In: Accounting
Case Problem
Capricorn Inc. is a private company reporting under ASPE. Its
unadjusted trial balance at its fiscal year end, December 31, 2023
is shown below:
Capricorn Inc. Unadjusted Trial Balance December 31, 2023 |
||
Debit |
Credit |
|
Cash |
$38,000 |
|
Inventory |
46,500 |
|
Supplies |
5,000 |
|
Building |
600,000 |
|
Accumulated depreciation – building |
120,000 |
|
Equipment |
330,000 |
|
Accumulated depreciation – equipment |
$66,000 |
|
Accounts payable |
34,000 |
|
Dividends payable |
0 |
|
Interest payable |
0 |
|
Income tax payable |
0 |
|
Unearned revenue |
30,600 |
|
Bonds payable (maturity date January 1, 2029) |
500,000 |
|
Preferred shares ($4 noncumulative, 1,000 issued) |
40,000 |
|
Common shares (120,000 issued) |
60,000 |
|
Retained earnings |
73,000 |
|
Cash dividends – preferred |
0 |
|
Cash dividends – common |
0 |
|
Sales |
515,000 |
|
Cost of goods sold |
159,000 |
|
Depreciation expense |
20,000 |
|
Income tax expense |
0 |
|
Insurance expense |
8,200 |
|
Interest expense |
1,800 |
|
Rent expense |
32,600 |
|
Salaries expense |
185,000 |
|
Supplies expense |
12,500 |
|
TOTALS |
$1,438,600 |
$1,438,600 |
No new shares were issued or reacquired during 2023.
The following transactions have not yet been recorded for
2023:
1. On December 31, 2023, the board of directors declared a total
cash dividend of $54,000
2. The bonds were issued at par with a contract interest rate of
4%. Interest is paid semi-annually on July 1 and January 1.
3. The income tax rate for 2023 is 20%
Required:
Using a blank MS Excel workbook, answer the following
questions:
1. Prepare the adjusting entries required for December 31, 2023
2. Prepare the closing entries for December 31, 2023
3. Prepare an income statement for the year ended December 31, 2023
4. Prepare a statement of retained earnings for the year ended
December 31, 2023
preferred cash dividend is $4 per share, total 1000 preferred shares issued, therefore preferred dividend is $4000 [1000x$4]
Total interest expense is $ 11,800 [ $1800 from unadjusted trial balance plus $10,000 interest for bond payable from adjustment entry]
All revenue, expenses and dividend accounts are closed by passing closing entries. Assets, Liabilities and Equity accounts balance are carrying forward to next accounting period.