In: Accounting
The trial balance for a company that sells alarms, as of January 1, 2016 had the following balances:
Cash 74,000
Accounts receivable 13,000
Supplies 200
Prepaid rent 3,200
Merchandise inventory (24 @ $200; 1 @ $200) 5,000
Land 4000
Accounts payable 1,900
Unearned revenue 900
Salaries payable 1,000
Common stock 50,000
Retained earnings 47,000
The following transactions took place during 2016:
1. Paid the salaries payable from 2015.
2. Paid $4,800 on May 1, 2016, for one year's lease on the company van in advance.
3. Paid $7,200 on May 2,2016 for one year's office rent in advance.
4. Purchased $400 of supplies on account.
5. Purchased 100 alarm systems for $28,000 cash during the year.
6. Sold 102 alarm systems for $57,000. All sales were on account.
(Compute cost of goods sold using the FIFO cost flow method)
7. Paid $2,100 on accounts payable during the year.
8. Billed $52,000 of monitoring services for the year.
9. Paid installers and other employees a total of $25,000 cash for salaries.
10. Collected $89,000 of accounts receivable during the year.
11. Paid $3,600 of advertising expense during the year.
12. Paid $2,500 of utilities expense for the year.
13. Paid a dividend of $10,000 to the shareholders.
1. Prepare the trial balance as at Dec 31, 2016 for the company
2. Prepare the income statement and balance sheet for the company.
Account |
Jan 1 Balance |
Dec 31 balance |
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Cash |
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AR |
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Supplies |
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Prepaid Rent |
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Inventory |
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Land |
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AP |
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Unearned Revenue |
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Salaries Payable |
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Common Stock |
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Retained Earnings |
Trial Balance |
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Debit | Credit | |
cash ( WN1) | $78,800 | |
Accounts receivable (WN2) | $33,000 | |
Supplies (200+400) | 600 | |
Prepaid Rent and lease(3200+7200+4800) | $15,200 | |
Inventory (5000+28000-(25*200+77*280) | 6440 | |
Land | 4000 | |
Accounts payable (1900+400-2100) | 200 | |
Unearned Revenue | 900 | |
Salaries Payable | 0 | |
Common Stock | 50000 | |
Retained Earnings | 47000 | |
dividend | 10000 | |
Sales | $57,000 | |
Service revenue | $52,000 | |
Cost of good sold (25*200+77*280) | $26,560 | |
Salaries expenses | $25,000 | |
Advertising expenses | $3,600 | |
Utilities expenses | $2,500 | |
Total | $205,700 | $207,100 |
Income statement | ||
Sales | $57,000 | |
Service revenue | $52,000 | |
Total revenue | $109,000 | |
Less: Cost of goods sold (25*200+77*280) | 26560 | |
Gross profit | $82,440 | |
Salaries expenses | $25,000 | |
Advertising expenses | $3,600 | |
Utilities expenses | $2,500 | |
Total expenses | $31,100 | |
Net Income | $51,340 | |
Statement of Retained Earnings | ||
Beginning Balance | $47,000 | |
Add: Net income | $51,340 | |
Less: dividend | -10000 | |
Ending Balance | $88,340 | |
Balance sheet | ||
For the year ending 31st December 2016 | ||
Current assets | ||
Cash | $78,800 | |
Accounts Receivable | $33,000 | |
Supplies | $600 | |
Prepaid Rent | $15,200 | |
Inventory | $6,440 | |
Total current assets | $134,040 | |
Land | 4000 | |
Total assets | $138,040 | |
Liabilities & stockholder equity | ||
Current liabilities | ||
Accounts payable | 200 | |
Unearned Revenue | 900 | |
Total Current liabilities | 1100 | |
stockholder equity | ||
common stock | 50000 | |
Retained earnings | $88,340 | |
Total stockholder equity | 138340 | |
Total Liabilities & stockholder equity | 139440 | |
working | ||
Cash Balance Calculation | ||
Cash Account Beginning | 74000 | |
Cash flows | ||
Salaries paid | -1000 | |
advance payment towards van lease | -4800 | |
prepaid office Rent | -7200 | |
purchase of 100 alarm systems | -28000 | |
payment of accounts payable | -2100 | |
Salaries Expenses | -25000 | |
Accounts receivable | 89000 | |
Advertising Expenses | -3600 | |
Paid utilities Expense | -2500 | |
Dividend payment | -10000 | |
Total cash during the period | 4800 | |
Ending cash balance | 78800 | |
Accounts receivable | ||
Beginning | 13000 | |
Add credit sales | 57000 | |
Less Collection of accounts receivable | -89000 | |
Billing of revenue | 52000 | |
Closing | 33000 |