Question

Account balances and supplemental information for the Kelly Corporation as of December 31, 2017, are given below:

Accounts Payable	$   75,900
Accounts Receivable	141,600
Accumulated Depreciation--Equipment	84,000
Bonds Payable	300,000
Cash	243,900
Common Stock	1,560,000
Deferred Income Tax Liability (noncurrent)	6,900
Dividends Payable	45,000
Equipment	840,000
Income Taxes Payable	91,500
Inventory	395,100
Investment in Land	510,000
Investment in Stock of Subsidiary	492,000
Note Payable	120,000
Notes Receivable	150,000
Prepaid Insurance	7,200
Retained Earnings	453,600
Salaries and Wages Payable	42,900

(a)	$300,000 of 12% bonds were issued on December 31, 2017, at par.
(b)	40,000 shares of $30 par value common stock were sold for $1,560,000.
(c)	All the equipment was purchased on January 2, 2016. The depreciation rate is 10 percent per year.
(d)	5 percent of accounts receivable are expected to be uncollectible.
(e)	A two-year insurance policy was purchased on May 1, 2017, for $7,200.
(f)	Accrued interest on $150,000 of short-term notes receivable from customers was $5,100 at December 31, 2017.
(g)	$120,000 was borrowed from the bank on a 5-year, 10% note payable dated July 1, 2017. The loan is to be repaid at the end of 5 years.   Interest is payable each year on July 1.

Required:

Prepare a properly classified balance sheet in proper form for Kelly Corporation as of December 31, 2017. NOTE: the above items a-g need to be considered and any adjustments need to be made to the balance sheet accounts and any related income statement effects should be adjusted to the retained earnings account.

Answer 1

Kelly Corporation
Balance Sheet
as at December 31, 2017
Assets
Current Assets
Cash		243900
Accounts Receivable	141600
Allowance for doubtful accounts   (d)	7080	134520
Inventory		395100
Notes Receivable		150000
Interest Receivable    (f)		5100
Total Current Assets		928620
Prepaid Insurance		4800
Investmentin land		510000
Investment in Stock of Subsidiary		492000
Equipment	840000
Accumulated Depreciation	84000	756000
Total Assets		2691420
Liabilities and Equity
Current Liabilities
Accounts Payable		75900
Salaries and Wages Payable		42900
Dividend Payable		45000
Income Taxes Payable		91500
Interest Payable   (g)		6000
Total Current Liabilities		261300
Notes Payable		120000
Deferred Tax Liability		6900
12% Bonds Payable		300000
Total Liabilities		688200
Stockholders' Equity
Common Stock		1560000
Retained Earnings *		443220
Stockholders' Equity		2003220
Total Liabilities and Equity		2691420
Workings:
Retained Earnings * :
Balance as per trial balance	453600
Less: Allowance for Doubtful Accounts   (d)	7080
Less: Insurance expense(7,200*8/24)     (e)	2400
Add: Accrued Interest on note receivable (f)	5100
Less: Accrued interest on note payable   (g)	6000
Balance as at December 31, 2017	443220
Allowance for doubtful accounts:
Balance of accounts receivable	114600
Allowance for doubtful accounts 5%   (d)	7080
(e) Prepaid insurance:
Balance as per trial balance	7200
Less: Expired insurance	2400
Balance as at December 31, 2016	4800
(g) Interest Payable
Note payable	120000
Interest payable@10% for 6 months	6000