Question

Puzzle Corporation's preliminary Trial balance as of December 31, 2018 is presented below. All 2018
transactions have been recorded except for the items described below.
						Debit			Credit
Cash					$	29,636
Accounts Receivable						48,300
Inventory						20,423
Land						65,400
Buildings						125,000
Equipment						86,250
Allowance for Doubtful Accounts								$	735
Accumulated Depreciation-Buildings									24,600
Accumulated Depreciation-Equipment									34,200
Accounts Payable									16,785
Interest Payable									0
Dividends Payable									0
Unearned Rent Revenue									13,000
Income Tax Payable									0
Bonds Payable									0
Discount on Bonds Payable						0
Common Stock ($8 par)									30,000
Paid in Capital in Excess of Par-Common Stock									11,834
Preferred Stock ($25 par)									0
Paid in Capital in Excess of Par-Preferred Stock									0
Retained Earnings									105,862
Treasury Stock						0
Cash Dividends						0
Sales Revenue									585,245
Rent Revenue									0
Bad Debt Expense						0
Interest Expense						0
Cost of Goods Sold						331,578
Depreciation Expense						0
Other Operating Expenses						39,465
Salaries and Wages Expense						76,209
Income Tax Expense						0
Total					$	822,261		$	822,261
											CONTINUED
Unrecorded transactions
1. On January 1, 2018, Puzzle issued 1,000 shares of $25 par, 6% preferred stock for $36,500.
2. On January 1, 2018, Puzzle also issued 1,000 shares of common stock for $45,275.
3. On January 1, 2018, Puzzle issued $46,000, 6.25%, 8 year bonds when the market rate was 7%.
Interest is to be paid annually on each January 1, beginning January 1, 2019.
4. Puzzle reaquired 450 shares of its common stock on May 5 for $48 per share.
5. On December 31, 2018, Puzzle declared the annual preferred dividend as well as a $1.75 per
share dividend on the outstanding common stock, all payable in cash on January 15, 2019.
6. Puzzle estimates that the total amount of accounts receivable that
is uncollectible at year end is $3,289.
7. The building is being depreciated using the straight line method over 25 years.
The salvage value is $22,500.
8. The equipment is being depreciated using the straight line method over 9 years.
The salvage value is $9,300.
9. The unearned rent was collected on November 1, 2018. It was receipt of 5 months'
rent in advance.
10. The 6.25% bonds payable pay interest every January 1. The interest for the
12 months ended December 31, 2018, has not been recorded. Puzzle uses the
effective interest method of amortization.
11. The Puzzle Corporation must make an adjusting entry to accrue income tax expense on
Income Before Income Tax at a rate of 26.5%. The income taxes will not be paid until March 2019.
Instructions:
(a) Prepare Journal entries for the transactions listed above. Round final answers if necessary to -0-
decimals (to the nearest dollar, do not show cents).
(b) Prepare an updated December 31, 2018 trial balance, reflecting the unrecorded transactions.
(c) Prepare a multiple-step income statement for the year ending December 31, 2018.
(d) Prepare a retained earnings statement for the year ending December 31, 2018.
(e) Prepare a classified balance sheet as of December 31, 2018.

Answer 1

	Journal Entries for Puzzle Corporation
1	Cash a/c	Dr		36500
	To 6% Preference shares a/c		Cr	25000
	To Paid in capital in excess of par- Preferred stock		Cr	11500
2	Cash a/c	Dr		45,275
	To Equity shrare capital a/c		Cr	8,000
	To Paid in capital in excess of par- Common stock		Cr	37,275
3	Cash a/c	Dr		46,000
	To 8 years bonds a/c		Cr	46,000
4	Common stock a/c	Dr		4,500
	Additional paid-in capital a/c	Dr		17,100
	To Cash a/c		Cr	21600
5	Retained earnings a/c	Dr		6563
	To dividend payable a/c		Cr	6563
6	Bad debts a/c	Dr		3,289
	To accounts receivable a/c		Cr	3,289
7	Depreciation on Building a/c	Dr		4,100
	To building a/c		Cr	4,100
8	Depreciation on equipment a/c	Dr		8,550
	To equipment a/c		Cr	8,550
9	Cash a/c	Dr		13,000
	To rent received in advance a/c		Cr	13,000
10	Interest expense a/c	Dr		2875
	To interest payable a/c		Cr	2875
11	Income tax expense	Dr		31,777
	To income tax payable		Cr	31,777
	Trial Balance of puzzle Corporation as of 31 December 2018
	Particulars	Debit	Particulars	Credit
	Cash	148,811	Accounts payable	16,785
	Accounts Receivable	45,011	Rent received in advance	13,000
	Inventory	20,423	Common stock	33,500
	Land	65,400	Paid in capital in excess of par- Common stock	32,009
	Building	96300	Preference stock	25,000
	Equipment	43500	Paid in capital in excess of par- Prefered stock	11,500
	Bad Debts	2,554	Retained earnings	99,299
	Cost of goods sold	331,578	Sales revenue	585,245
	Other operating expenses	39,465	Interest payable	2,875
	Salaries and wages	76,209	Dividend payable	6563
	Interest expense	2,875	8 years bonds	46000
	Depreciation on Equipment	8,550	Unearned rent revenue	13,000
	Depreciation on building	4100
		884,776		884,776
	Income statement of Puzzle Corporation as of 31st December, 2018
	Particulars	Amount	Particulars	Amount
			Revenue	585245
	COGS	331578
	Other operating expenses	39,465
	Salaries and wages	76,209
	Interest expense	2,875
	Depreciation on Equipment	8,550
	Depreciation on building	4100
	Bad Debts	2,554
	Profit before tax	119914
	Tax expense	31777
	Profit after tax	88137
		585245		585245

Statement of retained earnings as of 31st December 2018
Particulars		Amount
Retained earnings balance as of 1 january 2018		105862
Less : Amount payable as dividend		6563
Add : Profit after tax		88137
		187436