Question & Answer: The general ledger of Ziper storage Solution at December 22, 2017 is provided. Zips Storage uses a perpetual inventory syste…..

The general ledger of Ziper storage Solution at December 22, 2017 is provided. Zips Storage uses a perpetual inventory system.

Trial balance:

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	Debit	Credit
Cash	39,970
Accounts Receivvable	27,900
Allowance for Uncollectible Account	100
Supplies	6000
Prepaid Insurance	12,000
Inventory	83,230
Equipment	36,000
Accumlated Depreciation		80,000
Accounts Payable		6,700
Notes Payable		10,000
Interest Payable
Common stock		100,000
Retained Earning		17,200
Dividends	2,000
Sales		1,009,300
Cost of goods Sold	803,000
Salaries Expense	100,000
Bad Debt Expense
Depreciation Expense, Equipment
Supplies Expense
Insurance Expense
Interest Expense
Operation Expense	36,000
Income Tax Expense	5,000
	1,151,200	1,151,200
Net Income (Loss)

The follwing are the balance of the transaction for the month of Decenber:

December 22 Purcased inventory for $14,100 on account, terms 2/10, N/30.

December 24 Returned $600 of inventory purchased 12/22 due to a problem with the order.

December 27 Paid for the inventory purchased on 12/22.

December 28 Sold 600 storage bins at a price of $6 each with a cost of $5 per bin.

December 30 Wrote-off an account for a customer who declared bankruptcy, $1,100.

Required:

1. Record each of the summary transaction listed above. (GOT IT)

2. Post the transactions to the accounts. (GOT IT)

3. Complete the worksheet. Insurance expired during the year is $5,000. Supplies remaining on hand at the end of the year equal $2,000. Depreciation on the equipment of $2,000. Zips Storage Solution estimates the percentage of uncollectible account to be 30% of the receivables. The note payable is 6%, 2-year note dated 6/1/2016.

4. Journalize the necessary adjucting entries.

5. Post the adjusting entries.

6. Complete the income statement, statement of stockholder’s equity and classified balance sheet as of December 32, 2018.

7. Record the closing entries.

8. Post the closing entries.

9. Complete a post-closing trial balance.

Expert Answer

4. Adjusting entries :

	Account Titles	Debit	Credit
December 31, 2017		$	$
a.	Insurance Expense	5,000
	Prepaid Insurance		5,000
b.	Supplies Expense	4,000
	Supplies		4,000
c.	Depreciation Expense – Equipment	2,000
	Accumulated Depreciation – Equipment		2,000
d.	Bad Debt Expense	10,320
	Allowance for Uncollectible Accounts		10,320
e.	Interest Expense	600
	Interest Payable		600

Adjusted Trial Balance

December 31, 2017

Account Titles	Debit	Credit
	$	$
Cash	26,740
Accounts Receivable	30,400
Allowance for Uncollectble Accounts		9,120
Supplies	2,000
Prepaid Insurance	7,000
Inventory	93,460
Equipment	36,000
Accumulated Depreciation – Equipment		10,000
Accounts Payable		6,700
Notes Payable		10,000
Interest Payable		600
Common Stock		100,000
Retained Earnings		17,200
Dividends	2,000
Sales		1,012,900
Cost of Goods Sold	806,000
Salaries Expense	100,000
Bad Debt Expense	10,320
Depreciation Expense – Equipment	2,000
Supplies Expense	4,000
Insurance Expense	5,000
Interest Expense	600
Other Operating Expense	36,000
Income Tax Expense	5,000
Totals	1,166,520	1,166,520

6. Income Statement

For the year ended December 31, 2017:

	$	$
Sales		1,012,900
Cost of Goods Sold		806,000
Gross Margin		206,900
Operating Expenses
Salaries Expense	100,000
Bad Debt Expense	10,320
Depreciation Expense	2,000
Supplies Expense	4,000
Insurance Expense	5,000
Other Operating Expenses	36,000
Total Operating Expenses		157,320
Income from Operations		49,580
Interest Expense		600
Income before Taxes		48,980
Income Tax Expense		5,000
Net Income		43,980

Statement of Retained Earnings

For the year ended December 31, 2017

	$
Balance, December 31, 2016	17,200
Net Income for the period	43,980
Dividends	(2,000)
Balance, December 31, 2017	59,180

Balance Sheet

December 31, 2017

Assets	$	$
Cash	26,740
Accounts Receivable, net	21,280
Inventory	93,460
Supplies	2,000
Prepaid Insurance	7,000
Total Current Assets		150,480
Equipment, net		26,000
Total Assets		176,480
Liabilities and Stockholders’ Equity
Accounts Payable	6,700
Interest Payable	600
Note Payable	10,000
Total Current Liabilities		17,300
Long Term Liabilities		0
Total Liabilities		17,300
Stockholders’ Equity
Common Stock	100,000
Retained Earnings	59,180
Total Stockholders’ Equity		159,180
Total Liabilities and Stockholders’ Equity		176,480

7. Closing Entries:

	Account Titles	Debit	Credit
December 31, 2017		$	$
1.	Sales	1,012,900
	Income Summary		1,012,900
2.	Income Summary	968,920
	Cost of Goods Sold		806,000
	Salaries Expense		100,000
	Bad Debt Expense		10,320
	Supplies Expense		4,000
	Depreciation Expense		2,000
	Insurance Expense		5,000
	Other Operating Expense		36,000
	Interest Expense		600
	Income Tax Expense		5,000
3.	Income Summary	43,980
	Retained Earnings		43,980
4.	Retained Earnings	2,000
	Dividends		2,000

9. Post Closing Trial Balance

December 31, 2017

Account Titles	Debit	Credit
	$	$
Cash	26,740
Accounts Receivable	30,400
Allowance for Uncollectble Accounts		9,120
Supplies	2,000
Prepaid Insurance	7,000
Inventory	93,460
Equipment	36,000
Accumulated Depreciation – Equipment		10,000
Accounts Payable		6,700
Interest Payable		600
Notes Payable		10,000
Common Stock		100,000
Retained Earnings		59,180

Totals	195,600	195,600

Accounts Receivable :

Item	Debit	Credit	Balance
Beginning balance	27,900
Sales ( 600 x $ 6)	3,600		31,500
Allowance for Uncollectible Account		1,100	30,400

Allowance for Uncollectible Account :

Item	Debit	Credit	Balance
Beginning balance			(100)
Accounts Receivable	1,100		(1,200)
Bad Debt Expense		10,320	9,120 ( $ 30,400 x 30%)

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