Question

Hopkins Lighting Company is a wholesale lighting company that purchases lamps and resells them to retail customers. Hopkins is beginning operations on October 1, 2019. Hopkins Lighting Company stocks three inventory items: desk lamps, table lamps, and floor lamps. Hopkins uses a perpetual inventory system. All expenses associated with the office are Administrative Expenses and all expenses associated with the wharehouse are selling expenses. Hopkinss has hired you to assist them regarding what inventory flow method to adopt. Hopkinss not an expert on inventory flow methods expresses a desire to be tax efficient.

During the fourth quarter of 2019, Hopkins completed the following transactions:

Oct 1 The following assets were received from Hopkins in exchange for common stock:  cash, $150,000;  office supplies, $275; warehouse supplies, $350; land, $20,000; building, $780,000; office furniture and equipment, $125,000; and warehouse fixtures, $260,000.

3    Purchased lamps on account from Blue Ridge Lights, n/30, FOB destination:

                        2,500 desk lamps at $8 each

                        3,000 table lamps at $18 each

                        2,000 floor lamps at $26 each

10     Purchased lamps on account from Blue Ridge Lights, terms n/30, FOB destination:

                        5,000 desk lamps at $9 each

                        7,500 table lamps at $19 each

                        2,500 floor lamps at $25 each

12    Sold lamps on account to Atlas Home Furnishings, terms 2/10, n/30:

                        4,000 table lamps at $45 each

15    Sold lamps on account to Hiawassee Office Supply, terms 2/10, n/30:

                        1,000 desk lamps at $20 each

20    Received a check from Atlas Home Furnishings for full amount owed on Oct. 12 sale.

28    Sold lamps on account to Parkway Home Stores, terms 2/10, n/30:

                        3,500 table lamps at $45 each

                        1,500 floor lamps at $65 each

30    Paid amount due to Blue Ridge Lights from Oct. 3 purchase.

31    Paid salaries, $40,000 (75% selling, 25% administrative).

31    Paid utilities, $2,500 (60% selling, 40% administrative).

Nov 1   Sold lamps on account to Hiawassee Office Supply, terms 2/10, n/30:

                        3,000 desk lamps at $20 each

5   Purchased lamps on account from Blue Ridge Lights, terms N/30, FOB destination:

                        5,000 desk lamps at $10 each

                        10,000 table lamps at $21 each

                        5,000 floor lamps at $27 each

5   Received a check from Parkway Home Stores for full amount owed on Oct. 28 sale.

8   Received a check from Hiawassee Office Supply for full amount owed on Nov. 1 sale.

10    Paid amount due to Blue Ridge Lights from Oct. 10 purchase.     

10   Purchased and paid for supplies: $325 for the office; $675 for the warehouse.

15   Sold lamps on account to Anderson Office Supply, n/30:

                        2,000 desk lamps at $20 each

18   Sold lamps on account to Go-Mart Discount Stores, terms 1/10, n/30:

                        2,000 table lamps at $45 each

                        2,000 floor lamps at $65 each

28   Received a check from Go-Mart Discount Stores for full amount owed on Nov. 18 sale.

30   Paid salaries, $40,000 (75% selling, 25% administrative).

30   Paid Utilities, $2,670 (60% selling, 40% administrative).

Dec 5    Paid amount due to Blue Ridge Lights from Nov. 5 purchase.

15   Received a check from Anderson Office Supply for full amount owed on Nov. 15 sale.

15   Paid dividends, $50,000.

27   Sold lamps on account to Atlas Home Furnishings, terms 2/10, n/30:

                        4,500 desk lamps at $20 each

                        5,000 table lamps at $45 each

31    Paid salaries, $40,000 (75% selling, 25% administrative).

31    Paid utilities, $3,200 (60% selling, 40% administrative).

Requirements:

1.         Open general ledger T-accounts and enter opening balances as of October 1, 2019.

2.         Record the transactions in the general journal.

4.         Post transactions to the general ledger.

5.         Prepare adjusting entries for the year ended December 31, 2018, and post to the ledger:

            a. Depreciation, $48,500 (75% selling, 25% administrative). Use a single accumulated depreciation account.

            b. Supplies on hand:  office, $200; and warehouse, $650.

            c. A physical inventory account resulted in the following counts:  desk lamps, 2,000; table       lamps, 6,000; and floor lamps, 6,000.  

            d. Replacement cost of inventory, desk lamps, $11; table lamps, $22; floor lamps, $24.

6.         Prepare an adjusted trial balance.

7.         Prepare an income statement, statement of retained earnings, and balance sheet as of December 31, 2019.

Answer 1