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The following trial balance was taken from the books of Coyote Company as of December 31,...

The following trial balance was taken from the books of Coyote Company as of December 31, 2019.

            Account                                                    Debit             Credit

Cash                                                                  $60,000

Accounts receivable                                            50,000

Allowance for doubtful accounts                                               $ 1,000

Short-Term notes receivable                                 20,000

Inventory, January 1, 2019                                   70,000

Furniture and equipment                                      210,000

Accumulated depreciation of F & E                                           40,000

Patents                                                               100,000

Accounts payable                                                                        22,000

Bonds payable                                                                        20,000

L-T notes payable                                                                   15,000

Common stock                                                                          290,000

Retained earnings                                                                       87,000

Dividends                                                           20,000

Prior period adjustments                                     10,000

Sales                                                                                          700,000

Sales returns & allowance                                    40,000

Sales discount                                                      10,000

Rent revenues                                                                            60,000

Interest revenues                                                                        10,000

Purchase                                                            420,000

Purchase returns & allowance                                                     20,000

Selling expenses                                                60,000

Advertising expense                                           30,000

Supplies expense                                                 6,000

Insurance expense                                              24,000

Wage and Salary expense                                    90,000

Rent expense                                                         60,000

Loss on sale of PS store before tax                     10,000

Operating income from PS store before tax                             25,000

Totals                                                                1,290,000        1,290,000

At the year-end, the following items have not been recorded.

  1. Insurance premium expired during the year, $14,000.
  2. Estimated bad debts expense, 1.0% of net sales.
  3. Inventory as of 12/31/2019 turned out to be $50,000.
  4. Office supplies were purchased for $6,000 and charged to supplies expenses then. There are $2,000 of supplies remaining as of 12/31/2019
  5. Six months’ rent of $60,000 was paid in advance on September 1, 2019, and charged to rent expense then.
  6. Furniture and equipment have an average useful life of 5 years and a salvage value of $10,000. Coyote Company uses the straight-line method of depreciation.
  7. Patents have been amortized by $10,000/year.
  8. The utility bill of $2,000 for the month of December 2019 will be paid on its due date, January 10, 2020.
  9. Salaries earned but not yet paid by December 31, 2019, $8,000.
  10. The tax rate is 30%.

Instructions: Prepare the following:

  1. Any necessary adjusting entries at the end of 2019.
  2. Income Statement and statement of retained earnings, and balance sheet of the company for the year 2019 in good forms (i.e. multiple-steps statements)
  3. Any necessary closing entries at the end of 2019.

Solutions

Expert Solution

Adjusting Entry
Date Particulars Debit Credit
1 Prepaid Insurance $10,000
To Insurance Expense $10,000
(Insurance not expired is transferred)
2 Bad Debts Expenses $6,500
To Provision for Doubtful Debts $6,500
(Bad Debts expense 1% of Net Sales)
3 Office Supplies $2,000
To Office supplies expense
(Office supplies expense not used)
4 Prepaid Rent $20,000
To Rent Expense $20,000
(Advance rent expense transferred from Rent)
5 Depreciation Expense $40,000
To Accumulated Depreciation onf F & E $40,000
(Depreciation of Furniture & Equipment)
6 Amortization of Patent $10,000
To Accumulated Amortization of Patent $10,000
(Amortization of Patent)
7 Utility expense $2,000
To Utility expense Payable $2,000
(Utility expense payable for the year)
8 Salary expense $8,000
To Salary expense payable $8,000
(Salary payable at the year end)
Closing Journal Entry
Date Particulars Debit Credit
Accounts Payable $22,000
Bonds Payable $20,000
Utility Payable $2,000
Salary Payable $8,000
Income Tax Payable $3,150
L-T Notes Payable $15,000
Common Stock $2,90,000
Retained Earnings $64,350
Allowance for Doubtful Debts $7,500
Accumulated Depreciation $80,000
Accumulated Amortization of Patent $10,000
To Cash $60,000
To Accounts Receivable $50,000
To Short Term Notes Receivable $20,000
To Inventory $50,000
To Office Supplies $2,000
To Prepaid Insurance $10,000
To Prepaid Rent $20,000
To Furniture & Equipment $2,10,000
To Patent $1,00,000
(Closing Entry at the year End)
Income Statement for the year ended 31-12-2019
Particulars Amount
Sales Revnue $7,00,000
Less: Sales Return & Allowance $40,000
Less: Sales Discount $10,000
Net Sales $6,50,000
Cost of Goods Sold
Opening Inventory $70,000
Add: Purchases $4,20,000
Less: Purchase Returns $20,000
Less: Closing Inventory $50,000
Cost of Goods Sold $4,20,000
Gross Profit $2,30,000
Operating Expense
Wage and Salary Expense $98,000
Selling Expense $60,000
Advertising Expense $30,000
Supplies Expense $4,000
Insurance Expense $14,000
Rent Expense $40,000
Bad Debts Expense $6,500
Depreciation Expense $40,000
Amortization expense $10,000
Utility Expense $2,000
Total Operating Expense $3,04,500
($74,500)
Non operating Income (Expense)
Loss on sales of PS store ($10,000)
Operating income from PS store $25,000
Rent Revenue $60,000
Interest Revenue $10,000
Total non-operating income $85,000
$10,500
Income Tax 30% $3,150
Net profit $7,350
Balance Sheet As on 31-12-2019
Particular Amount
Asset
Current Asset
Cash $60,000
Accounts Receivable $50,000
Less: Allowance for Doubtful Debts $7,500 $42,500
Short Term Notes Receivable $20,000
Inventory $50,000
Office Supplies
ekkarill92 answered 1 year ago
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