Question

Hassellhouf Company’s trial balance at December 31, 2020, is as follows. All 2020 transactions have been recorded except for the items described following the trial balance.

		Debit		Credit
Cash		$28,000
Accounts Receivable		35,000
Notes Receivable		8,300
Interest Receivable		0
Inventory		36,400
Prepaid Insurance		3,600
Land		20,600
Buildings		138,000
Equipment		61,200
Patents		10,600
Allowance for Doubtful Accounts				$400
Accumulated Depreciation—Buildings				46,000
Accumulated Depreciation—Equipment				24,480
Accounts Payable				27,200
Salaries and Wages Payable				0
Unearned Rent Revenue				2,100
Notes Payable (due in 2018)				13,000
Interest Payable				0
Notes Payable (due after 2018)				36,000
Owner’s Capital				99,620
Owner’s Drawings		12,500
Sales Revenue				905,000
Interest Revenue				0
Rent Revenue				0
Gain on Disposal of Plant Assets				0
Bad Debts Expense		0
Cost of Goods Sold		637,000
Depreciation Expense		0
Insurance Expense		0
Interest Expense		0
Other Operating Expenses		61,600
Amortization Expense		0
Salaries and Wages Expense		101,000
Total		$1,153,800		$1,153,800

Unrecorded transactions:

1.		On May 1, 2020, Hassellhouf purchased equipment for $17,600 plus sales taxes of $1,500 (all paid in cash).
2.		On July 1, 2020, Hassellhouf sold for $3,500 equipment which originally cost $5,100. Accumulated depreciation on this equipment at January 1, 2020, was $1,800; 2020 depreciation prior to the sale of the equipment was $500.
3.		On December 31, 2020, Hassellhouf sold on account $5,000 of inventory that cost $3,200.
4.		Hassellhouf estimates that uncollectible accounts receivable at year-end is $3,900.
5.		The note receivable is a one-year, 8% note dated April 1, 2020. No interest has been recorded.
6.		The balance in prepaid insurance represents payment of a $3,600 6-month premium on September 1, 2020.
7.		The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000.
8.		The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.
9.		The equipment purchased on May 1, 2020, is being depreciated using the straight-line method over 5 years, with a salvage value of $2,000.
10.		The patent was acquired on January 1, 2020, and has a useful life of 10 years from that date.
11.		Unpaid salaries and wages at December 31, 2020, total $2,000.
12.		The unearned rent revenue of $2,100 was received on December 1, 2020, for 3 months’ rent.
13.		Both the short-term and long-term notes payable are dated January 1, 2020, and carry a 9% interest rate. All interest is payable in the next 12 months.

a)Prepare journal entries for the transactions listed above

b)Prepare an updated December 31, 2020, trial balance.

c)Prepare a 2020 income statement.

d)Prepare a 2020 an owner’s equity statement.

e)Prepare a December 31, 2020, classified balance sheet. (List Current Assets in order of liquidity. List Property, Plant and Equipment in the order of Land, Buildings and Equipment.)

Answer 1