Accounting 202 Spring 2016Project 3 YOU MAY NOT DISCUSS THIS PROJECT WITH ANYONE (EXCEPT INSTRUCTOR, GA’s AND PARTNER )Instructions: This document contains the instructions and information you will use to complete Project 3. Accompanying this document is an Excel worksheet that contains the template for Project 3 which you will complete and submit as an attachment to this assignment in ecampus. DO NOT CHANGE THE LINES OR SPACINGOF THE SPREADSHEET!!!You may work with a partner on this project, or you may do the project individually. If you work with a partner, both partners must work on all portions of the project. Submit only one Excel file per pair of students. Download the excel file with Project 3 and save to your computer using P3 and the last name of each partner as the file name (for example: P3SmithJones). Be sure that you save the file in .xlsx format. Submit your completed Excel file on eCampus (as detailed above) no later than Thursday, April 28 at 11:59 PM.You decide to earn some money to finance your education by starting a business that designs Web pages. You will begin business on January 1, 2016, and run the business for the next 12 months. On your Excel spreadsheet, calculate the number of budgeted hours you will work for clients during the year by adding the last three digits of your student ID numbers of you and your partner, if working with a partner. If working alone, just use the last three digits of your student ID number. If the sum is less than 500, add 500 to the number. ( If the last three digits of your ID number happen to be 000, use the first three digits of your ID number instead.) This number willbe the expected number of billable hours to be worked in the coming budget year. You are going to prepare a budgeted income statement, cash budget, and budgeted balance sheet for the coming year based on the assumptions listed below.BUDGET ASSUMPTIONS FOR THE COMING YEAR:1. Before the business begins, you will take $5,000 cash from your savings account to invest in the business. Youwill protect yourself by organizing as a corporation, with yourself as the only stockholder.2. Before the business begins, it will buy a computer, printer, and software package that together cost $5,800. Your parents have agreed to lend the business $5,800 cash so that the business can pay for the equipment and software. The business plans to repay your parents on January 31, 2017. Your parents do not expect any interestbut require you to sign a promissory note.The beginning balance sheet for your business is presented on the following page:13. Starting January 1, 2016, the business will charge $50 per hour for design work and bill clients as each job is completed. You expect that by December 31, 2016, the end of the fiscal year, 70% of clients will have paid the business in cash. You expect that the rest will pay by January 31, 2016.4. The business will hire an assistant to help with general office work. The assistant will earn $18 per hour and will work exactly the same hours that you work. The assistant will be paid for each month's work on the fifth day of the month following themonth when the work is done. For the sake of simplicity, treat the assistant as an independent contractorrather than an employee. This means that you do not have to worry about withholding or matching payroll taxes. 2Arachne, Inc.Balance SheetJanuary 1, 2016 AssetsCurrent Assets Cash $5,000Long-term Assets Equipment 5,800 Less Accumulated Depreciation 05,800Total Assets $10,800 Liabilities and Stockholder’s EquityCurrent Liabilities $0Long-term Liabilities Note Payable 5,800Total Liabilities $5,800Stockholder’s Equity Common Stock $5,000 Retained Earnings 0Total Liabilities $5,000Total Liabilities and Stockholder’s Equity $10,800Assume that hours worked in December, 2016 are expected to total 10% (round to nearest whole hour) of the total hours for the year.5. The business will purchase office supplies for cash of $3,000 in January, 20166. On March 1, the business will pay cash of $2,700 for a one-year liability insurance policy.7. Since this is a new business, you think that it is important to advertise. The business will buy $400 of newspaper advertising each month. All payments for advertising costs will be made in the following month. (Forexample, January advertising expense will be paid for in February).8. A dividend of $2,000 will be declared and paid before year end.Record SUMMARY budgeted transactions for the entire year based on the above assumptions in the T-Accounts below. Round all amounts to the nearest whole dollar. The T-Accounts will not be turned in, but should be completed to assist you in completing the budgeted financial statements.Cash Accounts Payable Common Stock Sales 5000 3000 400 5000 4105028735 2700 2000 8335 4400 13300 Wages Expense14778 AccountsReceivable Wages PayableRetainedEarnings12315 1478 16951 InsuranceExpense2250 AdvertisingExpenseOffice Supplies Notes Payable Dividends4800 3000 821 58002000 2179 Supplies Expense821 3PrepaidInsurance2700 2250DepreciationExpense450 1450 Equipment5800 AccumulatedDepreciation 1450 ASSETS = LIABILITIES + STOCKHOLDER’S EQUITYRecord the expected adjusting entries in the T-Accounts for the following:A1) It is expected that the equipment and software will be used for four years, after which time they will be worthless. The business uses the straight-line method of depreciation.A2) It is expected that office supplies will be used up at the rate at the rate of $1.00 per hour worked, with the remaining amount still on hand at year-end.A3) Record the insurance that has been used up during the year.Instructions for Excel Worksheet:Part A: In the Excel spreadsheet, complete the Budgeted Income Statement (you may not need to fill in all lines provided) and questions 1. – 5. (Review Chapter 7 and related notes for assistance.)Part B: Review chapter 9 and your notes from class. In the Excel spreadsheet, complete the Cash Budget (you may not need to fill in all lines provided).Part C: Review Chapter 9 and your notes from class. In the Excel spreadsheet, complete the Budgeted Balance Sheet in good form. Complete questions 1. and 2. in this section.Part D: Review Chapter 7 and 10 and your notes form class. Assume