Problem 6-15B Retail inventory method LO6
CHECK FIGURE: 2. Loss at cost = $2,040.27
The records of The Wilke Co. provided the following information for the year ended December 31, 2020:

At Cost At Retail
January 1 beginning inventory ......................... $ 40,835 $ 57,305
Purchases ............................................................... 251,945 383,530
Purchase returns .................................................. 5,370 7,665
Sales ........................................................................ 393,060
Sales returns ......................................................... 2,240

Required
1. Prepare an estimate of the company’s year-end inventory by the retail method. Round all calculations to
two decimal places.
2. Under the assumption the company took a year-end physical inventory at marked selling prices that totalled
$39,275, prepare a schedule showing the store’s loss from theft or other causes at cost and at retail.

Balance Sheet

Assets: 12/31/19

Current Assets:

Cash $3,000.00

Accounts Receivable 1,250.00

Prepaid Expenses $100.00

Total Current Assets $4,350.00

Non-Current Assets:

Property, Plant, and Equipment

Land $10,000.00

Buildings 25,000.00

Equipment 15,000.00

Accumulated Depreciation $(12,000.00)

Total Property, Plant, and Equipment $38,000.00

Total Assets $42,350.00

Liabilities:

Current Liabilities

Accounts Payable $100.00

Accrued Expense 150.00

Salary and Wages Payable -

Notes Payable -

Unearned Revenue $1,500.00

Total Liabilities $1,750.00

Shareholder's Equity

Common Stock - $1 par (See Note Below) $15,000.00

Retained Earnings $25,600.00

Total Equity $40,600.00

Total Liabilities and Equity $42,350.00

Transactions during January 2020:

1. On January 2, 2020, ACC executed a 3 month- 6% promissory note for $10,000.00 in favor of its

bank, Cheatem Trust Company, Inc. for working capital purposes.

7. Depreciation expense for the month of January was $1,000.00

8. January service revenue for the Company is $21,000.00. All revenues are recorded as "on account."

9. ACC reviewed its work product for January and determined that it had performed $500.00 of the

services required that were being accounted for as unearned revenue in addition to revenues

described in transaction 8.

10. ACC recorded interest expense associated with the Note Payable described in transaction 1.

NOTE: Other events possibly having an effect on the company:

At the end of January, the Board of Directors voted to shut down and liquidate a component of the

company's operations. This represents a strategic shift in their operations. The component experienced

a 2,100 loss during January. This was partially offset by a $1,200 gain on the disposition of the assets.

Both of these transactions are net of tax and have already been appropriately reflected in the

Retained Earnings balance shown on the December 31, 2019 Balance Sheet.

Note 14 of ACC's financial statements for the year ended 12/31/19 indicates the company's

effective tax rate to be 25%.

The company's common stock account includes 100,000 shares authorized, 1,000 shares issued

and outstanding.

Required:

On separate sheets of paper, please:

Prepare the appropriate journal entries associated with the above transactions. It is not necessary to

prepare journal entries associated with the discontinued component.

Prepare a "T" account depiction of the Company's General Ledger activity for the

month of January 2020.

Prepare ACC's Income Statement for the month ending January 31, 2020

Prepare ACC's Balance Sheet at January 31, 2020.

1. Under GAAP, the consideration transferred in a business combination would include all of the following, except:
   1. Shares issued and given to the former owners of the acquired company
   2. Contingent consideration to be given to the former owners depending on the future earnings of that company
   3. Liabilities assumed by the purchaser
   4. Legal and accounting fees paid by the acquirer
2. When Large bought Tiny, Large issued some new shares of Large stock and gave them to the former owners of Tiny. In connection with issuing the stock, Large had to pay $25,000 of stock issuance fees. Large had to credit cash $25,000. What should it debit?
   1. Additional paid-in capital
   2. Stock issuance fees expense
   3. Investment in Tiny
   4. Goodwill
3. True/False: Under GAAP, consolidated financial statements should have the same balance sheet and income statement data as a company would have shown if it dissolved its subsidiaries into the parent company, instead of keeping them in separate legal existence.

The following information is available for a corporation:

January 1st, 2020 Shares outstanding: 1,250,000

April 1, 2020 Shares Issued: 200,000

July 1, 2020 Purchased Treasury Stock 75,000

October 1, 2020 Issued a 2 for 1 stock split

The number of shares to be used in computing earnings per common share for 2020 is

A) 2,737,500

B) 2,825,500

C) 2,725,000

D) 1,706,250

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