Question

American Laser, Inc., reported the following account balances on January 1.

	Debit			Credit
Accounts Receivable	$	5,000
Accumulated Depreciation				$	30,000
Additional Paid-in Capital					122,000
Allowance for Doubtful Accounts					2,000
Bonds Payable					0
Buildings		279,000
Cash		18,000
Common Stock, 10,000 shares of $1 par					10,000
Notes Payable (long-term)					18,000
Retained Earnings					120,000
Treasury Stock		0
TOTALS	$	302,000		$	302,000

The company entered into the following transactions during the year.

Jan.		15		Issued 21,000 shares of $1 par common stock for $82,000 cash.
Jan.		31		Collected $3,000 from customers on account.
Feb.		15		Reacquired 3,320 shares of $1 par common stock into treasury for $36,520 cash.
Mar.		15		Reissued 2,320 shares of treasury stock for $27,520 cash.
Aug.		15		Reissued 600 shares of treasury stock for $4,600 cash.
Sept.		15		Declared (but did not yet pay) a $1 cash dividend on each outstanding share of common stock.
Oct.		1		Issued 100, 10-year, $1,010 bonds, at a quoted bond price of 101.
Oct.		3		Wrote off a $2,000 balance due from a customer who went bankrupt.
Dec.		29		Recorded $262,000 of service revenue, all of which was collected in cash.
Dec.		30		Paid $232,000 cash for this year’s wages through December 31. Ignore payroll taxes and payroll deductions.
Dec.		31		Calculated $10,000 of depreciation for the year to be recorded. (Ignore accrual adjustments for interest and income taxes.)

Dec.

31

Close the revenue and expense accounts.

Dec.

31

Close the dividends account.

• Requirement
• General Journal
• General Ledger
• Trial Balance
• Balance Sheet
• Debt to Assets Ratio

General Journal tab - Prepare the journal entries to record each transaction. Review the accounts as shown in the General Ledger and Trial Balance tabs.

General Ledger tab - Each journal entry is posted automatically to the general ledger.

Trial Balance tab - The option you choose will be the values used to populate the balance sheet tabs.

Balance Sheet tab - Prepare the noncurrent liabilities and stockholders’ equity sections of the balance sheet at December 31. At the end of the year, the adjusted net income was $20,000.

General Journal tab - Prepare a closing journal entry for the income statement accounts, assuming the events on December 29–31 were the only transactions to affect income statement accounts.
General Journal tab - After preparing the financial statements, record the closing entry for Dividends.
Impact on Debt to Assets Ratio tab - Calculate the Debt to Assets Ratio and analyze the impact of the Debt to Assets Ratio.

Answer 1

1.

Prepare Journal entries as follows:

Date	Account Titles and Explanation	Debit	Credit
Jan. 15	Cash	$82,000
	Common Stock [21,000 shares × $1]		$21,000
	Additional-paid-in-capital-common stock		$61,000
Jan. 31	Cash	$3,000
	Accounts Receivable		$3,000
Feb. 15	Treasury stock [3,320 shares × $11]	$36,520
	Cash		$36,520
Mar. 15	Cash	$27,520
	Treasury stock [2,320 shares × $11]		$25,520
	Additional-paid-in-capital-Treasury stock		$2,000
Aug. 15	Cash	$4,600
	Additional-paid-in-capital-Treasury stock	$2,000
	Treasury stock [600 shares × $11]		$6,600
Sep. 15	Cash Dividend	$30,600
	Dividend payable		$30,600
	[10,000 + 21,000 - 3,320 + 2,320 + 600] shares × $1
Oct. 01	Cash [1000 × $101]	$101,000
	Bonds payable		$1,000
	Premium on bonds payable		$100,000
Oct. 03	Allowance for doubtful accounts	$2,000
	Accounts Receivable		$2,000
Dec. 29	Cash	$262,000
	Service revenue		$262,000
Dec. 30	Wages Expense	$232,000
	Cash		$232,000
Dec. 31	Depreciation expense	$10,000
	Accumulated depreciation		$10,000

_________________________________________________________________

Post the above entries into ledger as follows:

_____________________________________________________________________

3.

Prepare Adjusted Trial Balance as follows:

________________________________________________________________________

Prepare Closing entries as follows:

Date	Account Titles and Explanation	Debit	Credit
Dec. 31	Service Revenue	$262,000
	Income Summary		$262,000
Dec. 31	Income summary	$242,000
	Wages Expense		$232,000
	Depreciation expense		$10,000
Dec. 31	Income summary [$262,000 - $242,000]	$20,000
	Retained earnings		$20,000
Dec. 31	Retained Earnings	$30,600
	Dividends		$30,600

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