In: Accounting
Prepare the income statement, the statement of owner's equity, and a classified balance sheet. Use proper formatting techniques including headings and dollar signs.
You opened a new pet supplies store and named it Ozzie’s Pet Supply and Boarding on December 1, 2019. The following information about December’s transactions, accounts, and adjustment data is available.
Transactions:
Dec. 1 Family members contributed $50,000 cash to the business in
exchange for capital.
Dec. 2 Purchased $10,800 of equipment for the store paying cash.
Dec. 3 Paid $4,500 for a 9-month insurance policy starting on December 1.
Dec. 4 Paid $18,000 cash to purchase land to be used in operations.
Dec. 5 Purchased office supplies on account, $3,000.
Dec. 6 Borrowed $28,000 from the bank for business use. You signed a bank payable note for an interest rate of 5% APR.
Dec. 7Paid $800 for advertising expenses.
Dec. 8 Purchased inventory (dog food) for the store at a cost of $1,500
Dec. 9 Paid for office supplies $3,000
Dec 10 Received a bill for utilities to be paid in January,
$200.
Dec 31 Service Revenues earned during the month included $18,500 cash and $2,000 on account.
Dec. 31 Sold one hundred percent of the dog food purchased on Dec. 8th for $2,100 in cash.
Dec. 31 Paid employees' salaries $2,000 and building rent $800.
Dec. 31 Dividends of $200 were paid.
Dec. 31 Customer prepaid $1,000 for boarding services in January.
Accounts
Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Equipment; Accumulated Depreciation-Equipment; Land; Accounts Payable; Utilities Payable; Interest Payable; Unearned Revenue; Bank Notes Payable; Family, Capital; Service Revenue; Dog Food Revenue; Salaries Expense; Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense-Equipment; Inventory; COGS; Dividends; Service Charge-Bank; Uncollectible Accounts Expense; Allowance for Doubtful Accounts.
Adjustment Data
1.Income statement
Notes-
1.Depreciation expense = 10,800 - 0 / 4years / 12 months = $ 225 Formula used - Cost minus residual value divided by useful life; where cost is 10,800 residual value is zero and useful life is 4 years
2.Insurance expense for one month= 4,500 / 9 months x 1 month = $ 500
3.Interest expense = 28,000 x 5% x 1 month / 12 month = $ 117 . Entry for accrued interest expense is
Interest expense Dr 117
Interest payable Cr 117
2.Retained earnings
3.Balance sheet
It is assumed that the notes will be payable for more than a year hence not a current liability.
Note - To account for doubtful accounts either the percentage estimated to be uncollectible or the amount that is uncollectible must be mentioned , since both of these information is not available it is not possible to accounts for allowance for doubtful accounts .Hence no entry has been passed for the same.