Problem P2-42 continues with the company introduced in Chapter 1, Canyon Canoe Company. Here you will account for Canyon Canoe Company's transactions as it is actually done in practice. Begin by reviewing the transactions from Chapter 1.
The transactions have been reprinted below.
Nov. 1 Received $16,000 cash to begin the company and issued common stock to Amber and Zach.
2 Signed a lease for a building and paid $1,200 for the first month's rent.
3 Purchased canoes for $4,800 on account.
4 Purchased office supplies on account, $750.
7 Earned $1,400 cash for rental of canoes.
13 Paid $1,500 cash for wages.
15 Paid $50 dividends to stockholders.
16 Received a bill for $150 for utilities. (Use separate payable account.)
20 Received a bill for $175 for cell phone expenses. (Use separate payable account.)
22 Rented canoes to Early Start Daycare on account, $3,000.
26 Paid $1,000 on account related to the November 3 purchase.
28 Received $750 from Early Start Daycare for canoe rental on November 22.
30 Paid $100 dividends to stockholders.
In addition, Canyon Canoe Company completed the following transactions for December.
Dec. 1 Amber and Zack contributed land on the river (worth $85,000) and a small building to use as a rental office (worth $35,000) in exchange for common stock.
1 Prepaid $3,000 for three months' rent on the warehouse where the company stores the canoes.
2 Purchased canoes signing a note payable for $7,200
4 Purchased office supplies on account for $500.
9 Received $4,500 cash for canoe rentals to customers.
15 Rented canoes to customers for $3,500, but will be paid next month.
16 Received a $750 deposit from a canoe rental group that will use the canoes next month.
18 Paid the utilities and telephone bills from last month.
19 Paid various accounts payable, $2,000.
20 Received bills for the telephone ($325) and utilities ($295) which will be paid later.
31 Paid wages of $1,800.
31 Paid cash dividend to stockholders, $300.
Requirements
1. Journalize the transactions for both November and December, using the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Rent; Land; Building; Canoes; Accounts Payable; Utilities Payable; Telephone Payable; Unearned Revenue; Notes Payable; Common Stock; Dividends; Canoe Rental Revenue; Rent Expense; Utilities Expense; Wages Expense; and Telephone Expense. Explanations are not required.
2. Open a T-account for each of the accounts.
3. Post the journal entries to the T-accounts, and calculate account balances. Formal posting references are not required.
4. Prepare a trial balance as of December 31, 2018.
5. Prepare the income statement of Canyon Canoe Company for the two months ended December 31, 2018.
6. Prepare the statement of retained earnings for the two months ended December 31, 2018.
7. Prepare the balance sheet as of December 31, 2018.
8. Calculate the debt ratio for Canyon Canoe Company at December 31, 2018.