In: Accounting
Preparation of accounts and Cash flow statement.
The following is a listing of the accounts of Sally’s
Struthers Co. at December 31, 2002.
Cash
$20,000
Accounts Receivable 30,000
Inventory (8 Struthers @ $5,000 each) 40,000
Prepaid Insurance 1,000
Vehicles
100,000
Accumulated
Depreciation-Vehicles
36,000
Equipment
300,000
Accumulated
Depreciation-Equipment
150,000
Security
Deposits
3,000
Accounts Payable 12,000
Taxes Payable 10,000
Wages Payable 5,000
Rent
Payable
2,000
Common Stock (5,000 shares)
50,000
Retained Earnings
229,000
During 2003 the following transactions occurred:
Jan 1, Paid all accounts payable for
merchandise.
Jan 1, Received all accounts receivable.
Jan 1, Borrowed $120,000 from bank. Note is
repayable $20,000 per year plus interest. The first payment is due
on Dec 31, 2003. The interest rate is 10%.
Feb 1, Bought 10 more Struthers at $6,000 each,
40% down and the rest payable in one year.
Mar 1, Paid 2002 taxes payable.
Apr 1, Paid $4,000 for utilities.
May 1, Issued 2,000 shares of common stock for
$20,000.
June 1, Sold 6 Struthers for $20,000 each. Customers
pay 70% down and the rest payable in one year.
July 1, Purchased 4 Struthers at $7,000 each -
same terms.
Aug 1, Paid dividend of $2.00 per share.
Sept 1, Sold 5 Struthers for $22,000 each - same
terms.
Nov 1, Purchased two year insurance policy for
$3,000.
Dec 1, Exchanged 5,000 shares of common stock for
a piece of land worth $50,000.
Dec 20, Received $20,000 from accounts receivable.
Dec 31, Paid first payment on Note Payable-Bank.
During the year the company paid wages of $ 40,000 in
cash. At the end of the year they owed
wages of $2,000.
During the year they paid 14 months rent at $2,000 per month.
Tax rate is 30%. 2003 taxes are to be paid in
2004.
The vehicles were all purchased on the same date and have a total
salvage value of $10,000 and are expected to have a useful life of
5 years.
All equipment is expected to last 20 years and have no salvage
value.
The company uses FIFO when accounting for inventory.
At December 31, 2003 the stock was selling for $50 per share.
Required:
a) Prepare Cash flow statement
b) Journalize the transactions using