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This gives a company’s starting balance sheet, and lists 18 transactions.
Required:
Prepare journal entries for the 18 transactions.
Prepare a trial balance showing what the ending ledger balances would be after the 18 transactions.
Prepare an income statement for the year.
Prepare a statement of stockholders’ equity for the year
Prepare a balance sheet at the end of the year 2016.
East Company
January 1, 2016,
Balance Sheet
Cash 20,000
Accounts receivable 110,000
Less: Allowance for doubtful accounts (10,000)
Inventory (500 units @ $20 each) 10,000
Equipment 9,000
Less: Accumulated depreciation ( 2,000)
—————–
Total assets 137,000
Accounts payable 20,000
Long-term notes payable (5% interest, due in 2019) 100,000
Capital stock 10,000
Retained earnings 7,000
——————-
137,000
Transactions or events:
The company collected 98,000 of the accounts receivable in cash.
The company wrote off one $1,000 accounts receivable from J. Jones
On Jan. 1, the company bought a car for $30,000.
The company paid 19,000 of its accounts payable in cash.
The company bought 900 units of inventory for $21 each in cash.
The company bought a 1 year insurance policy for $2400 on October 1.
The company paid rent for the months January through December of $18,000
On July 1, the company bought rights to a patent for $20,000. The patent has ten more years of useful life.
On Dec 31, the company paid rent for Jan. 2017 for $1,500.
On Dec. 1, the company bought another 200 units of inventory for $22 on account.
On Dec. 15, the company sold 1,300 units for $30 each. 1000 were sold for cash, and 300 on account.[The company accounts for its inventory on the FIFO basis, so the first items bought are assumed to be the first ones sold.]
The company decided to record bad debt expense of $1,000.
The company recorded depreciation on the equipment. The equipment is one year old. It had a cost of $9,000, salvage value of $1,000, and an expected useful life of 4 years.
The company recorded depreciation on the car, using the straight line method, assuming it had a five year life, and salvage value of $6,000.
The company made the appropriate adjustment to reflect the fact the insurance policy only had nine more months left of effectiveness.
The company accrued the interest that had been built up on the long-term notes. The money had been borrowed on January 1, 2016. No payments of interest or principal were due until some time in 2017.
The company made the appropriate entry to record amortization on the patent on December 31.
On December 1, the company paid dividends of $1,000 to its shareholders.
thank you
Expert Answer
In the books of East Company
Journal Entries
- Cash 98000
Accounts receivable 98000
2.Allowance for Doubtful Accounts 1000
Account Receivable 1000
3.Vehicles 30000
Cash 30000
(Car purchased)
4.Accounts Payable 19000
Cash 19000
5.Inventory 18900
Cash 18900
(900 units * $21/unit)
6.Prepaid Insurance 2400
Cash 2400
7.Rent expenses 18,000
Cash 18,000
8.Patent 20,000
Cash 20,000
9Prepaid Rent 1500
Cash 1500
10Inventory 4400
Accounts Payable 4400
(200 units * $22 /unit)
11.Cash (1000*30) 30,000
Accounts Recievable(300*30) 9,000
Sales 39000
Cost of Goods sold 26800
Inventory 26800
(500*20)+(800*21)
12.Bad Debt expense 1000
Allowance for doubtful accounts 1000
13.Depreciation –Equipment 2000
Accumulated Depreciation-Equipment 2000
(9000-1000)/4=2000
14.Depreciation expense- Vehicle 4800
Accumulated Depreciation –Vehicle 4800
(30000-6000)/5=4800
15.Insurance Expense 600
Prepaid Insurance 600
(200*3)
16.Interest expense 5000
Interest on Long term notes payable 5000
17.Patent Amortization expenses 1000
Patent 1000
(20000/10*0.5)
18.Dividends 1000
Cash 1000
