Question

Excalibur Corporation sells video games for personal computers. The unadjusted trial balance as of December 31, 2018, appears below. December 31 is the company’s fiscal year-end. The company uses the perpetual inventory system. Account Title Debits Credits Cash 80,380 Accounts receivable 25,500 Supplies 0 Prepaid rent 0 Inventory 61,500 Office equipment 77,000 Accumulated depreciation—office equipment 10,010 Accounts payable 32,100 Salaries and wages payable 4,200 Note payable 30,300 Common stock 105,000 Retained earnings 18,050 Sales revenue 240,000 Cost of goods sold 125,000 Interest expense 0 Salaries and wage expense 46,750 Rent expense 15,800 Supplies expense 2,080 Utility expense 5,650 Totals 439,660 439,660 Cash dividends paid to shareholders during the year amounted to $7,875. Information necessary to prepare the year-end adjusting entries appears below. The office equipment was purchased in 2016 and is being depreciated using the straight-line method over an eight-year useful life with no salvage value. Accrued salaries and wages at year-end should be $6,300. The company borrowed $30,300 on September 1, 2018. The principal is due to be repaid in 10 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 10%. The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $520. Prepaid rent at year-end should be $1,150. 1. Complete the worksheet below. 2-a. Use the information in the worksheet to prepare an income statement for 2018. 2-b. Use the information in the worksheet to prepare a statement of shareholders’ equity for 2018. 2-c. Use the information in the worksheet to prepare a balance sheet as of December 31, 2018. 3. Prepare the necessary closing entries assuming that adjusting entries have been correctly posted to the accounts.

Answer 1

2-a Income Statement

Excalibur Corporation
Income Statement
For the year ended 31st Dec,2018
Revenue:
	Gross Sales					$240,000.00
	Less:	Sales Returns and Allowances				$0.00
	Net Sales					$240,000.00
Cost of Goods Sold:
	Cost of Goods Sold					$125,000.00
	Gross Profit (Loss)					$115,000.00
Expenses:
	Salaries & wages			$53,050.00
	Depreciation			$9,625.00
	Interest			$1,010.00
	Supplies			$1,560.00
	Rent			$14,650.00
	Utilities			$5,650.00
	Total Expenses					$85,545.00
	Net Operating Income					$29,455.00
Other Income:
	Gain (Loss) on Sale of Assets			$0.00
	Interest Income			$0.00
	Total Other Income					$0.00
Net Income (Loss)						$29,455.00

2 b Balance sheet

Balance Sheet for Excalibur Corporation
BALANCE SHEET	2018
Current assets	$169,050
Cash	$72,505
Accounts Receivable	$25,500
Inventory	$62,020
Pre-paid expenses	$1,150
Fixed assets	$57,365
Leasehold
Property & land
Renovations/improvements
Furniture & fitout
Vehicles
Equipment/tools	$77,000
Computer equipment
Less: Accumulated Depreciation	-$19,635
Total assets	$218,540
Stockholder Equity	$152,505
Common Stock	$105,000
Retained Earning	$39,630
Current/short-term liabilities	$73,910
Credit cards payable
Accounts payable	$32,100
Interest payable	$1,010
Accrued wages	$10,500
Note Payable	$30,300
More…
Long-term liabilities	$0
Loans
More…
Total liabilities	$218,540

2 c Statement of Shareholder Equity:

Excalibur Corporation
Statement of changes in equity for the year ended 31stDecember 2018
	Share Capital	Retained Earnings	Revaluation Surplus	Total Equity
	USD	USD	USD	USD
Balance at 1 January 2018	105,000	18,050	-	123,050
Issue of share capital	0	0	0	0
Income for the year	0	29,455	0	29,455
Revaluation gain	0	0	0	0
Dividends	0	7,875	-	7,875
				0
Balance at 31 December 2018	105,000	39,630	0	144,630

3 Closing entries:

S.NO	Date	Particulars	Debit	Credit
1	31.12.2018	Depreciation	9625
		To Accumulated Depreciation		9625
		(To record Depreciation on Office Equipment)
2	31.12.2018	Salaries & Wages	6300
		To Salaries & Wages Payable		6300
		(To record accrued Salaries & Wages)
3	31.12.2018	Interest	1010
		To Interest Payable		1010
		(To record Interest on borrowed capital)
4	31.12.2018	Inventories	520
		To Supplies		520
		(To record Supplies in hand)
5	31.12.2018	Prepaid Rent	1150
		To Rent		1150
		(To record prepaid rent)
6	31.12.2018	Retained Earning	7875
		To Cash		7875
		(To record payment of Dividend in Cash)