Question

In: Accounting

Below are transactions conducted by Sydney Company during its second year of operation (20X2). A PERPETUAL...

Below are transactions conducted by Sydney Company during its second year of operation (20X2). A PERPETUAL INVENTORY SYSTEM is used. The normal balances at the beginning of the year are as follows:

                                    Cash $ 58,000

                                    Accounts receivable $3,800

                                    Merchandise inventory $ 14,000

                                    Common Stock $ 45,000

                                    Retained Earnings $ 30,800

TRANSACTIONS for 20X2.

1. Purchased $57,000 of merchandise on account from a supplier with credit terms n/30.

2. Purchased $2000 of Supplies on account.

3. Purchased equipment for $18,000 cash.

4. Sold merchandise to a customer for $55,000 on account. Credit terms were 2/10;n/30. Sydney’s cost for the merchandise was $30,000.

5. A customer returned merchandise to Sydney because they changed their mind. There was nothing wrong with the merchandise, so Sydney put the merchandise back on the shelf and gave the customer full credit on their account. The merchandise cost Sydney $500 and had a selling price of $900.

6. Paid cash to the supplier for invoices totaling $28,000 on account.

7. Paid $9,000 cash for Selling & Administrative Expenses.

8. A customer paid Sydney on account for invoices totaling $10,000. Since the payment to Sydney was made within the discount period, a 2% discount was taken from this amount by the customer.

Adjustments made at year-end

9. A count of supplies at year end indicated a balance of $300.

10. A count of Merchandise Inventory revealed that $41,100 of Merchandise Inventory is still available at year-end.

11. Recorded depreciation expense of $3600 for a full year.

12. Accrued Selling & Administrative expenses of $1800.

REQUIRED:               

1. Post beginning balances to the T-accounts (or you may use an accounting equation spreadsheet.

2. Record the transactions. Record directly to T-accounts using the transaction number as a posting reference.

3. Prepare a multi-step income statement for the current year ending12/31/20X2.

4. Prepare a classified Balance sheet as of year-end 12/31/20X2.

5. Prepare a statement of cash flows for the current year 12/31/20X2.

Solutions

Expert Solution

1 & 2)
T - Accounts :
DEBIT AMOUNT $ CREDIT AMOUNT $
Cash a/c
OB 58000 3 18000
8 9800 6 28000
7 9000
CB 12800
AR a/c
OB 3800 5 900
4 55000 8 10000
CB 47900
Merchandise Inventory a/c
OB 14000 4 30000
1 57000 10 400
5 500 CB 41100
Common Stock a/c
OB 45000
Retained Earnings a/c
OB 30800
AP a/c
6 28000 1 57000
CB 31000 2 2000
Supplies a/c
2 2000 Supp exp 1700
CB 300
Equipment a/c
3 18000
Sales Revenues a/c
4 55000
COGS a/c
4 30000 5 500
10 400 CB 29900
Sales return a/c
5 900
Selling & Admin Exp a/c
7 9000 CB 10800
12 1800
Discount sales a/c
8 200
Supplies exp a/c
9 1700
Depreciation a/c
11 3600
Acc Dep a/c
11 3600
Expenses payable a/c
12 1800
3. Multi Step Income Statement:
Amount $
Revenues 55000
Less: Sales return -900
Net Sales 54100
Less: COGS 29900
Gross Profit 24200
Less: Expenses:
Discount 200
Selling and Admin 10800
Supplies 1700
Depreciation 3600
Total Expenses 16300
Net Income 7900
4. Balance Sheet:
Assets 20X2 20X1
Cash 12800 58000
AR 47900 3800
Merc. Inventory 41100 14000
Supplies 300
Current Assets 102100 75800
Equipment 18000
Acc Dep - Equ -3600   
Total Assets 116500 75800
Liabilities amount $
AP 31000 0
EP 1800 0
Current Liabilities 32800 0
CS 45000 45000
RE 30800 30800
Net Income 7900
Total Liabilities 116500 75800
5) Cash Flow Statement :
Cash flow from Operating Activities:
Net Income 7900
Add:Dep 3600
Less: increase in AR -44100
Less: increase in M Inven -27100
Less: increase in supplies -300
Add: increase in AP 31000
Add: increase in EP 1800
Cash outflow of Operating Acitivities -27200
Cash flow fromInvesting Activities:
Less: purchase of equip -18000
total cash outflow of all activities -45200
Add: Opening Balance 58000
Closing Balance 12800

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