Vanishing Games Corporation VGC operates a massively

multiplayer online game #2703

Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging
players a monthly subscription of $15. At the start of 2013, VGC's income statement accounts
had zero balances and its balance sheet account balances were as
follows:Cash........................... $1,500,000 .........Accounts Payable.......... $ 108,000Accounts
Receivable............ 150,000......... Unearned Revenue............ 73,500Supplies.............................
14,700 ..Notes Payable (due 2016)............ 60,000Equipment........................ 874,500.........
Contributed Capital......... 2,500,000Land............................. 1,200,000.......... Retained
Earnings......... 1,419,700Building........................... 422,000In addition to the above accounts,
VGC's chart of accounts includes the following: Subscription Revenue, Licensing Revenue,
Wages Expense, Advertising Expense, and Utilities Expense.Required:1. Analyze the effect of
the January 2013 transactions (shown below) on the accounting equation, using the format
shown in this chapter's Demonstration Case B.a. Received $50,000 cash from customers for
subscriptions that had already been earned in 2012.b. Received $25,000 cash from Electronic
Arts, Inc., for licensing revenue earned in themonth of January 2013.c. Purchased 10 new
computer servers for $33,500; paid $10,000 cash and signed a three year note for the
remainder owed.d. Paid $10,000 for an Internet advertisement run on Yahoo! in January
2013.e. Sold 15,000 monthly subscriptions at $15 each for services provided during the month
of January 2013. Half was collected in cash and half was sold on account.f. Received an
electric and gas utility bill for $5,350 for January 2013 utility services. The bill will be paid in
February.g. Paid $378,000 in wages to employees for work done in January 2013.h. Purchased
$3,000 of supplies on account.i. Paid $3,000 cash to the supplier in (h).2. Prepare journal
entries for the January 2013 transactions listed in requirement 1, using the letter of each
transaction as a reference.3. Create T-accounts, enter the beginning balances shown above,
post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-
accounts.4. Prepare an unadjusted trial balance as of January 31, 2013.5. Prepare an Income
Statement for the month ended January 31, 2013, using unadjusted balances from requirement
4.6. Prepare a Statement of Retained Earnings for the month ended January 31, 2013, using
the beginning balance given above and the net income from requirement 5. Assume VGC has
no dividends.7. Prepare a classified Balance Sheet at January 31, 2013, using your response to
requirement 6.8. Why does the income statement total not equal the change in cash?View
Solution:
Vanishing Games Corporation VGC operates a massively multiplayer online game

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