Question

On November 30, 2016, Davis Company had the following account balances:

	Debit	Credit
Cash	$3,090
Accounts Receivable	9,900
Allowance for Doubtful Accounts		$100
Inventory	17,750
Supplies	1,400
Land	9,000
Buildings and Equipment	42,000
Accumulated Depreciation		4,200
Accounts Payable		10,700
Common Stock		20,000
Retained Earnings (1/1/2016)		42,400
Dividends	2,000
Sales Revenue		69,700
Cost of Goods Sold	36,860
Salaries Expense	12,500
Advertising Expense	8,100
Other Expenses	4,500

During the month of December, Davis entered into the following transactions:

Date	Transaction
Dec. 4	Made cash sales of $3,000; the cost of the inventory sold was $1,800.
7	Purchased $2,400 of inventory on credit.
14	Collected $900 of accounts receivable.
18	Sold land for $7,800; the land originally cost $5,000.
20	Made credit sales of $4,000; the cost of the inventory sold was $2,400.
21	Returned $360 of defective inventory to supplier for credit to the Davis Company’s account.
27	Purchased $1,250 of inventory for cash.
28	Paid $1,100 of accounts payable.
31	Purchased land at a cost of $6,000; made a $1,000 down payment and signed a 12%, 2-year note for the balance.

	Required:
1.	Prepare general journal entries to record the preceding transactions.
2.	Post to general ledger T-accounts.
3.	Prepare a year-end trial balance on a worksheet and complete the worksheet using the following information: a. accrued salaries at year-end total $1,200; b. for simplicity, the building and equipment are being depreciated using the straight-line method over an estimated life of 20 years with no residual value; c. supplies on hand at the end of the year total $630; d. bad debts expense for the year totals $830; e. the income tax rate is 30%; income taxes are payable in the first quarter of 2017
4.	Prepare the company’s financial statements for 2016.
5.	Prepare the 2016 (a) adjusting and (b) closing entries in the general journal.     Labels Contributed capital Current assets Current liabilities Long-term liabilities Operating expenses Other item Property, plant, and equipment Amount Descriptions Dividends Earnings per share (2,000 shares) Gross profit Income before income taxes Income from operations Net income Net loss Retained earnings, December 31, 2016 Retained earnings, January 1, 2016 Total assets Total current assets Total current liabilities Total liabilities Total liabilities and shareholders’ equity Total operating expenses Total property, plant, and equipment Total shareholders’ equity CHART OF ACCOUNTS Davis Company General Ledger ASSETS 111 Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 131 Inventory 141 Supplies 142 Prepaid Insurance 180 Land 181 Buildings and Equipment 182 Accumulated Depreciation LIABILITIES 211 Accounts Payable 221 Notes Payable 224 Interest Payable 231 Salaries Payable 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings 351 Dividends 391 Income Summary REVENUE 411 Sales Revenue 601 Gain on Sale of Land EXPENSES 510 Cost of Goods Sold 521 Salaries Expense 525 Interest Expense 531 Advertising Expense 532 Bad Debt Expense 534 Insurance Expense 535 Supplies Expense 536 Utilities Expense 539 Other Expenses 541 Depreciation Expense 551 Income Tax Expense 701 Loss on Sale of Land

Answer 1

	Davis Company
	Journal entries
Date	Account's tittle	Debit $	Credit $
4-Dec	Cash	3,000
	Sales revenue		3,000
4-Dec	Cost of goods sold	1,800
	Inventory		1,800
7-Dec	Inventory	2,400
	Accounts Payable		2,400
14-Dec	Cash	900
	Accounts Receivable		900
18-Dec	Cash	7,800
	Land		5,000
	Gain on sale of Land		2,800
20-Dec	Accounts Receivable	4,000
	Sales revenue		4,000
20-Dec	Cost of goods sold	2,400
	Inventory		2,400
21-Dec	Accounts Payable	360
	Inventory		360
27-Dec	Inventory	1,250
	Cash		1,250
28-Dec	Accounts Payable	1,100
	Cash		1,100
31-Dec	Land	6,000
	Cash		1,000
	Notes Payable		5,000
	Adjustment entries
31-Dec	Salaries expenses	1,200
	Salaries payable		1,200
	( to be record accrued salary )
31-Dec	Depreciation expenses ( $ 42,000 / 20 years )	2,100
	Accumulated depreciation - Building and Equipment		2,100
	( depreciation charged for equipment )
31-Dec	Supplies expenses ( $ 1,400 - $ 630 )	770
	Supplies		770
31-Dec	Bad Debt Expenses	830
	Allowance for Doubtful Accounts		830
31-Dec	Income Tax expenses	2,532
	Income Tax Payable		2,532

Davis Company
Trial Balance (Decemeber 31,2016)
	Debit $	Credit $
Cash	11,440
Accounts Receivable	13,000
Allowance for Doubtful Accounts		930
Inventory	16,840
Supplies	630
Land	10,000
Building and Equipment	42,000
Accumulated depreciation - Building and Equipment		6,300
Accounts Payable		11,640
Common Stock		20,000
Notes Payable		5,000
Salaries payable		1,200
Retianed Earnings ( 1/1/2016)		42,400
Dividends	2,000
Sales Revenue		76,700
Gain on sale of Land		2,800
Cost of goods sold	41,060
Salaries expenses	13,700
Advertising expenses	8,100
Supplies Expenses	770
Depreciation expenses	2,100
Bad Debt Expenses	830
Other Expenses	4,500
TOTAL	166,970	166,970

Davis Company
Income Statement ( December 31, 2016 )
	$	$
Sales Revenue	76,700
Less: Cost of Goods sold	(41,060)
Gross Income		35,640
Gain on sale of Land		2,800
Expenses;
Salaries expenses	13,700
Advertising expenses	8,100
Supplies Expenses	770
Depreciation expenses	2,100
Bad Debt Expenses	830
Other Expenses	4,500
Total expense		(30,000)
Net income		8,440
Less: Income Tax ( $ 8,440 x 30% )		(2,532)
Net income after tax		5,908
Statement of Owner's Equity
	$
Common Stock	20,000
Retianed Earnings ( 1/1/2016)	42,400
Net income after tax	5,908
Less: Dividends	(2,000)
Ending balance of owner's equity	66,308

Davis Company
Balance Sheet as at December 31,2016
Equity and liabilities	$	Assets	$
Owner's equity	66,308	Land	10,000
Notes Payable	5,000	Building and Equipment      $ 42,000
		Less: Acc. Depreciation       ( $ 6,300)	35,700
Current liabilities;
Accounts Payable	11,640	Current assets;
Salaries payable	1,200	Cash	11,440
Allowance for Doubtful Accounts	930	Accounts Receivable	13,000
Income Tax Payable	2,532	Inventory	16,840
		Supplies	630
TOTAL	87,610	TOTAL	87,610