Question

In: Accounting

Case Problem Capricorn Inc. is a private company reporting under ASPE. Its unadjusted trial balance at...

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

Solutions

Expert Solution

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.


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