Question

CAPTAIN JET INC.
BALANCE SHEET
DECEMBER 31, 2017
Current Assets
Cash	41,200
Notes Receivable	16,000
Accounts Receivable	38,800
Inventories	40,000
Prepaid Insurance	540
Prepaid Rent	500
Total Current Assets	137,040
Non-Current Assets
Long-term Investments
Investments in held-for-maturity securities	51,000
Land held for future development	45,500
Property, Plant, and Equipment
Land	85,000
Buildings	291,000
Less: Accumulated Depreciation	(187,500)
Intangible Assets
Capitalized Development Costs	8,000
Goodwill	76,000
Other Identifiable Intangible Assets	48,000
Total Non-Current Assets	417,000
Total Assets	554,040
Current Liabilities
Notes Payable	110,000
Accounts Payable	33,500
Unearned Revenues	12,000
Income Taxes Payable	8,440
Property Taxes Payable	6,600
Interest Payable	1,500
Total Current Liabilities	172,040
Non-Current Liabilities
Provisions Related to Pensions	0
Bonds Payable	0
Total Non-Current Liabilities	0
Total Liabilities	172,040
Stockholders' Equity
Common Stock	100,000
Preferred Stock	100,000
Paid-in-capital - Common Stock	27,500
Paid-in-capital - Preferred Stock	10,000
Retained Earnings	152,250
Accumulated Other Comprehensive Income	5,000
Less: Treasury Stock	(12,750)
Total Stockholders' Equity	382,000
Total Liabilities and Stockholders' Equity	554,040

The 2017 balance sheet of the Captain Jet Inc. is attached. During 2018, the following events occurred.

1. On January 10, sell merchandise on account to Rayms $9,600 and Fischer $8,800.

2. On January 12, purchase merchandise on account from Zapfel $3,000 and Liotta $2,400.

3. On January 13, Receive checks, $4,000 from Longhini and $2,000 from Hall, for sales on account.

4. On January 15, send checks to Joosten for 9,000 and to Maida for $11,000 for merchandise purchased last year.

5. On January 16, issue credit of $400 to Fieber for merchandise returned. Hint: you need to create a "sales returns" account, which is a contra account for "sales revenue" on the income statement; meanwhile reduce accounts receivable.

6. On January 21, pay off the balances to Zapfel and Liotta for the purchases on January 12.

7. Summary monthly cash sales (for January) total $15,500.

8. On Feburary 9, receive payment in full from Rayms and Fischer.

9. On March 1, pay rent of $6,000 for a two-year term, effective on the day of purchase.

10. On April 1, sell merchandise on account to Dunlap $1,600.

11. On May 1, pay $400 cash for office supplies. All supplies are expensed right away.

12. Cash dividends totaling $800 are declared and paid on June 13.

13. On July 1, Issue a note of $120,000 to bank (one year, annual interest rate 3%) for cash.

14. On July 5, purchase merchandise from Maida for $33,000 on account

15. On July 7, issue common stock 1000 shares, $10 par, in exchange of a land with a fair market value of $15,000.

16. On July 8, return $200 of merchandise to Maida and receive credit. Hint: This is a purchase return, as well as reduces accounts payable

17. On August 1, sell merchandise to Lachey on account for $80,000.

18. On August 5, Pay off the balance to Maida.

19. On August 10, receive half of the payment from Lachey.

20. On August 14, expect $1,300 bad debt from Tooket and directly write it off from accounts receivable.(Hint: you need to record "bad debt expense" and reduce accounts receivable)

21. On August 30, Pay utitlities expense, $10,902.

22. On August 31, Lachey pays off its balance.

23. Over the year, sales and office employees earned $45,500 in salaries and wages, of which $1,500 was still payable at the end of year.

24. On October 1, pay off notes payable $110,000 and associated accrued interest $6,000, of which $1,500 was shown on the balance sheet.

25. On December 31, An unpaid utilities bill (December, $1,250) is due on January 10 next year.

Additional Information at the end of the year:

1. Depreciation expense for the year was $14,250.

2. The company estimated that it has to pay federal income tax, $250.

3. After physically counting, the company decided that the ending inventories worth $40,146.

4. The company adopts the periodic inventory system.

Instructions:

1. Prepare journal entries for each event (in sheet "JE").

2. Prepare adjusting entries (in sheet "JE").

3. Prepare adjusted trial balance (in sheet "adj.TB").

4. Prepare Income Statement, Retained Earnings Statement and Balance Sheet (in sheet "FSs").

5. Prepare closing entries (in sheet "Closing").

Answer 1

1 & 2. Journal Entries for Each Event and Adjusting Entries

Date	Particulars	Debit Amount	Credit Amount
10.01.2018	Rayms (Accounts Receivable)	$9,600
	Fischer (Accounts Receivable)	$8,800
	Sales Account		$18,400
12.01.2018	Purchase Account	$5,400
	Zapfel (Accounts Payable)		$3,000
	Liotta (Accounts Payable)		$2,400
13.01.2018	Bank	$6,000
	Longhini (Accounts Payable)		$4,000
	Hall (Accounts Payable)		$2,000
15.01.2018	Joosten (Accounts Receivable)	$9,000
	Maida (Accounts Receivable)	$11,000
	Bank		$20,000
16.01.2018	Sales Return Account	$400
	Fieber (Accounts Receivable)		$400
21.01.2018	Zapfel (Accounts Payable)	$3,000
	Liotta (Accounts Payable)	$2,400
	Bank		$5,400
31.01.2018	Cash	$15,500
	Sales Account		$15,500
09.02.2018	Bank	$18,400
	Rayms (Accounts Receivable)		$9,600
	Fischer (Accounts Receivable)		$8,800
01.03.2018	Rent (For 306 Days out of 730 Days)	$2,515
	Prepaid Rent (For 424 Days out of 730 Days)	$3,485
	Bank		$6,000
01.04.2018	Dunlap (Accounts Receivable)	$1,600
	Sales Account		$1,600
01.05.2018	Office Expenses	$400
	Cash		$400
13.06.2018	Retained Earnings	$800
	Dividend Payable		$800
13.06.2018	Dividend Payable	$800
	Cash		$800
01.07.2018	Cash	$120,000
	Notes Payable		$120,000
05.07.2018	Purchase Account	$33,000
	Maida (Accounts Payable)		$33,000
07.07.2018	Land	$15,000
	Common Stock (1000 Shares, $10 Par)		$10,000
	Paid-in-Capital - Common Stock		$5,000
	($15000 FMV - $10000 Par)
08.07.2018	Maida (Accounts Payable)	$200
	Purchase Return Account		$200
01.08.2018	Lachey (Accounts Receivable)	$80,000
	Sales Account		$80,000
05.08.2018	Maida (Accounts Payable)	$32,800
	Bank		$32,800
10.08.2018	Bank	$40,000
	Lachey (Accounts Receivable)		$40,000
14.08.2018	Bad Debt Expense	$1,300
	Tooket (Accounts Receivable)		$1,300
30.08.2018	Utilities Expense	$10,902
	Bank		$10,902
31.08.2018	Bank	$40,000
	Lachey (Accounts Receivable)		$40,000
01.10.2018	Notes Payable	$110,000
	Interest Payable	$1,500
	Interest Expenses	$4,500
	Cash		$116,000
31.12.2018	Salaries and Wages	$45,500
	Bank		$44,000
	Salaries and Wages Payable		$1,500
31.12.2018	Utilities Expense	$1,250
	Accounts Payable		$1,250
31.12.2018	Interest Expense	$1,800
	Interest Payable		$1,800
	$120000 * 3% * (184 Days From July 1 to Dec 31 / 365 Days in Year)
31.12.2018	Depreciation Expense	$14,250
	Buildings		$14,250
31.12.2018	Income Taxes Expense	$250
	Income Taxes Payable		$250
31.12.2018	Inventory	$40,146
	Purchase Account		$40,146
31.12.2018	Insurance Expense	$540
	Prepaid Insurance		$540
	(Assuming Prepaid Insurance balance blongs to current year to be expense out in this year)
31.12.2018	Prepaid Rent	$500
	Rent		$500
	(Assuming Prepaid Rent balance blongs to current year to be expense out considering two-year rent cycle started again in the current year)