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Final Project Data

On December 1, 2015 John Trap created a new travel agency, Trap Adventures, Inc. providing exclusive adventure trips. The following transactions occurred during December 2015.

NOTE: There are no beginning balances – this is a new company.

Dec 1 John Trap invested $60,000 cash in the company for common stock.
Dec 2 Purchase office equipment for $17,500 cash.
Dec 2 The company rented furnished office space by paying $18,000 cash for the first six months (December 2015 – May 2016) rent.
Dec 3 The company purchased $1,500 of office supplies on account.
Dec 10 The company paid $3,600 cash for the premium on a 12-month insurance policy.
Dec 14 The company paid $10,750 cash for two weeks' salaries earned by employees.
Dec 24 The company collected $54,000 cash on commissions from airlines on tickets obtained for customers.
Dec 28 The company paid $12,125 cash for two weeks' salaries earned by employees.
Dec 29 The company paid $350 cash for minor repairs to the company's computer.
Dec 30 The company paid $450 cash for this month's telephone bill.
Dec 30 Dividends of $3,000 cash were paid.

PART 2: Answer two of the questions below in 1-2 fully developed paragraphs. A fully developed paragraph should have a major point with 3-5 support sentences. 1-2 sentences is not acceptable or does not discuss the question.

1. Trap Adventures, Inc. is looking for an accountant. In your own words, explain to Trap’s hiring team the role of accountant and accounting within business.
      a. Provide examples of the expectations of the accountant.

2. Discuss the financial position of Trap Adventures, Inc. using the following ratios:
      a. Current ratio
      b. Return on equity: For each ratio, provide the calculation and an explanation of the meaning. Is this a positive or negative result for the Trap Adventures, Inc.?

3. Using Trap Adventures, Inc.’s income statement, evaluate the operations for the month of December. Complete a common-size income statement using sales as the base number.
      a. What is the largest percentage?
      b. What is the smallest percentage?
      c. What recommendations could be made to increase Trap’s net income?

4. Currently, Trap Adventures, Inc. does not own any loans or bank notes (long-term liabilities). What would happen if Trap decides to obtain a bank loan for $25,000 to fund daily operations?
      a. How would this transaction impact the financial statements – which accounts would be affected?
      b. What is the debt to equity ratio?
      c. What does the debt to equity ratio represent?

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