Fishy
Farm
Fishy Farm is a small enterprise positioned in
the mountains of southwestern Virginia.
The enterprise is definitely a business fish hatchery devoted to elevating
the best freshwater sport fish within the space together with trout, bass and
perch. The realm has an abundance of
contemporary water clear mountain streams, which offer the pure useful resource for fish
breading and elevating.
JB Nathan is the founder and proprietor of Fishy
Farm. An avid fisherman himself, JB has
all the time had an curiosity in the sort of enterprise. He was capable of buy land and convert it
right into a fish hatchery by constructing breeding and holding fish tanks close to a number of
mountain streams which flowed by means of his property. Formally, JB labored for a state fish hatchery
about 50 miles to the north in Possum Creek, and used this palms on expertise
to start out his personal enterprise.
JB employed an impartial accountant to maintain
his information for the previous couple of years, however felt, identical to elevating fish, he might
discover ways to do the bookkeeping actions on his personal. Earlier than taking up this extra obligation, he
wished to follow recording a number of accounting actions associated to the
firm and decide if he might develop the suitable monetary
statements. He determined to start with the
stability sheet that was ready for him as of the shut of enterprise on December
31, 20×0. He was going to evaluation all of
the actions which came about throughout the month of January 20×1 and see if he
might develop an accurate revenue assertion for the month and a brand new stability sheet
as of January 31, 20×1. This was
in all probability a great month to experiment with the accounting course of, as a result of
enterprise was gradual throughout the colder winter months. He wished to make sure he was snug with
the accounting course of earlier than issues started to get actual busy with fish breeding
within the spring.
Throughout January he bought a brand new water
filtration system which can clear and aerate the water within the holding tanks
and make it appropriate for recycling. The
brisker water ought to promote higher circumstances for sooner fish development and permit
JB to promote bigger fish extra rapidly. The
gear value $16,000 and he paid 10% down and signed an eight% 5-year observe for
the stability due. He was additionally capable of
promote a used pump to a neighbor for its e book worth of $350.
JB works alone on Fishy Farm though
typically work will get busy within the spring and summer season months. When obligatory he will get his spouse or neighbors
to assist him with shifting gear or stocking fish tanks. He pays himself a wage out of the enterprise
and feels he earns sufficient to make a cushty dwelling. He won’t ever go hungry; it’s not many
companies the place the proprietor can eat the stock. JB has a skillet and filet knife proper subsequent
to his workplace desk.
The next exhibit is the stability sheet
for Fishy Farm.
Fishy Farm
Steadiness Sheet
December 31, 20×0
Merchandise
Whole
Property
Present
Property
Money
$ 10,500
Accounts
Receivable
2,200
Provides
four,000
Stock
24,600
Pay as you go Bills
1,800
Whole
Present Property
$ 43,100
Lengthy
Time period Property
Land
$ 52,000
Automobile (internet)
eight,400
Constructing (internet)
140,000
Fish Tanks (internet)
75,000
Gear (internet)
43,500
Whole
Lengthy Time period Property
$318,900
Whole
Property
$362,000
Liabilities
and Fairness
Present
Liabilities
Accounts Payable
$17,200
Notes Payable (
7.2% Line of Credit score)
6,500
Unearned Income
1,000
Whole
Present Liabilities
$ 24,700
Lengthy-Time period
Liabilities
Notes Payable
115,000
Mortgage Payable
137,000
Whole
Lengthy-Time period Liabilities
252,000
Fairness
Capital
Inventory
75,000
Retained
Earnings
10,300
Whole
Fairness
85,300
Whole
Liabilities and Fairness
$362,000
Three years in the past JB invested $75,000 within the
enterprise from financial savings he had constructed up over his final 10 years of labor. He has all the time maintained a really disciplined
life fashion and tried to avoid wasting his cash so he might attain his objective of proudly owning his
personal enterprise. He’s happier being in a
enterprise he enjoys versus having some huge cash. He additionally likes to work outside and be capable to
set his personal schedule. When he arrange his
enterprise, since he was born and raised within the space, he was capable of get good
offers on the land and different property that he bought. JB additionally has had long run relations with the
bankers they usually gave him favorable charges on loans within the buy of the land,
buildings and gear.
JB stored an inventory of actions the enterprise
was concerned in throughout the month of January.
JB wrote checks for the next
actions:
·
Labor and wage $three,550
·
Utility invoice from December $440
·
Phone
$80
·
Ralston Meals Provider (for a cost of a
invoice on fish meals) $1,380
·
Insurance coverage $300
·
Property Taxes $250
·
Eggs of all Varieties (for buy of fish
eggs and small fish for stock functions from a regional provider) $three,300
·
Cost of $1,000 on the long-term observe
payable with $800 going to curiosity on the mortgage.
·
Cost of $1,500 on the mortgage with $300
towards the precept stability.
JB obtained money for the next
actions:
·
Sale of 20,000 fish to the state of
Virginia for$14,250. The price of these
fish to JB had been $6,800.
·
Cost from Frank’s Fishing Pond for a
sale from final 12 months within the quantity of $1,200.
The price of these fish bought had been $500.
·
Cost of $700 from Premier Sport Fish as
an advance cost for the sale of 300 of one of the best bass fish in March. These fish will value JB $250 to lift.
Another actions JB was conscious of
throughout the month had been:
·
Depreciation on the car was $100, on
the constructing was $750, on the fish tanks was $900 and the gear was $500.
·
$150 of pay as you go promoting was used up.
·
A complicated fish sale of $600 was accomplished with the price of these
fish equaling $200.
·
Acquired January utility invoice of $520
·
Sale of 6,000 fish on account to the state
of West Virginia for $5,000. The price of
these fish to JB had been $2,000.
·
Bought on account from Sport Fish
Breeders 10,000 child bass for $1,400.
Word: For enterprise functions use an revenue
tax fee of 40%.
Required:
1. Develop
journal entries for the entire accounting transactions in January for Fishy
Farm.
2. Create
an revenue assertion for the month of January for Fishy Farm.
three. Reconstruct
the stability sheet for Fishy Farm as of January 31, 20×1.
four. Determine
and focus on points that JB needs to be involved about concerning taking up the
accounting perform of the enterprise.
5. If
you had been a banker, would you lend cash to Fishy Farm? Why or why not?
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