Question

Quigley Corporation's trial balance at December 31, 2017, is presented below. All 2017 transactions have been recorded except for the items described below.

	Debit	Credit
Cash	$ 25,500
Accounts Receivable	51,000
Inventory	22,700
Land	65,000
Buildings	95,000
Equipment	40,000
Allowance for Doubtful Accounts		$   450
Accumulated Depreciation—Buildings		30,000
Accumulated Depreciation—Equipment		14,400
Accounts Payable		19,300
Interest Payable		-0-
Dividends Payable		-0-
Unearned Rent Revenue		8,000
Bonds Payable (10%)		50,000
Common Stock ($10 par)		30,000
Paid-in Capital in Excess of Par—Common Stock		6,000
Preferred Stock ($20 par)		-0-
Paid-in Capital in Excess of Par—Preferred Stock		-0-
Retained Earnings		75,050
Treasury Stock	-0-
Cash Dividends	-0-
Sales Revenue		570,000
Rent Revenue		-0-
Bad Debt Expense	-0-
Interest Expense	-0-
Cost of Goods Sold	400,000
Depreciation Expense	-0-
Other Operating Expenses	39,000
Salaries and Wages Expense	65,000
Total	$803,200	$803,200

Unrecorded transactions and adjustments:

1.On January 1, 2017, Quigley issued 1,000 shares of $20 par, 6% preferred stock for $22,000.

2.On January 1, 2017, Quigley also issued 1,000 shares of common stock for $23,000.

3.Quigley reacquired 300 shares of its common stock on July 1, 2017, for $49 per share.

4.On December 31, 2017, Quigley declared the annual cash dividend and a $1.50 per share dividend on the outstanding common stock, all payable on January 15, 2018.

5.Quigley estimates that uncollectible accounts receivable at year-end is $5,100.

6.The building is being depreciated using the straight-line method over 30 years. The salvage value is $5,000.

7.The equipment is being depreciated using the straight-line method over 10 years. The salvage value is $4,000.

8.The unearned rent was collected on October 1, 2017. It was the receipt of 4 months' rent in advance (October 1, 2017 through January 31, 2018).

9.The 10% bonds payable pay interest every January 1. The interest for the 12 months ended December 31, 2017, has not been paid or recorded.

Instructions

(Ignore income taxes.)

(a)  

Prepare journal entries for the transactions and adjustment listed above.

(b)  

Prepare an updated December 31, 2017, trial balance, reflecting the journal entries in (a).

Total $871,200

(c)  

Prepare a multiple-step income statement for the year ending December 31, 2017.

(d)  

Prepare a retained earnings statement for the year ending December 31, 2017.

(e)  

Prepare a classified balance sheet as of December 31, 2017.

Total assets $273,400

Answer 1

(a)

Date	Account Titles and Explanation	Debit	Credit
2017
Jan-01	Cash	22000
	Preferred stock (1000 x $20)		20000
	Paid-in capital in excess of par-preferred stock		2000
	(To record issue of preferred stock)
Jan-01	Cash	23000
	Common stock (1000 x $10)		10000
	Paid-in capital in excess of par-common stock		13000
	(To record issue of common stock)
Jul-01	Treasury stock (300 x $49)	14700
	Cash		14700
	(To record common stock reacquired)
Dec-31	Cash dividends	6750
	Dividends payable		6750
	[(6% x $20000) + $1.50 x (3000 + 1000 - 300)]
	(To record declaration of cash dividends)
Dec-31	Bad debt expense ($5100 - $450)	4650
	Allowance for doubtful accounts		4650
	(To record bad debt expense)
Dec-31	Depreciation expense [($95000-$5000)/30]	3000
	Accumulated depreciation-building		3000
	(To record depreciation on building)
Dec-31	Depreciation expense [($40000-$4000)/10]	3600
	Accumulated depreciation-equipment		3600
	(To record depreciation on equipment)
Dec-31	Unearned rent revenue	6000
	Rent revenue ($8000 x 3/4)		6000
	(To record rent revenue earned)
Dec-31	Interest expense ($50000 x 10%)	5000
	Interest payable		5000
	(To record interest accrued on bonds payable)

(b)

Quigley Corporation
Trial Balance
At December 31, 2017
Account Title	Debit	Credit
Cash	55800
Accounts receivable	51000
Inventory	22700
Land	65000
Buildings	95000
Equipment	40000
Allowance for doubtful accounts		5100
Accumulated depreciation-buildings		33000
Accumulated depreciation-equipment		18000
Accounts payable		19300
Interest payable		5000
Dividends payable		6750
Unearned rent revenue		2000
Bonds payable		50000
Common stock ($10 par)		40000
Paid-in capital in excess of par-common stock		19000
Preferred stock ($20 par)		20000
Paid-in capital in excess of par-preferred stock		2000
Retained earnings		75050
Treasury stock	14700
Cash dividends	6750
Sales revenue		570000
Rent revenue		6000
Bad debt expense	4650
Interest expense	5000
Cost of goods sold	400000
Depreciation expense	6600
Other operating expenses	39000
Salaries and wages expense	65000
Totals	871200	871200

(c)

Quigley Corporation
Income Statement
For the Year Ended December 31, 2017
Sales revenue		570000
Cost of goods sold		400000
Gross profit		170000
Less: Operating expenses
Bad debt expense	4650
Interest expense	5000
Depreciation expense	6600
Other operating expenses	39000
Salaries and wages expense	65000
Total operating expenses		120250
Operating income		49750
Other revenues and expenses:
Rent revenue		6000
Net income		55750

(d)

Quigley Corporation
Statement of Retained Earnings
For the Year Ended December 31, 2017
Beginning balance	75050
Add: Net income	55750
	130800
Less: Cash dividends	6750
Ending balance	124050

(e)

Quigley Corporation
Balance Sheet
December 31, 2017
Assets
Current Assets
Cash		55800
Accounts receivable	51000
Allowance for doubtful accounts	-5100	45900
Inventory		22700
Total Current assets			124400
Property, Plant, and Equipment
Land		65000
Building	95000
Accumulated depreciation-Buildinggs	-33000	62000
Equipment	40000
Accumulated depreciation-Equipment	-18000	22000
Total property, plant, and equipment			149000
Total Assets			273400
Liabilities
Current Liabilities
Accounts payable	19300
Interest payable	5000
Dividends payable	6750
Unearned rent revenue	2000
Total current liabilities		33050
Long-term liabilities
Bonds payable		50000
Total Liabilities			83050
Stockholders' Equity
Preferred stock ($20 par)	20000
Common stock ($10 par)	40000
Paid-in Capital in Excess of Par-Preferred stock	2000
Paid-in Capital in Excess of Par-Common stock	19000
Total paid-in capital		81000
Retained earnings		124050
Treasury stock		-14700
Total stockholders' equity			190350
Total Liabilities and Stockholders' Equity			273400