Question

ACC 301 Financial Reporting I Spring 2018 Accounting Cycle Practice Set Attached is the unadjusted trial balance for Surfs Up, Inc. Instructions: 1.         Construct T-accounts and enter the balances shown. 2.         The following adjusting entries have been identified:             a.         Bad debt expense is estimated to be $8,000. b.         Annual depreciation expense on the Equipment is $16,000 and annual depreciation expense for building is $9,000. c.         Prepaid Insurance is for 2 years of insurance paid on 1/1/17. Record the amount for 2017. d.         The note payable ($270,000) has interest of 6% per year and the interest is payable on 1/1/18. Record the interest for 2017. e.         Salaries and wages earned but unpaid as of year-end are $10,750 (sales) and $4,950 (administrative).             f.          At year-end, $1,660 of Supplies remain on hand.             g.         $10,000 of the unearned rent revenue was earned as of 12/31/17. h.           Utilities expense incurred for December, but unpaid and unrecorded was $4,000. i.          Assume no income tax expense and do not calculate earnings per share. Prepare the adjusting journal entries (include explanations) and post the entries to the appropriate T-accounts (construct additional T-accounts as necessary). 3.         Prepare an adjusted trial balance. 4.         Prepare a classified balance sheet and a multiple-step income statement in good form. 5.         Prepare closing journal entries and post to the T-accounts. 6.         Prepare a post-closing trial balance. You should use Excel or a similar spreadsheet program to prepare your work. (you T- accounts can be prepared by hand and postings can be by hand) Your grade will be based on both the accuracy and the organization of your work product. Please submit a hard copy of your work or upload all pieces on blackboard under the assignment. (Submit adjusting journal entries, adjusted trial balance, classified balance sheet, multistep income statement, closing journal entries, post closing trial balance and your final T-accounts after posting closing entries) Surfs Up, Inc.
Trial Balance
			31-Dec-17
					Debit		Credit
Cash					$45,760
Accounts Receivable					$83,350
Allowance for Doubtful Accounts							$4,000
Supplies					$7,110
Inventory					$315,240
Prepaid Insurance					$14,000
Equipment					$422,000
Accumulated Depreciation - Equipment							$118,000
Building					$500,000
Accumulated Depreciation - Building							$15,000
Land					$100,000
Notes Payable							$270,000
Accounts Payable							$89,500
Unearned Rent Revenue							$18,000
Common Stock							$110,000
Retained Earnings							$265,000
Sales Revenue							$2,100,000
Rent Revenue							$64,000
Cost of Goods Sold					$937,440
Salaries and Wages Expense - sales					$273,500
Advertising Expense-Sales					$78,100
Utilities Expense-Administrative					$49,000
Telecommunications -Administrative					$32,000
Salaries and Wages Expense - administrative					$196,000
					$3,053,500		$3,053,500	$ 0

Answer 1

1. T accounts
General Ledger
Cash
31/12/2017	$45,760
Accounts Receivable
31/12/2017	$83,350
Allowance for Doubtful accounts
		31/12/2017	$4,000
Supplies
31/12/2017	$7,110
Inventory
31/12/2017	$315,240
Prepaid Insurance
31/12/2017	$14,000
Equipment
31/12/2017	$422,000
Accumulated Depreciation - Equipment
		31/12/2017	$118,000
Building
31/12/2017	$500,000
Accumulated Depreciation-Building
		31/12/2017	$15,000
Land
31/12/2017	$100,000
Notes Payable
		31/12/2017	$270,000
Accounts payable
		31/12/2017	$89,500
Unearned Rent Revenue
		31/12/2017	$18,000
Common Stock
		31/12/2017	$110,000
Retained Earnings
		31/12/2017	$265,000
Sales Revenue
		31/12/2017	$2,100,000
Rent Revenue
		31/12/2017	$64,000
Cost of Goods Sold
31/12/2017	$937,440
Salaries & wages expenses - sales
31/12/2017	$273,500
Advertisement expenses - sales
31/12/2017	$78,100
Utilities expenses - Administrative
31/12/2017	$49,000
Telecommunications - Administrative
31/12/2017	$32,000
Salaries & wages expenses - administrative
31/12/2017	$196,000

2. Adjusting Journal Entries
a.	Bad Debt expenses a/c	$8,000
	Allowance for doubtful accounts		$8,000
	(To provide for estimated Bad debts)
b.	Depreciation-Equipment	$16,000
	Depreciation-Building	$9,000
	Accumulated Depreciation-equipment		$16,000
	Accumulated Depreciation-Building		$9,000
	(To record depreciation on equipment and building for 2017)
c.	Insurance Expenses a/c	$7,000
	Prepaid Insurance		$7,000
	(To record insurance expenses for 2017)
d.	Interest Expenses a/c	$16,200
	Interest payable a/c		$16,200
	(To record interest expense for 2017, payable on 1/1/2018)
	Interest expense = 270000 x 6% = $16,200
e.	Salaries & Wages expenses-sales	$10,750
	Salaries & Wages expenses-administrative	$4,950
	Salaries & Wages payable		$15,700
	(To record unpaid salaries and wages as of year end)
f.	Supplies expenses a/c	$5,450
	Supplies a/c		$5,450
	(To record supplies used)
g.	Unearned Rent Revenue a/c	$10,000
	Rent Revenue a/c		$10,000
	(To record unearned rent revenue earned as of 31/12/2017)
h.	Utilities expenses a/c	$4,000
	Utilities payable		$4,000
	(To record Utilities expenses incurred, but unpaid as of 31/12/2017)

T accounts after adjusting journal entries
Allowance for Doubtful accounts
		31/12/2017	$4,000
		31/12/2017	$8,000
Bad Debt expenses
31/12/2017	$8,000
Accumulated Depreciation - Equipment
		31/12/2017	$118,000
		31/12/2017	$16,000
Accumulated Depreciation-Building
		31/12/2017	$15,000
		31/12/2017	$9,000
Depreciation - Equipment
31/12/2017	$16,000
Depreciation - Building
31/12/2017	$9,000
Prepaid Insurance
31/12/2017	$14,000	31/12/2017	$7,000
Insurance Expenses
31/12/2017	$7,000
Interest payable
		31/12/2017	$16,200
Interest Expenses
31/12/2017	$16,200
Salaries & wages expenses - sales
31/12/2017	$273,500
31/12/2017	$10,750
Salaries & wages expenses - administrative
31/12/2017	$196,000
31/12/2017	$4,950
Salaries and wages payable
		31/12/2017	$15,700
Supplies
31/12/2017	$7,110	31/12/2017	$5,450
Supplies Expenses
31/12/2017	$5,450
Rent Revenue
		31/12/2017	$64,000
		31/12/2017	$10,000
Unearned Rent Revenue
31/12/2017	$10,000	31/12/2017	$18,000
Utilities expenses - Administrative
31/12/2017	$49,000
31/12/2017	$4,000
Utilities payable
		31/12/2017	$4,000

3. Adjusted Trial Balance
Particulars	Debit	Credit
Cash	$45,760
Accounts Receivable	$83,350
Allowance for Doubtful accounts		$12,000
Supplies	$1,660
Inventory	$315,240
Prepaid Insurance	$7,000
Equipment	$422,000
Accumulated Depreciation-Equipment		$134,000
Building	$500,000
Accumulated Depreciation-Building		$24,000
Land	$100,000
Notes Payable		$270,000
Accounts payable		$89,500
Interest payable		$16,200
Salaries & Wages payable		$15,700
Utilities payable		$4,000
Unearned Rent Revenue		$8,000
Common Stock		$110,000
Retained Earnings		$265,000
Sales Revenue		$2,100,000
Rent Revenue		$74,000
Cost of Goods Sold	$937,440
Salaries & Wages expenses-sales	$284,250
Advertisement expenses-sales	$78,100
Utilities expenses - administrative	$53,000
Telecommunication expenses-administrative	$32,000
Salaries & Wages expenses-administrative	$200,950
Supplies expenses	$5,450
Insurance expenses	$7,000
Bad Debts expenses	$8,000
Interest expenses	$16,200
Depreciation - equipment	$16,000
Depreciation - Building	$9,000
	$3,122,400	$3,122,400

4. Income statement
Particulars	Amount
Sales Revenue		$2,100,000
Less: Cost of Goods Sold		$937,440
		$1,162,560
Rent Revenue		$74,000
Gross Profit		$1,236,560
Operating Expenses
Salaries & Wages expenses-sales	$284,250
Advertisement expenses-sales	$78,100
Utilities expenses - administrative	$53,000
Telecommunication expenses-administrative	$32,000
Salaries & Wages expenses-administrative	$200,950
Supplies expenses	$5,450
Insurance expenses	$7,000
Bad Debts expenses	$8,000
Depreciation - equipment	$16,000
Depreciation - Building	$9,000	$693,750
Operating Profit		$542,810
Non-operating expenses
Interest expenses		$16,200
Net Profit		$526,610
Classified Balance Sheet
ASSETS	Amount
Current Assets:
Cash		$45,760
Accounts Receivable	$83,350
Less: Allowance for Doubtful accounts	($12,000)	$71,350
Supplies		$1,660
Inventory		$315,240
Prepaid Insurance		$7,000
Total Current Assets		$441,010
Fixed Assets
Equipment	$422,000
Accumulated Depreciation-Equipment	($134,000)	$288,000
Building	$500,000
Accumulated Depreciation-Building	($24,000)	$476,000
Land		$100,000
Total Fixed Assets		$864,000
Total Assets		$1,305,010
LIABILITIES
Current Liabilities:
Notes Payable		$270,000
Accounts payable		$89,500
Interest payable		$16,200
Salaries & Wages payable		$15,700
Utilities payable		$4,000
Unearned Rent Revenue		$8,000
Total Current Liabilities		$403,400
Equity
Common Stock		$110,000
Retained Earnings		$791,610
Total Equity		$901,610
Total Liabilities & Equity		$1,305,010

5. Closing Journal Entries
	Sales Revenue	$2,100,000
	Rent Revenue	$74,000
	Income Summary		$2,174,000
	(To close income account to income summary)
	Income Summary	$1,647,390
	Cost of Goods Sold		$937,440
	Salaries & Wages expenses-sales		$284,250
	Advertisement expenses-sales		$78,100
	Utilities expenses - administrative		$53,000
	Telecommunication expenses- administrative		$32,000
	Salaries & Wages expenses-administrative		$200,950
	Supplies expenses		$5,450
	Insurance expenses		$7,000
	Bad Debts expenses		$8,000
	Interest expenses		$16,200
	Depreciation - equipment		$16,000
	Depreciation - Building		$9,000
	(To close expenses accounts to income summary)

Income Summary	$526,610
Retained Earnings		$526,610
(To close profit for the period)

Income Summary
31/12/2017	$1,647,390	31/12/2017	$2,174,000
31/12/2017	$526,610

Sales Revenue
31/12/2017	$2,100,000	31/12/2017	$2,100,000
Rent Revenue
31/12/2017	$74,000	31/12/2017	$64,000
		31/12/2017	$10,000
Cost of Goods Sold
31/12/2017	$937,440	31/12/2017	$937,440
Salaries & wages expenses - sales
31/12/2017	$273,500	31/12/2017	284250
31/12/2017	$10,750
Advertisement expenses - sales
31/12/2017	$78,100	31/12/2017	$78,100
Utilities expenses - Administrative
31/12/2017	$49,000	31/12/2017	$53,000
31/12/2017	$4,000
Telecommunications - Administrative
31/12/2017	$32,000	31/12/2017	$32,000
Salaries & wages expenses - administrative
31/12/2017	$196,000	31/12/2017	$200,950
31/12/2017	$4,950
Bad Debt expenses
31/12/2017	$8,000	31/12/2017	$8,000
Depreciation - Equipment
31/12/2017	$16,000	31/12/2017	$16,000
Depreciation - Building
31/12/2017	$9,000	31/12/2017	$9,000
Insurance Expenses
31/12/2017	$7,000	31/12/2017	$7,000
Interest Expenses
31/12/2017	$16,200	31/12/2017	$16,200
Supplies Expenses
31/12/2017	$5,450	31/12/2017	$5,450

Retained Earnings
		31/12/2017	$265,000
		31/12/2017	$526,610

6. Post Closing Trial Balance
Particulars	Debit	Credit
Cash	$45,760
Accounts Receivable	$83,350
Allowance for Doubtful accounts		$12,000
Supplies	$1,660
Inventory	$315,240
Prepaid Insurance	$7,000
Equipment	$422,000
Accumulated Depreciation-Equipment		$134,000
Building	$500,000
Accumulated Depreciation-Building		$24,000
Land	$100,000
Notes Payable		$270,000
Accounts payable		$89,500
Interest payable		$16,200
Salaries & Wages payable		$15,700
Utilities payable		$4,000
Unearned Rent Revenue		$8,000
Common Stock		$110,000
Retained Earnings		$791,610
	$1,475,010	$1,475,010
Retained Earnings
Retained Earnings on 1/1/2017	$265,000
Add: Net Profit	$526,610
Retained Earnings on 31/12/2017	$791,610