Question

Bulldog uses the first in, first out (FIFO) method to account for tire inventory.
Bulldog accrues salaries and payroll taxes on the last day of each month and pays all employment-related liabilities on the 5th day of the following month. Assume employees are in the 10% income tax bracket. Use the following tax rates: FICA OASDI, 6.2%; Medicare, 1.45%; Federal Unemployment Tax, 0.6%; and State Unemployment Tax, 5.4%.
The expected useful life of the equipment and furniture is five years with zero salvage value.
During January, Bulldog Consulting completed the following transactions:
Jan 2. Completed oil changes for a total of $9,600 (in cash).
2. Prepaid three months office rent, $2,400.
5. Paid salary and payroll taxes accrued at the end of December.
7. Purchased 80 tires on account, $1,600, plus freight of $40.
18. Sold 50 tires on account, $3,250.
19. Completed oil changes for a total of $5,000 on account.
19. Completed oil changes for the orders prepaid as of December 31.
21. Paid cash on account, $1,460.
22. Purchased 150 tires on account, $3,450.
23 Sold 40 tires for cash, $2,400.
24. Paid utilities, $700.
28. Sold 110 tires for cash, $7,200.
31. Record all of the adjusting entries necessary to prepare the financial statements at the end
of January. Additional information:
> Accrued salaries for January (Gross pay, $2,500) and accrued relevant employee
payroll withholdings and employer payroll expense.
> A physical count of tire inventory shows 25 units in inventory.
>At the end of January, office supplies on hand cost $250.

To Do:

(1) Prepare journal entries for all needed January transactions. Post to the ledger. Print an unadjusted trial balance for submission.
(2) Prepare all necessary adjusting entries at January 31. Post to the ledger. Print an adjusted trial balance for submission.
(3) Prepare and print the following financial statements for submission: multi-step income statement for the month ended January 31, statement of retained earnings for the month ended January 31, classified balance sheet at January 31.
(4) Prepare all necessary closing entries at January 31. Post to the ledger. Print a post-closing trial balance for submission.
(5) Print all journal entries (January transactions, adjusting entries, and closing entries) for submission.

Additional Info:
Bulldog Automotive account balances as of January 1, 2018:
The ledger: Cash, $18,697; Accounts Receivable, $3,600; Tire Inventory, $0; Office Supplies, $300; Prepaid Rent, $0; Equipment, $3,600; Accumulated Depreciation – Equipment, $120; Furniture, $6,000; Accumulated Depreciation – Furniture, $200; Accounts Payable, $3,600; Unearned Revenue, $800; Salaries Payable, $685; Employee Income Tax Payable, $83; FICA OASDI Payable, $52; FICA Medicare Payable, $12; Federal Unemployment Tax Payable, $0; State Unemployment Tax Payable, $0; Bulldog Income Tax Payable, $0; Common Stock, $20,000; Retained Earnings, $6,645; Dividends, $0; Income Summary, $0; Service Revenue, $0; Sales Revenue, $0; Cost of Goods Sold, $0; Salaries Expense, $0; Bulldog Income Tax Expense, $0; Rent Expense, $0; Utilities Expense, $0; Payroll Tax Expense, $0; Depreciation Expense – Equipment, $0; and Depreciation Expense – Furniture, $0; Office Supplies Expense, $0.

Answer 1

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Date	Account	Debit	Credit
Jan 2	Cash	$       9,600
	Oil Change Revenue		$     9,600
Jan 2	Prepaid Rent	$       2,400
	Cash		$     2,400
Jan 5	Employee Income Tax Payable	$            83
	FICA OASDI Payable	$            52
	FICA Medicare Payable	$            12
	Salary Payable	$          685
	Cash		$         832
Jan 7	Purchases	$       1,640
	Accounts Payable		$     1,640
Jan 18	Accounts Receivable	$       3,250
	Sales		$     3,250
Jan 19	Accounts Receivable	$       5,000
	Oil Change Revenue		$     5,000
Jan 19	Unearned Oil Change Revenue	$          800
	Oil Change Revenue		$         800
Jan 21	Accounts Payable	$       1,460
	Cash		$     1,460
Jan 22	Purchases	$       3,450
	Accounts Payable		$     3,450
Jan 23	Cash	$       2,400
	Sales		$     2,400
Jan 24	Utility Expenses	$          700
	Cash		$         700
Jan 28	Cash	$       7,200
	Sales		$     7,200
Adjusting:
Jan 31	Salaries Expenses	$       2,500
	Payroll Tax Expense	$          341
	Salaries Payable		$     2,500
	FICA OASDI Payable		$         155
	FICA Medicare Payable		$           36
	Federal Unemployment Tax Payable		$           15
	State Unemployment Tax Payable		$         135
Jan 31	Inventory	$       5,090
	Purchase		$     5,090
	(tranfer of Pur to Inventory)
	Cost of Goods Sold	$       4,537
	Inventory		$     4,537
	(5090/230*(230-25)
Jan 31	Office Supplies Expense	$            50
	Office Supplies		$           50
	300-250
Jan 31	Depreciation Expense-Equipment	$            60		3600/5*1/12
	Accumulated Depreciation-Equipment		$           60
Jan 31	Depreciation Expense-Furniture	$          100		6000/5*1/12
	Accumulated Depreciation-Furniture		$         100
Jan 31	Rent Expense	$          800		2400/3
	Prepaid Rent		$         800
Jan 31	Income Tax Expense	$          800
	Income Tax Payable		$         800
Closing entries
Jan 31	Oil Change Revenue	$    15,400
	Sales	$    12,850
	Income Summary		$   28,250
	(to close revenue accounts)
Jan 31	Income Summary	$    16,753
	Cost of Goods Sold		$     4,537
	Salaries Expense		$     2,500
	Rent Expense		$         800
	Utilities Expense		$         700
	Payroll Tax Expense		$         341
	Depreciation Expense-Equipment		$           60
	Depreciation Expense-Furniture		$         100
	Office Supplies Expense		$           50
	Income Tax Expense		$     7,665
	(to close expense account)
Jan 31	Income Summary	$    11,497
	Retained Earning		$   11,497
	(to close income summary account)

	Beginning		Unadjusted		Adjustment		Adjusted Trial		Post Closing
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$ 18,697		$ 13,808				$ 32,505		$ 32,505
Accounts Receivable	$    3,600		$    8,250				$ 11,850		$ 11,850
Tire Inventory	$          -		$    5,090			$    4,537	$       553		$       553
Office Supplies	$       300					$         50	$       250		$       250
Prepaid Rent	$          -		$    2,400			$       800	$    1,600		$    1,600
Equipment	$    3,600						$    3,600		$    3,600
Accumulated Depreciation		$         120				$         60		$       180	$          -	$       180
Furniture	$    6,000						$    6,000		$    6,000
Accumulated Depreciation		$         200				$       100		$       300	$          -	$       300
Accounts Payable		$     3,600		$    3,630				$    7,230	$          -	$    7,230
Unearned Oil Change Revenue		$         800	$       800					$          -	$          -	$          -
Salaries Payable		$         685	$       685			$    2,500		$    2,500	$          -	$    2,500
Employee Income Tax Payable		$           83	$         83					$          -	$          -	$          -
FICA OASDI Payable		$           52	$         52			$       155		$       155	$          -	$       155
FICA Medicare Payable		$           12	$         12			$         36		$         36	$          -	$         36
Federal Unemployment Tax Payable		$            -				$         15		$         15	$          -	$         15
State Unemployment Tax Payable		$            -				$       135		$       135	$          -	$       135
Bulldog Income Tax Payable		$            -				$    7,665		$    7,665	$          -	$    7,665
Common Stock		$   20,000						$ 20,000	$          -	$ 20,000
Retained Earnings		$     6,645						$    6,645	$          -	$ 18,142
Dividends							$          -
Income Summary							$          -
Oil Change Revenue				$ 15,400				$ 15,400
Sales Revenue				$ 12,850				$ 12,850
Cost of Goods Sold					$    4,537		$    4,537
Salaries Expense					$    2,500		$    2,500
Bulldog Income Tax Expense					$    7,665		$    7,665
Rent Expense					$       800		$       800
Utilities Expense			$       700				$       700
Payroll Tax Expense					$       341		$       341
Depreciation Expense-Equipment					$         60		$         60
Depreciation Expense-Furniture					$       100		$       100
Office Supplies Expense					$         50		$         50
Total	$ 32,197	$   32,197	$ 31,880	$ 31,880	$ 16,053	$ 16,053	$ 73,111	$ 73,111	$ 56,358	$ 56,358
Income Statement:
Oil Change Revenue		$   15,400
Sales Revenue		$   12,850
Total Revenue		$   28,250
Cost of Goods Sold		$     4,537
Gross Margin		$   23,713
Less Operating Expenses:
Salaries Expense		$     2,500
Rent Expense		$         800
Utilities Expense		$         700
Payroll Tax Expense		$         341
Depreciation Expense-Equipment		$           60
Depreciation Expense-Furniture		$         100
Office Supplies Expense		$           50
Income before Tax		$   19,162
Less: Income tax-assuming 40%	40%	$     7,665
		$   11,497
Statement of Retained Earning
Beginning Balance		$     6,645
Add: Net Income		$   11,497
Less: Dividend
Ending Balance		$   18,142
Balance Sheet
Cash	$ 32,505
Accounts Receivable	$ 11,850
Tire Inventory	$       553
Office Supplies	$       250
Prepaid Rent	$    1,600
Total Current Assets		$   46,758
Equipment	$    3,600
Accumulated Depreciation	$      -180	$     3,420
Furniture	$    6,000
Accumulated Depreciation	$      -300	$     5,700
Total Assets		$   55,878
Current Liabilities:
Accounts Payable		$     7,230
Salaries Payable		$     2,500
FICA OASDI Payable		$         155
FICA Medicare Payable		$           36
Federal Unemployment Tax Payable		$           15
Income Tax payable		$     7,665
State Unemployment Tax Payable		$         135
Total Current Liabilities:		$   17,736
Common Stock		$   20,000
Retained Earnings		$   18,142
Total Equity		$   38,142
Total Liabilities and Equity		$   55,878