In: Accounting
Bulldog uses the first in, first out (FIFO) method to account
for tire inventory.
Bulldog accrues salaries and payroll taxes on the last day of each
month and pays all employment-related liabilities on the 5th day of
the following month. Assume employees are in the 10% income tax
bracket. Use the following tax rates: FICA OASDI, 6.2%; Medicare,
1.45%; Federal Unemployment Tax, 0.6%; and State Unemployment Tax,
5.4%.
The expected useful life of the equipment and furniture is five
years with zero salvage value.
During January, Bulldog Consulting completed the following
transactions:
Jan 2. Completed oil changes for a total of $9,600 (in cash).
2. Prepaid three months office rent, $2,400.
5. Paid salary and payroll taxes accrued at the end of
December.
7. Purchased 80 tires on account, $1,600, plus freight of
$40.
18. Sold 50 tires on account, $3,250.
19. Completed oil changes for a total of $5,000 on account.
19. Completed oil changes for the orders prepaid as of December
31.
21. Paid cash on account, $1,460.
22. Purchased 150 tires on account, $3,450.
23 Sold 40 tires for cash, $2,400.
24. Paid utilities, $700.
28. Sold 110 tires for cash, $7,200.
31. Record all of the adjusting entries necessary to prepare the
financial statements at the end
of January. Additional information:
> Accrued salaries for January (Gross pay, $2,500) and accrued
relevant employee
payroll withholdings and employer payroll expense.
> A physical count of tire inventory shows 25 units in
inventory.
>At the end of January, office supplies on hand cost $250.
(1) Prepare and print the following financial statements for
submission: multi-step income statement for the month ended January
31, statement of retained earnings for the month ended January 31,
classified balance sheet at January 31.
(2) Prepare all necessary closing entries at January 31. Post to
the ledger. Print a post-closing trial balance for submission.
Additional Info
Bulldog Automotive account balances as of January 1, 2018:
The ledger: Cash, $18,697; Accounts Receivable, $3,600; Tire
Inventory, $0; Office Supplies, $300; Prepaid Rent, $0; Equipment,
$3,600; Accumulated Depreciation – Equipment, $120; Furniture,
$6,000; Accumulated Depreciation – Furniture, $200; Accounts
Payable, $3,600; Unearned Revenue, $800; Salaries Payable, $685;
Employee Income Tax Payable, $83; FICA OASDI Payable, $52; FICA
Medicare Payable, $12; Federal Unemployment Tax Payable, $0; State
Unemployment Tax Payable, $0; Bulldog Income Tax Payable, $0;
Common Stock, $20,000; Retained Earnings, $6,645; Dividends, $0;
Income Summary, $0; Service Revenue, $0; Sales Revenue, $0; Cost of
Goods Sold, $0; Salaries Expense, $0; Bulldog Income Tax Expense,
$0; Rent Expense, $0; Utilities Expense, $0; Payroll Tax Expense,
$0; Depreciation Expense – Equipment, $0; and Depreciation Expense
– Furniture, $0; Office Supplies Expense, $0.
Thank you
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Date | Account | Debit | Credit | |
Jan 2 | Cash | $ 9,600 | ||
Oil Change Revenue | $ 9,600 | |||
Jan 2 | Prepaid Rent | $ 2,400 | ||
Cash | $ 2,400 | |||
Jan 5 | Employee Income Tax Payable | $ 83 | ||
FICA OASDI Payable | $ 52 | |||
FICA Medicare Payable | $ 12 | |||
Salary Payable | $ 685 | |||
Cash | $ 832 | |||
Jan 7 | Purchases | $ 1,640 | ||
Accounts Payable | $ 1,640 | |||
Jan 18 | Accounts Receivable | $ 3,250 | ||
Sales | $ 3,250 | |||
Jan 19 | Accounts Receivable | $ 5,000 | ||
Oil Change Revenue | $ 5,000 | |||
Jan 19 | Unearned Oil Change Revenue | $ 800 | ||
Oil Change Revenue | $ 800 | |||
Jan 21 | Accounts Payable | $ 1,460 | ||
Cash | $ 1,460 | |||
Jan 22 | Purchases | $ 3,450 | ||
Accounts Payable | $ 3,450 | |||
Jan 23 | Cash | $ 2,400 | ||
Sales | $ 2,400 | |||
Jan 24 | Utility Expenses | $ 700 | ||
Cash | $ 700 | |||
Jan 28 | Cash | $ 7,200 | ||
Sales | $ 7,200 | |||
Adjusting: | ||||
Jan 31 | Salaries Expenses | $ 2,500 | ||
Payroll Tax Expense | $ 341 | |||
Salaries Payable | $ 2,500 | |||
FICA OASDI Payable | $ 155 | |||
FICA Medicare Payable | $ 36 | |||
Federal Unemployment Tax Payable | $ 15 | |||
State Unemployment Tax Payable | $ 135 | |||
Jan 31 | Inventory | $ 5,090 | ||
Purchase | $ 5,090 | |||
(tranfer of Pur to Inventory) | ||||
Cost of Goods Sold | $ 4,537 | |||
Inventory | $ 4,537 | |||
(5090/230*(230-25) | ||||
Jan 31 | Office Supplies Expense | $ 50 | ||
Office Supplies | $ 50 | |||
300-250 | ||||
Jan 31 | Depreciation Expense-Equipment | $ 60 | 3600/5*1/12 | |
Accumulated Depreciation-Equipment | $ 60 | |||
Jan 31 | Depreciation Expense-Furniture | $ 100 | 6000/5*1/12 | |
Accumulated Depreciation-Furniture | $ 100 | |||
Jan 31 | Rent Expense | $ 800 | 2400/3 | |
Prepaid Rent | $ 800 | |||
Jan 31 | Income Tax Expense | $ 800 | ||
Income Tax Payable | $ 800 | |||
Closing entries | ||||
Jan 31 | Oil Change Revenue | $ 15,400 | ||
Sales | $ 12,850 | |||
Income Summary | $ 28,250 | |||
(to close revenue accounts) | ||||
Jan 31 | Income Summary | $ 16,753 | ||
Cost of Goods Sold | $ 4,537 | |||
Salaries Expense | $ 2,500 | |||
Rent Expense | $ 800 | |||
Utilities Expense | $ 700 | |||
Payroll Tax Expense | $ 341 | |||
Depreciation Expense-Equipment | $ 60 | |||
Depreciation Expense-Furniture | $ 100 | |||
Office Supplies Expense | $ 50 | |||
Income Tax Expense | $ 7,665 | |||
(to close expense account) | ||||
Jan 31 | Income Summary | $ 11,497 | ||
Retained Earning | $ 11,497 | |||
(to close income summary account) |
Beginning | Unadjusted | Adjustment | Adjusted Trial | Post Closing | ||||||
Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit | |
Cash | $ 18,697 | $ 13,808 | $ 32,505 | $ 32,505 | ||||||
Accounts Receivable | $ 3,600 | $ 8,250 | $ 11,850 | $ 11,850 | ||||||
Tire Inventory | $ - | $ 5,090 | $ 4,537 | $ 553 | $ 553 | |||||
Office Supplies | $ 300 | $ 50 | $ 250 | $ 250 | ||||||
Prepaid Rent | $ - | $ 2,400 | $ 800 | $ 1,600 | $ 1,600 | |||||
Equipment | $ 3,600 | $ 3,600 | $ 3,600 | |||||||
Accumulated Depreciation | $ 120 | $ 60 | $ 180 | $ - | $ 180 | |||||
Furniture | $ 6,000 | $ 6,000 | $ 6,000 | |||||||
Accumulated Depreciation | $ 200 | $ 100 | $ 300 | $ - | $ 300 | |||||
Accounts Payable | $ 3,600 | $ 3,630 | $ 7,230 | $ - | $ 7,230 | |||||
Unearned Oil Change Revenue | $ 800 | $ 800 | $ - | $ - | $ - | |||||
Salaries Payable | $ 685 | $ 685 | $ 2,500 | $ 2,500 | $ - | $ 2,500 | ||||
Employee Income Tax Payable | $ 83 | $ 83 | $ - | $ - | $ - | |||||
FICA OASDI Payable | $ 52 | $ 52 | $ 155 | $ 155 | $ - | $ 155 | ||||
FICA Medicare Payable | $ 12 | $ 12 | $ 36 | $ 36 | $ - | $ 36 | ||||
Federal Unemployment Tax Payable | $ - | $ 15 | $ 15 | $ - | $ 15 | |||||
State Unemployment Tax Payable | $ - | $ 135 | $ 135 | $ - | $ 135 | |||||
Bulldog Income Tax Payable | $ - | $ 7,665 | $ 7,665 | $ - | $ 7,665 | |||||
Common Stock | $ 20,000 | $ 20,000 | $ - | $ 20,000 | ||||||
Retained Earnings | $ 6,645 | $ 6,645 | $ - | $ 18,142 | ||||||
Dividends | $ - | |||||||||
Income Summary | $ - | |||||||||
Oil Change Revenue | $ 15,400 | $ 15,400 | ||||||||
Sales Revenue | $ 12,850 | $ 12,850 | ||||||||
Cost of Goods Sold | $ 4,537 | $ 4,537 | ||||||||
Salaries Expense | $ 2,500 | $ 2,500 | ||||||||
Bulldog Income Tax Expense | $ 7,665 | $ 7,665 | ||||||||
Rent Expense | $ 800 | $ 800 | ||||||||
Utilities Expense | $ 700 | $ 700 | ||||||||
Payroll Tax Expense | $ 341 | $ 341 | ||||||||
Depreciation Expense-Equipment | $ 60 | $ 60 | ||||||||
Depreciation Expense-Furniture | $ 100 | $ 100 | ||||||||
Office Supplies Expense | $ 50 | $ 50 | ||||||||
Total | $ 32,197 | $ 32,197 | $ 31,880 | $ 31,880 | $ 16,053 | $ 16,053 | $ 73,111 | $ 73,111 | $ 56,358 | $ 56,358 |
Income Statement: | ||||||||||
Oil Change Revenue | $ 15,400 | |||||||||
Sales Revenue | $ 12,850 | |||||||||
Total Revenue | $ 28,250 | |||||||||
Cost of Goods Sold | $ 4,537 | |||||||||
Gross Margin | $ 23,713 | |||||||||
Less Operating Expenses: | ||||||||||
Salaries Expense | $ 2,500 | |||||||||
Rent Expense | $ 800 | |||||||||
Utilities Expense | $ 700 | |||||||||
Payroll Tax Expense | $ 341 | |||||||||
Depreciation Expense-Equipment | $ 60 | |||||||||
Depreciation Expense-Furniture | $ 100 | |||||||||
Office Supplies Expense | $ 50 | |||||||||
Income before Tax | $ 19,162 | |||||||||
Less: Income tax-assuming 40% | 40% | $ 7,665 | ||||||||
$ 11,497 | ||||||||||
Statement of Retained Earning | ||||||||||
Beginning Balance | $ 6,645 | |||||||||
Add: Net Income | $ 11,497 | |||||||||
Less: Dividend | ||||||||||
Ending Balance | $ 18,142 | |||||||||
Balance Sheet | ||||||||||
Cash | $ 32,505 | |||||||||
Accounts Receivable | $ 11,850 | |||||||||
Tire Inventory | $ 553 | |||||||||
Office Supplies | $ 250 | |||||||||
Prepaid Rent | $ 1,600 | |||||||||
Total Current Assets | $ 46,758 | |||||||||
Equipment | $ 3,600 | |||||||||
Accumulated Depreciation | $ -180 | $ 3,420 | ||||||||
Furniture | $ 6,000 | |||||||||
Accumulated Depreciation | $ -300 | $ 5,700 | ||||||||
Total Assets | $ 55,878 | |||||||||
Current Liabilities: | ||||||||||
Accounts Payable | $ 7,230 | |||||||||
Salaries Payable | $ 2,500 | |||||||||
FICA OASDI Payable | $ 155 | |||||||||
FICA Medicare Payable | $ 36 | |||||||||
Federal Unemployment Tax Payable | $ 15 | |||||||||
Income Tax payable | $ 7,665 | |||||||||
State Unemployment Tax Payable | $ 135 | |||||||||
Total Current Liabilities: | $ 17,736 | |||||||||
Common Stock | $ 20,000 | |||||||||
Retained Earnings | $ 18,142 | |||||||||
Total Equity | $ 38,142 | |||||||||
Total Liabilities and Equity | $ 55,878 |