/31/11 & post to T-accounts

8) Prepare a post-closing trial balance as of 12/31/11

9) Calculate the following Financial Ratios for 2011 & write a short explanation for what each ratio means
& what the company’s results show. (The bank manager is not very good with financial ratios).
a) Current Ratio
b) Accounts Receivable Turnover
c) Days to Collect
d) Inventory Turnover
e) Days to Sell
f) Return on Assets
g) Debt to Assets
h) Times Interest Earned
i) Gross Profit Percentage
j) Profit Margin
k) Return on Equity
l) Earnings per Share