Problem 1

Journal Entry: Dr Cr
1. Cash 1,500,000
OSC 1,125,000
OSPremium 375,000
2. PPE 2,475,000
A/P 2,475,000
3. Cash 1,105,000
A/R 5,145,000
Sales 6,250,000
4. Cash 175,000
Unearned Revenue 175,000
5. A/P 3,325,000
Cash 3,325,000
6. Cash 5,100,000
A/R 5,100,000
7. Supplies 30,000
Cash 30,000
8. Prepaid Adv. 42,500
Cash 42,500
9. Salaries Expense 2,250,000
Cash 2,250,000
10. Utilities Expense 32,500
Cash 32,500
11. Retained Earnings 375,000
Cash 375,000
Adjustment:

1. Salaries Expense 37,500

Salaries Payable 37,500
2. Supplies Expense 50,000
Supplies 50,000
3. Rent Expense 600,0000
Prepaid Rent 600,0000
4. Advertising Exp 32,500
Prepaid Advertising 32,500
5. Utilities Expense 7,500
Utilities Payable 7,500

Cash 2,700,000
Accounts Receivable 895,000
Prepaid Advertising 10,000
Property, Plant and Equipment 3,915,000
Supplies 40,000
Prepaid Building Rental 600,000
Accounts Payable 50,000
Unearned Revenue 175,000
Salaries Payable 37,500
Utilities Payable 7,500
Sales 6,250,000
Advertising Exp 32,500
Rent Expense 600,000
Salaries Expense 2,287,500
Utilities Expense 40,000
Supplies Expense 50,000
Ordinary Share Capital (3,600 shares outstanding) 3,825,000
Premium 375,000
Retained Earnings 450,000
11,170,000 11,170,000

HEAVEN SPORTS CORPORATION

Statement of Profit or Loss
for the Year Ended December 31, 2020

Sales revenue 6,250,000

Operating expenses:
Advertising Exp (32,500)
Rent Expense (600,000)
Salaries Expense (2,287,500)
Utilities Expense (40,000)
Supplies Expense (50,000)
Total operating expenses (3,010,000
Operating profit 3,240,000
Income tax expense (972,000)
Net Income 2,268,000

HEAVEN SPORTS CORPORATION

Statement of Changes in Equity
 for the Year Ended December 31, 2020

Shared Capital Paid-In Capital in Retained Total

Excess of Par Earnings

Capital Beginning, January 1 2,700,000 825,000 3,5

Issued Share Capital 1,125,00 375,000 1,5
Distribution of Cash Dividend (375,000) (375
Net Income 2,268,000 2,2
Capital Ending, December 31 3,825,000 375,000 2,718,000 6,9

HEAVEN SPORTS CORPORATION

Statement of Financial Position
as of December 31, 2020
Assets
Current assets:
Cash 2,700,000
Accounts Receivable 895,000
Prepaid Advertising 10,000
Prepaid Building Rental 600,000
Supplies 40,000
Total current assets 4,245,000
Noncurrent Assets:
Property, plant, and equipment 3,915,000
Total Noncurrent assets 3,915,000
Total assets 8,160,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts Payable 50,000
Unearned Revenue 175,000
Salaries Payable 37,500
Utilities Payable 7,500
Income Tax Payable 972,000
Total liabilities 1,242,000
Shareholders’ equity:
Ordinary share capital 3,825,000
Paid In Capital in Excess of Par 375,000
Retained earnings 2,718,000
Total shareholders’ equity 6,918,000
Total liabilities and shareholders’ equity 8,160,000

HEAVEN SPORTS CORPORATION

 Statement of Cash Flows
for the Year Ended December 31, 2020

Cash Flow from Operating Activities:

Net Profit 2,268,000
Changes in Assets and Liabilities:
Increase in Accounts Receivable (45,000)
Decrease in Supplies 20,000
Increase in Prepaid Advertising (10,000)
Decrease in Prepaid Building Rental 600,000
Decrease in Accounts Payable (850,000)
Increase in Unearned Revenue 175,000
Increase in Salaries Payable 37,500
Increase in Utilities Payable 7,500
Increase in Income Tax Payable 972,000
Net Cash Flow from Operating Activities 3,175,000

Cash Flow from Investing Activities:

Acquisition of transportation Equipment (2,475,000)
Net Cash Flow from Investing Activities (2,475,000)

Cash Flow from Financing Activities:

Proceeds from issuance of Ordinary Share Capital 1,500,000
Payment of Cash Dividends (375,000)
Net Cash Flow from Financing Activities 1,125,000

Net Increase in Cash 1,825,000

Cash Balance, January 1 875,000
Cash Balance, December 31 2,700,000