Question

The following trial balance was taken from the books of Coyote Company as of December 31, 2019.

            Account                                     Debit Credit

Cash                                                                $30,000

Accounts receivable                               40,000

Allowance for doubtful accounts                                 $ 1,000

S-T Notes receivable                              20,000

Inventory, January 1, 2019                     40,000

Furniture and equipment                        110,000

Accumulated depreciation of F & E                             20,000

Patents                                                 100,000

Accounts payable                                                          22,000

Bonds payable                                                            20,000

L-T notes payable                                                       15,000

Common stock                                                            140,000

Retained earnings                                                         40,000

Sales                                                                            550,000

Purchase                                                 278,000

Insurance expense                                  20,000

Salary expense                                  120,000

Rent expense 50,000

Totals                                                   808,000         808,000

At the year end, the following items have not been recorded.

1. Prepaid insurance expired during the year, $8,000.
2. Estimated bad debts, 1.0% of sales.
3. Inventory as of 12/31/2019 turned out to be $60,000.
4. Five months’ rent of $50,000 was paid in advance on October 1, 2019 and charged to rent expense then.
5. Furniture and equipment have an average useful life of 4 years and salvage value of $10,000. Coyote Company uses the straight-line method of depreciation.
6. Utility bill of $1,600 for the month of December 2019 will be paid on its due date, January 10, 2020.
7. Salaries earned but not yet paid by December 31, 2019, $7,000.

Instruction: prepare

1. Any necessary adjusting entries at the end of 2019.
2. Income Statement and statement of retained earnings, and balance sheet of the company for the year 2019.
3. Any necessary closing entries at the end of 2019.

Answer 1

Income Statement (OR)

Trading and profit & Loss A/c

(As at 31st December 2019)

Particulars	Amount (Dr.)	Particulars	Amount(Cr.)
To opening Stock To Purchase       To Balance c/d (gross profit)	40,000 2,78,000 2,92,000	By Sales By Closing Stock	5,50,000 60,000

To insurance expenses 20,000 (-) Prepaid expenses (8,000) . To depreciation A/c To salary expenses 1,20,000 (+) outstanding 7,000 To New PBD 5500 (-) PBD allowence (1,000) To Rent 50,000 (-) Prepaid (advance) (10,000) By Balance c/d (Net Profit)

12,000 5,000 1,27,000 4,500 40,000 1,03,500

By Gross profit

3,12,000

Balance Sheet

(As at 31st December 2019)

Liabilities	Amount	Assets	Amount
Retained earnings (capita) 40,000 (+) Net profit 1,03,500 Accounts payable Bonds payable L-T notes payable Common stock Outstanding salary New accumulatd dep.	1,43,500 22,000 20,000 15,000 1,40,000 7,000 25,000	Cash Accounts receivables 40,000-5500 S-T Notes receivables Furniture and equipment patents Closing stock Prepaid rent prepaid insurance	30,000 34,500 20,000 1,10,000 1,00,000 60,000 10,000 8,000

3,72,500

3,72,500

Statement of Retained earning

Particulars	Amount
Retained earnings in the beginning 40,000 (+) Income of the current year 1,03,500   1,43,500 (-) Dividend distributed (Nil) Retained Earning at the end of the year	1,43,500

Closing entry :

To Transfer any expense to P&L A/c

P&l A/c Dr.

to Related expenses

note - (do all entries as explained above)

Adjusting entry

For PBD

PBD Dr. 5,500

To Accounts Payable 5,500

note - (do all the remaining as given above)