Question

Ayayai Corp.’s unadjusted trial balance at December 1, 2017, is presented below.

	Debit		Credit
Cash	$25,000
Accounts Receivable	35,000
Notes Receivable	8,000
Interest Receivable	0
Inventory	36,000
Prepaid Insurance	3,300
Land	20,000
Buildings	135,000
Equipment	60,000
Patent	9,000
Allowance for Doubtful Accounts			$400
Accumulated Depreciation—Buildings			45,000
Accumulated Depreciation—Equipment			24,000
Accounts Payable			27,000
Salaries and Wages Payable			0
Notes Payable (due April 30, 2018)			11,500
Income Taxes Payable			0
Interest Payable			0
Notes Payable (due in 2023)			35,000
Common Stock			50,000
Retained Earnings			41,400
Dividends	12,000
Sales Revenue			900,000
Interest Revenue			0
Gain on Disposal of Plant Assets			0
Bad Debt Expense	0
Cost of Goods Sold	630,000
Depreciation Expense	0
Income Tax Expense	0
Insurance Expense	0
Interest Expense	0
Other Operating Expenses	61,000
Amortization Expense	0
Salaries and Wages Expense	100,000
Total	$1,134,300		$1,134,300

The following transactions occurred during December.

Dec. 2		Purchased equipment for $15,600, plus sales taxes of $600 (paid in cash).
2		Ayayai sold for $3,500 equipment which originally cost $4,800. Accumulated depreciation on this equipment at January 1, 2017, was $1,800; 2017 depreciation prior to the sale of equipment was $400.
15		Ayayai sold for $5,000 on account inventory that cost $3,200.
23		Salaries and wages of $6,300 were paid.

Adjustment data:

1.		Ayayai estimates that uncollectible accounts receivable at year-end are $3,800.
2.		The note receivable is a one-year, 8% note dated April 1, 2017. No interest has been recorded.
3.		The balance in prepaid insurance represents payment of a $3,300, 6-month premium on September 1, 2017.
4.		The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000.
5.		The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.
6.		The equipment purchased on December 2, 2017, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,800.
7.		The patent was acquired on January 1, 2017, and has a useful life of 9 years from that date.
8.		Unpaid salaries at December 31, 2017, total $2,000.
9.		Both the short-term and long-term notes payable are dated January 1, 2017, and carry a 10% interest rate. All interest is payable in the next 12 months.
10		Income tax expense was $12,000. It was unpaid at December 31.

A) Prepare journal entries for the transactions listed above and adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

B) Prepare an adjusted trial balance at December 31, 2017.

C) Prepare a 2017 income statement.

D) Prepare a 2017 retained earnings statement. (List items that increase retained earnings first.)

E)  Prepare a December 31, 2017, balance sheet. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Buildings and Equipment.)

Answer 1