Question

ACC 202   ACC Cycle set 2

This is to be prepared using pencil only on the provided templates and lined or graph paper.

P&S Plumbing began operations on 1/1/2017. Their annual reporting period ends 12/31. The trial balance on 1/1/2019 follows:

Account title	Debit	Credit
Cash	6,000
Accounts receivable	6,000
Allowance for uncollectable accounts		1,000
Supplies	13,000
Materials	7,000
Equipment	78,000
Accumulated Depreciation		8,000
Land
Accounts payable
Wages payable
Interest payable
Income taxes payable
Long-term notes payable
Common stock (8,000 shares, $0.50 par value		4,000
Additional paid-in capital		80,000
Retained earnings		17,000
Service revenue
Wages expense
Supplies expense
Bad debt expense
Interest expense
Depreciation expense
Income tax expense
Misc. expenses
Totals	110,000	110,000

Transaction during 2019:

1. $15,000 cash was borrowed on a five-year 8% note payable, dated 3/1/2019.
2. $13,000 cash was paid for land.
3. Earned $215,000 in sales revenues for 2019. $52,000 on account and the remainder in cash.
4. Issued 4,000 additional shares of common stock for cash at $1 per share on 1/1/2019.
5. Incurred $114,000 in miscellaneous expenses for 2019, $20,000 on credit and the rest paid in cash.
6. Collected $34,000 owned on account.
7. Purchased materials with $15,000 cash.
8. Purchased $27,000 supplies on account.
9. Paid $26,000 accounts payable.
10. Signed a $12,000 one-year service contract for work to begin on 2/1/2020.
11. Declared and paid $25,000 in cash dividends.

Adjusting entries:

12. $18,000 in supplies remained on 12/31/2019.

13. $10,000 depreciation on equipment.
14. Interest accrued on notes payable in step a.
15. $16,000 in wages earned but will not be paid until 1/3/2020.
16. $11,000 in income taxes for 2019 will be paid in 2020.
17. $2,000 was written off during the year.
18. $2,000 of A/R is estimated to be uncollectable. Hint: The AfUA has a $1,000 debit balance after the write-offs.

Required:

1. Set up T-accounts for the trial balance accounts and enter beginning balances.
2. Prepare journal entries for the 2019 transactions and post them to the ledger.
3. Prepare and post the adjusting entries.
4. Prepare an adjusted trial balance
5. Prepare the income statement, balance sheet, statement of cash flows, and statement of stockholder’s equity in the correct order.
6. Journalize and post the closing entries.
7. Compute the following ratios for 2019 and briefly explain what they suggest about the company (round to 2 decimals).
   1. Current ratio
   2. Net profit margin
   3. Total asset turnover

Adjusted trial balance total debits =404,000

Total liabilities and stockholders equity = 182,000

Answer 1

Journal Entries:

S.No. / Date	Particulars	Debit ($)	Credit ($)
a. Mar 01	Cash	15,000
	Notes Payable		15,000
b.	Land	13,000
	Cash		13,000
c.	Accounts Receivable	52,000
	Cash	163,000
	Service Revenue		215,000
d. Jan 01	Cash	4,000
	Common Stock		2,000
	Additional Paid in Capital		2,000
e.	Miscellaneous Expenses	114,000
	Accounts Payable		20,000
	Cash		94,000
f.	Cash	34,000
	Accounts Receivable		34,000
g.	Materials	15,000
	Cash		15,000
h.	Supplies	27,000
	Accounts Payable		27,000
i.	Accounts Payable	26,000
	Cash		26,000
j.	No Entry since it says only signed.
k.	Retained Earnings	25,000
	Cash		25,000

Adjusting Entries:

S.No.	Particulars	Debit ($)	Credit ($)
a.	Supplies Expense	22,000
	Supplies		22,000
a.	Depreciation Expense	10,000
	Accumulated Depreciation		10,000
b.	Interest Expense	1,000
	Interest Payable		1,000
c.	Wages Expense	16,000
	Wages Payable		16,000
d.	Income Tax Expense	11,000
	Income Tax Payable		11,000
e.	Bad Debts Expense	2,000
	Accounts Receivable		2,000
f.	Allowance for Uncollectable Accounts	2,000
	Accounts Receivable		2,000

Ledger Accounts:

Particulars	Debit ($)	Particulars	Credit ($)
Cash
Beginning Balance	6,000	Land	13,000
Notes Payable	15,000	Miscellaneous Expenses	94,000
Service Revenue	163,000	Materials	15,000
Common Stock	2,000	Accounts Payable	26,000
Additional Paid in Capital	2,000	Retained Earnings	25,000
Accounts Receivable	34,000	Ending Balance	49,000
	222,000		222,000
Accounts Receivable
Beginning Balance	6,000	Cash	34,000
Service Revenue	52,000	Bad Debts Expense	2,000
		Allowance for Uncollectable Accounts	2,000
		Ending Balance	20,000
	58,000		58,000
Allowance for Uncollectable Accounts
Accounts Receivable	2,000	Beginning Balance	1,000
		Ending Balance	1,000
	2,000		2,000
Supplies
Beginning Balance	13,000	Supplies Expense	22,000
Accounts Payable	27,000	Ending Balance	18,000
	40,000		40,000
Materials
Beginning Balance	7,000
Cash	15,000	Ending Balance	22,000
	22,000		22,000
Equipment
Beginning Balance	78,000	Ending Balance	78,000
	78,000		78,000
Accumulated Depreciation
		Beginning Balance	8,000
Ending Balance	18,000	Depreciation Expense	10,000
	18,000		18,000
Land
Cash	13,000	Ending Balance	13,000
	13,000		13,000
Accounts Payable
Cash	26,000	Miscellaneous Expense	20,000
Ending Balance	21,000	Supplies	27,000
	47,000		47,000
Wages Payable
Ending Balance	16,000	Wage Expense	16,000
	16,000		16,000
Interest Payable
Ending Balance	1,000	Interest Expense	1,000
	1,000		1,000
Income Tax Payable
Ending Balance	11,000	Income Tax Expense	11,000
	11,000		11,000
Long Term Notes Payable
Ending Balance	15,000	Cash	15,000
	15,000		15,000
Common Stock
		Beginning Balance	4,000
Ending Balance	6,000	Cash	2,000
	6,000		6,000
Additional Paid in Capital
		Beginning Balance	80,000
Ending Balance	82,000	Cash	2,000
	82,000		82,000
Retained Earnings
Dividends	25,000	Beginning Balance	17,000
Wage Expense	16,000	Service Revenue	215,000
Supplies Expense	22,000
Bad Debt Expense	2,000
Interest Expense	1,000
Depreciation Expense	10,000
Income Tax Expense	11,000
Misc Expense	114,000
Ending Balance	31,000
	232,000		232,000
Service Revenue
		Accounts Receivable	52,000
Retained Earnings	215,000	Cash	163,000
	215,000		215,000
Wages Expense
Wages Payable	16,000	Retained Earnings	16,000
	16,000		16,000
Supplies Expense
Supplies	22,000	Retained Earnings	22,000
	22,000		22,000
Bad Debt Expense
Accounts Receivable	2,000	Retained Earnings	2,000
	2,000		2,000
Interest Expense
Interest Payable	1,000	Retained Earnings	1,000
	1,000		1,000
Depreciation Expense
Accumulated Depreciation	10,000	Retained Earnings	10,000
	10,000		10,000
Income Tax Expense
Income Tax Payable	11,000	Retained Earnings	11,000
	11,000		11,000
Misc. Expense
Accounts Payable	20,000
Cash	94,000	Retained Earnings	114,000
	114,000		114,000

Adjusted Trial Balance:

Account Title	Debit ($)	Credit ($)
Cash	49,000
Accounts Receivable	20,000
Allowance for Uncollectable Accounts	1,000
Supplies	18,000
Materials	22,000
Equipment	78,000
Accumulated Depreciation		18,000
Land	13,000
Accounts Payable		21,000
Wages Payable		16,000
Interest Payable		1,000
Income Tax Payable		11,000
Long Term Notes Payable		15,000
Common Stock		6,000
Additional Paid in Capital		82,000
Retained Earnings	8,000
Service Revenue		215,000
Wages Expense	16,000
Supplies Expense	22,000
Bad Debts Expense	2,000
Interest Expense	1,000
Depreciation Expense	10,000
Income Tax Expense	11,000
Misc. Expense	114,000
TOTAL	385,000	385,000