Question

Marmidan Mold Shop Inc. designs and builds molds for the automotive and aircraft industries. The account balances in the company’s general ledger on January 1, 2020 (first day of the new annual fiscal year) were as follows (all account balances are in their normal position):

Cash                                                                    $     3,700

Accounts receivable                                                   5,900

Supplies inventory                                                    29,300

Land                                                                        168,500  

Buildings                                                                 116,500

Accumulated depreciation, buildings                       37,500   

Equipment                                                                 58,500

Accumulated depreciation, equipment                     18,000

Accounts payable                                                      25,200

Income tax payable                                                   16,600

Interest payable                                                           4,200

Wages payable (due in 2020)                                    15,700                                         

9% Notes payable ($10,000 due June 30, 2021,

     balance due June 30, 2022)                                  61,500

Common shares                                                       151,500

Retained earnings, Dec. 31, 2019                              52,200  

Transactions during 2020:

1.The company provided sales services to customers, on credit, for $ 210,300. In addition, the company produced cash sales to customers of $ 62,300.

2.Accounts receivable from customers of $ 15,600 remain to be collected at December 31, 2020.

3.Inventory of $ 62,900 was purchased on credit and debited to the supplies inventory account.

4.Minor parts were purchased with cash for $ 7,400 and debited to the supplies inventory account.

5.Wages payable at the beginning of 2020 were paid early in 2020. In addition, wages were earned by employees and paid during 2020 in the amount of $ 112,000.

6.Income tax payable at the beginning of 2020 was paid early in 2020.

7.Payments of $ 73,000 were made to creditors for supplies previously purchased on credit.

8.One year’s interest at 9% was paid on the notes payable at July 1, 2020.

9. During 2020, Don Tallint, the principal shareholder, purchased a new car for his wife

    Debbie. The new car cost $ 45,000 and was paid for with cash from personal sources.

10.Property taxes were paid on the land and buildings in the amount of $ 17,000 with cash.

11.Dividends were declared and paid in caah in the amount of $ 7,200.

Information available for year end adjusting entries:

12.•Supplies inventory was counted on December 31, 2020 and it was determined the supplies inventory still on hand at yearend was $ 31,900.

13. •Annual depreciation on the buildings is $ 6,000.

14•Annual deprecation on the equipment is $ 5,500

15•Additional wages of $4,000 were earned but are unpaid and unrecorded at December 31, 2020.

16•Interest for six months at 9% per year on the notes payable is unpaid and unrecorded at December 31, 2020..

17•Income taxes of $ 16,500 were unpaid and unrecorded at December 31, 2020.

Required:

1.Record beginning 2020 beginning balances in T accounts. Prepare journal entries for transactions 1 to 11 above as required and record the journal entries in T accounts while

adding any new T accounts that you need as you complete this task.

2.Prepare any necessary adjusting journal entries fpr items 11 to 17 above and record the adjusting journal entries in the T accounts while adding any new T accounts that you need as you complete this task.

3. Prepare a single step income statement for Marmidan Mold Shop Inc. for the year ended December 31, 2020.

4.Prepare a statement of retained earnings for Marmidan Mold Shop Inc. for the year ended December 31, 2020.

5.Prepare a classified statement of financial position for Marmidan Mold Shop Inc. as at December 31, 2020

       

Answer 1

1. Prepare journal entries for transactions 1 to 11 above as required

2. Prepare any necessary adjusting journal entries fpr items 11 to 17 above

Record beginning 2020 beginning balances in T accounts for question 1 and 2

3.Prepare a single step income statement for Marmidan Mold Shop Inc. for the year ended December 31, 2020.

Income statement
Sales	2,72,600
Supplies inventory expense	-67,700
Wages expenses	-1,16,000
Depreciation expense	-11,500
Property tax expense	-17,000
Net operating income	60,400
Interest expense	-5,535
Net income before tax	54,865
Income tax expense	-16,500
Net income	38,365

4. Prepare a statement of retained earnings for Marmidan Mold Shop Inc. for the year ended December 31, 2020.

Statement of retained earnings
	Amount($)
Opening balance	52,200
Add: Net income	38,365
Less: Dividend	-$7,200
	83,365

5.Prepare a classified statement of financial position for Marmidan Mold Shop Inc. as at December 31, 2020

Statement of financial position
Assets
Non Current assets
Land	1,68,500
Buildings net depreciation	73,000
Equipment net depreciation	35,000
Current assets
Cash	10,733
Accounts receivable	15,600
Supplies inventory	31,900
Total assets	3,34,733
Equity
Common shares	1,51,500
Retained earnings	83,365
Non current liability
9% Notes payable	51,500
Current liability
Accounts payable	15,100
Income tax payable	16,500
Interest payable	2,768
Wages payable	4,000
9% Notes payable	10,000
Total Liabilites and stockholder's equity	3,34,733