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The unadjusted pre-closing 12/31/20 account balances for the Maloney Company are listed below: Net Sales $12,540...

The unadjusted pre-closing 12/31/20 account balances for the Maloney Company are listed below:

Net Sales

$12,540

Net Purchases

9,000

Selling Expenses

424

Cash

487

Machines

6,019

Accumulated Depreciation, Machines

2,154

Accounts Payable

1,445

Retained Earnings

4,182

Allowance for Doubtful Accounts

60

Building

4,800

Accumulated Depreciation, Building

468

Common Stock

4,760

Accounts Receivable

2,877

Depreciation Expense, Machines

1,077

Inventory @ 1/1/20 (periodic method used)

925

During your audit, you discover the following four items that have yet to be recorded:

  1. No depreciation on the building has been recorded in 2020. Depreciation on the building is based on Double-Declining Balance. It was purchased on 1/1/18 and has an estimated useful life of 40 years. The estimated salvage value is $1,000.
  2. Maloney exchanged a machine for a similar machine on 12/31/20. The original machine cost $3,429 and had a book value of $2,134. The new machine had a fair value of $1,823; Maloney also received $511 in cash. The exchange lacked commercial substance.
  3. Maloney uses the Income Statement approach to record Bad Debts. Bad Debts in 2020 are estimated to be 4% of Sales.
  4. Ending Inventory is to be estimated using the Gross Profit Method. The historic Gross Profit percentage is 25%.

Required

  1. Record journal entries for items #1-#3 above; show supporting computations. In addition, compute ending inventory per #4 above; show supporting computations. Assume adjusting/closing entries to adjust inventory, close Purchases, and Record CGS were properly made.
  2. Draft the 2020 Condensed Income Statement and the 12/31/20 Balance Sheet. Use the Cabrera (Textbook Illustration 4-3 in Chapter 4) and the Uptown Cabinet (Textbook Illustration 3-41 in Chapter 3) format examples in the text. Assume no taxes. Do not include EPS.

Solutions

Expert Solution

ekkarill92 answered 11 months ago
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