As a recently hired accountant for a small business, SMC, Inc., you are provided with last year’s balance sheet, income statement, and post-closing trial balance to familiarize yourself with the business.
You are also given the following information that summarizes the business activity for the current year,2020
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As arecently hired accountantfor a smallbusiness,SMC,Inc., you are providedwithlast year’s balance sheet, income statement, and post-closing trial balance to familiarize yourself with the business. SMC, Inc. Balance Sheet December 31, 2019 Assets Cash ......................................................................................................... $34,500 Accounts receivable ................................................................................ 25,000 Inventory .................................................................................................. 10,000 Supplies ................................................................................................... 200 Total assets.............................................................................................. $69,700 Liabilities and Stockholders’ Equity Liabilities: Accounts payable ............................................................................. $12,000 Salaries payable ............................................................................... 1,000 Income taxes payable ...................................................................... 3,675 Total liabilities.......................................................................................... $16,675 Stockholders’ equity: Capital stock (10,000 shares outstanding).................................... $25,000 Retained earnings ............................................................................ 28,025 Total stockholders’ equity ....................................................................... 53,025 Total liabilities and stockholders’ equity................................................ $69,700 SMC, Inc. Income Statement For the Year Ended December31,2019 Sales revenue .......................................................................................... $110,000 Rent revenue ........................................................................................... 1,000 Total revenues......................................................................................... $111,000 Less cost of goods sold........................................................................... 60,000 Gross profit ........................................................................................... $ 51,000 Less operating expenses: Supplies expense ............................................................................. $ 400 Salaries expense .............................................................................. 22,000 Miscellaneous expense................................................................... 4,100 26,500 Income beforetaxes................................................................................ $ 24,500 Less income taxes................................................................................... 3,675 Net income............................................................................................... $ 20,825 Earnings per share ( $20,825 / 10,000shares) $ 2.08 SMC, Inc. Post-Closing Trial Balance December 31, 2019 Debits Credits Cash ......................................................................................................... $34,500 Accounts Receivable............................................................................... 25,000 Inventory .................................................................................................. 10,000 Supplies ................................................................................................... 200 Accounts Payable.................................................................................... $12,000 Salaries Payable ...................................................................................... 1,000 Income TaxesPayable............................................................................. 3,675 Common Stock............................................................................................ 25,000 Retained Earnings ................................................................................... 28,025 Totals........................................................................................................ $69,700 $69,700 You are also given the following information that summarizes the business activity for the current year,2020 a. Issued 10,000 additional shares of common stock for $60,000 cash on January 1st. b. Borrowed $25,000 onMarch 1,2020,from Downtown Bank as a long-term loan. The interest rate on the loan is 4%and Interest for the year is payable on January 1, 2021. c. Paid $12,000 cash on April1 to lease a building for one year. d. Received $6,000 on May 1 from a tenant for one year’s rent. e. Paid $4,200 on June 1 for a one-year insurance policy. f. Purchased $3,500 of supplies for cash on June 15th. g. Purchased inventory for $125,000 on account on July 1. h. August 1, sold inventory for $185,000 on account; cost ofthe merchandise sold was $120,000. i. Collected $145,000 cash from customers’ accounts receivable onAugust 20th. j. September 1,Paid $95,000 cash for inventories purchased earlier during the year. k. September 20th paid $34,000 for sales reps’ salaries, including $1,000 owed atthe beginning of2020. l. Dividends for $9,500 were paid onOctober 20th. m. The income taxes payable for the year of 2019 were paid on November 15th. n. For adjusting entries, all prepaid expenses are initially recorded asassets, andall unearned revenues are initially recorded as liabilities (this is just informational). o. At year-end, $1,050 worth of supplies are on hand. p. At year-end, an additional $9,500 of sales salaries are owed, but have not yet been paid. q. Prepare an adjusting entry to recognize the taxes owed for 2020. The corporate tax rate is 21% of the income before income taxes. You are asked to do the following on an excel spreadsheet: 1. Journalize the transactions for the current year, 2020, using the chart of accounts listed on the excel spreadsheet provided for the project. 2. Set up T-accounts and enter the beginning balances from the December 31, 2019, post-closing trial balance for SMC. Post all current year journal entries to the T-accounts. 3. Journalize and post any necessary adjusting entries at the end of 2020. (Hint: Items b, c, d, e, o, p, and q require adjustment.) 4. After the adjusting entries are posted, prepare an adjusted trial balance, an income statement, statement ofretained earnings and a balance sheet for 2020. The format of your statements should mirror those prepared by the company in 2019. 5. Journalize and post-closing entries for 2020 and prepare a post-closing trial balance. 6. Compute the Current Ratio and Debt to Total Equity Ratio for 2019 and 2020 7. Interpretive Question: What is your overall assessmen |
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Assignment Summary
On the excel spreadsheet attached, perform the following tasks using the information from SMC, Inc. provided above:
In: Accounting
Exercise 22-14 (b) (indirect method)
Indigo Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:
| INDIGO INC. Comparative Statement of Financial Position December 31 |
|||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | ||||||
|
Cash |
$52,795 | $25,120 | |||||
|
Accounts receivable |
58,040 | 51,090 | |||||
|
Inventory |
39,980 | 60,020 | |||||
|
Prepaid rent |
5,270 | 4,170 | |||||
|
Equipment |
157,450 | 130,110 | |||||
|
Accumulated depreciation–equipment |
(35,270 | ) | (25,170 | ) | |||
|
Goodwill |
20,000 | 60,000 | |||||
|
Total assets |
$298,265 | $305,340 | |||||
|
Accounts payable |
$46,250 | $40,110 | |||||
|
Income tax payable |
3,980 | 6,020 | |||||
|
Salaries and wages payable |
8,120 | 4,120 | |||||
|
Short–term loans payable |
8,040 | 10,090 | |||||
|
Long–term loans payable |
60,000 | 79,000 | |||||
|
Common shares |
130,000 | 130,000 | |||||
|
Retained earnings |
41,875 | 36,000 | |||||
|
Total liabilities and shareholders’ equity |
$298,265 | 305,340 | |||||
| INDIGO INC. Income Statement Year Ending December 31, 2020 |
|||||
|---|---|---|---|---|---|
|
Sales revenue |
$348,085 | ||||
|
Cost of goods sold |
165,000 | ||||
|
Gross margin |
183,085 | ||||
|
Operating expenses |
120,000 | ||||
|
Operating income |
63,085 | ||||
|
Interest expense |
$11,600 | ||||
|
Impairment loss–goodwill |
40,000 | ||||
|
Gain on disposal of equipment |
(2,300 | ) | 49,300 | ||
|
Income before income tax |
13,785 | ||||
|
Income tax expense |
4,110 | ||||
|
Net income |
$9,675 | ||||
Additional information:
| 1. | Dividends on common shares in the amount of $3,800 were declared and paid during 2020. | |
| 2. | Depreciation expense is included in operating expenses, as is salaries and wages expense of $72,000. | |
| 3. | Equipment with a cost of $34,000 that was 70% depreciated was sold during 2020. |
Prepare a statement of cash flows using the indirect method.
(Show amounts that decrease cash flow with either a -
sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
In: Accounting
Emanuel Products produces coat racks in Toronto, Canada. The accountant has presented you the following budgeted data for the third quarter of 2020. Sales are forecasted to be 70,000 units at a price per unit of $35. The budgeted beginning and ending finished goods inventories are 6,000 and 12,000 units respectively. It is estimated that each rack requires five kilograms of metal at a budgeted price of $3 per kg. The beginning raw materials inventory is estimated as 3,500 kilograms. George Products wants to keep ending raw materials inventory of 5,500 due to fluctuations in demand. Each rack requires 1.4 hours of direct labour and the standard hourly pay rate is $18.
Required: (please show all steps of your computation in proper format)
1. Prepare a sales budget for the third quarter of 2020.
2. Prepare a production budget for the third quarter of 2020. (1.5 marks)
3. Prepare a direct materials purchases budget for the third quarter of 2020. (1.5 marks)
4. Prepare a direct labour budget for the third quarter of 2020. (1 mark)
5. Mr Peter started a business by acquiring a medium sized manufacturing firm. He hired you to work in the accounting department. You are in charge of providing management accounting reports to aid him in the planning and control of operations and make sure that everything the company does is consistent to the plan. He advised you not to implement a standard costing system as he does not see any purpose in doing that. What is your reaction to his advice? If you don’t agree on his idea, how do you convince him to accept the importance of standard costing? (1 mark)
(Total 6 Marks)
In: Accounting
Bridgeport Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:
| BRIDGEPORT
INC. Comparative Statement of Financial Position December 31 |
|||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | ||||||
|
Cash |
$47,670 | $25,040 | |||||
|
Accounts receivable |
57,990 | 51,030 | |||||
|
Inventory |
40,030 | 60,090 | |||||
|
Prepaid rent |
5,160 | 4,010 | |||||
|
Equipment |
163,130 | 130,080 | |||||
|
Accumulated depreciation–equipment |
(35,160 | ) | (25,010 | ) | |||
|
Goodwill |
24,000 | 64,000 | |||||
|
Total assets |
$302,820 | $309,240 | |||||
|
Accounts payable |
$46,130 | $40,080 | |||||
|
Income tax payable |
4,030 | 6,090 | |||||
|
Salaries and wages payable |
8,040 | 4,040 | |||||
|
Short–term loans payable |
7,990 | 10,030 | |||||
|
Long–term loans payable |
64,000 | 83,000 | |||||
|
Common shares |
130,000 | 130,000 | |||||
|
Retained earnings |
42,630 | 36,000 | |||||
|
Total liabilities and shareholders’ equity |
$302,820 | 309,240 | |||||
| BRIDGEPORT
INC. Income Statement Year Ending December 31, 2020 |
|||||
|---|---|---|---|---|---|
|
Sales revenue |
$348,425 | ||||
|
Cost of goods sold |
165,000 | ||||
|
Gross margin |
183,425 | ||||
|
Operating expenses |
120,000 | ||||
|
Operating income |
63,425 | ||||
|
Interest expense |
$12,100 | ||||
|
Impairment loss–goodwill |
40,000 | ||||
|
Gain on disposal of equipment |
(2,500 | ) | 49,600 | ||
|
Income before income tax |
13,825 | ||||
|
Income tax expense |
4,195 | ||||
|
Net income |
$9,630 | ||||
Additional information:
| 1. | Dividends on common shares in the amount of $3,000 were declared and paid during 2020. | |
| 2. | Depreciation expense is included in operating expenses, as is salaries and wages expense of $75,000. | |
| 3. | Equipment with a cost of $28,000 that was 70% depreciated was sold during 2020. |
Prepare a statement of cash flows FOR YEAR END DECEMBER
31,2020 using the INDIRECT method.
(Show amounts that decrease cash flow with either a -
sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
In: Accounting
Martinez Inc., a greeting card company that follows ASPE, had
the following statements prepared as at December 31,
2020:
| MARTINEZ
INC. Comparative Statement of Financial Position December 31 |
|||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | ||||||
|
Cash |
$45,745 | $25,080 | |||||
|
Accounts receivable |
58,150 | 51,170 | |||||
|
Inventory |
39,950 | 60,100 | |||||
|
Prepaid rent |
5,030 | 4,020 | |||||
|
Equipment |
164,730 | 130,100 | |||||
|
Accumulated depreciation–equipment |
(35,030 | ) | (25,020 | ) | |||
|
Goodwill |
34,000 | 70,000 | |||||
|
Total assets |
$312,575 | $315,450 | |||||
|
Accounts payable |
$46,130 | $40,100 | |||||
|
Income tax payable |
3,950 | 6,100 | |||||
|
Salaries and wages payable |
8,080 | 4,080 | |||||
|
Short–term loans payable |
8,150 | 10,170 | |||||
|
Long–term loans payable |
74,000 | 89,000 | |||||
|
Common shares |
130,000 | 130,000 | |||||
|
Retained earnings |
42,265 | 36,000 | |||||
|
Total liabilities and shareholders’ equity |
$312,575 | 315,450 | |||||
| MARTINEZ
INC. Income Statement Year Ending December 31, 2020 |
|||||
|---|---|---|---|---|---|
|
Sales revenue |
$343,365 | ||||
|
Cost of goods sold |
165,000 | ||||
|
Gross margin |
178,365 | ||||
|
Operating expenses |
120,000 | ||||
|
Operating income |
58,365 | ||||
|
Interest expense |
$11,600 | ||||
|
Impairment loss–goodwill |
36,000 | ||||
|
Gain on disposal of equipment |
(3,000 | ) | 44,600 | ||
|
Income before income tax |
13,765 | ||||
|
Income tax expense |
4,100 | ||||
|
Net income |
$9,665 | ||||
Additional information:
| 1. | Dividends on common shares in the amount of $3,400 were declared and paid during 2020. | |
| 2. | Depreciation expense is included in operating expenses, as is salaries and wages expense of $72,500. | |
| 3. | Equipment with a cost of $38,000 that was 70% depreciated was sold during 2020. |
Prepare a statement of cash flows using the DIRECT
method. (Show amounts that decrease cash flow with
either a - sign e.g. -10,000 or in parenthesis e.g.
(10,000).)
In: Accounting
Culver Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:
CULVER INC.
Comparative Statement of Financial Position
December 31
2020 2019
Cash $47,775
$25,090
Accounts receivable 57,930
51,030
Inventory 39,990
60,070
Prepaid rent 5,210
4,100
Equipment 161,990
130,120
Accumulated depreciation–equipment
(35,210 ) (25,100
)
Goodwill 28,000
68,000
Total assets
$305,685 $313,310
Accounts payable $46,190
$40,120
Income tax payable 3,990
6,070
Salaries and wages payable
8,090 4,090
Short–term loans payable 7,930
10,030
Long–term loans payable 68,000
87,000
Common shares 130,000
130,000
Retained earnings 41,485
36,000
Total liabilities and shareholders’
equity $305,685
313,310
CULVER INC.
Income Statement
Year Ending December 31, 2020
Sales revenue
$348,490
Cost of goods sold
165,000
Gross margin
183,490
Operating expenses
120,000
Operating income
63,490
Interest expense $12,100
Impairment loss–goodwill
40,000
Gain on disposal of equipment
(2,400 ) 49,700
Income before income tax
13,790
Income tax expense
4,105
Net income
$9,685
Additional information:
1. Dividends on common shares in the
amount of $4,200 were declared and paid during 2020.
2. Depreciation expense is included in
operating expenses, as is salaries and wages expense of
$70,000.
3. Equipment with a cost of $36,000 that
was 70% depreciated was sold during 2020.
Prepare a statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -10,000 or in parenthesis e.g. (10,000).)
In: Accounting
The labor supply and demand equations in Mexico and the US are Ndmex =140–2Wmex andNsmex =80 NdUS =600–4WUS andNsUS =260 (Notice: To make the exercise simple, we are assuming that the labor supply curves are perfectly vertical at 80 in México and at 260 in the US). where Ndmex and NdUS are the number of workers demanded in Mexico and the US (in millions of workers). Wmex and WUS are the yearly wage rates in Mexico and the US (in of your textbook. thousands of dollars). Nsmex and NsUS are the number of workers supplied in Mexico and the US (in millions of workers).
a. What are the equilibrium wages in Mexico and the US.
b. Due to the higher US wages (see your answer to part a), millions of Mexican workers want to emigrate to the US. However, the US inmigration authorities issue work permits for only 10 million Mexican workers. How will this limited flow of Mexican workers affect wages both in Mexico and the US (hint: if these flows take place, how many workers will there be left in México, how many workers will there be in the US, i.e., how do the labor supply curves shift?).
c. If an unlimited flow of Mexican workers is allowed (free movement of labor across borders), at the end, wages will be equal in both countries (basically, in practice, there will be just one unified labor market). What would be this wage? How many Mexican workers will emigrate to the US? How many Mexican workers will be demanded in the US? At the end, how many workers will there be in México and the US? (Hint: Find the total labor supply and demand equations).
In: Economics
Problem Set 8 Addendum:
1. There is one more topic in population genetics that I wanted to touch on, but did not get a chance to cover in lecture. We did discuss why genetic drift is of concern in zoo populations due to small population size. Related phenomena are when a natural population goes through a population bottleneck (a reduction of population size due to a severe natural event (flood, fire, severe storm) or due to human activity (habitat destruction, hunting to near extinction) or a founder effect (i.e. a small founder population derived from a larger mainland population is established on an island). See Campbell p. 493. In such events the chance survivors or chance founders (not based on better traits, just chance) represent very small numbers of individuals and in such cases the effects of drift can be very strong.
Elephant seals are a good example of the effect of a population bottleneck on the level of genetic variation in the population. In the 1890s hunting reduced the northern elephant seal population from thousands of individuals to 20 individuals. Under a hunting ban the population increased and now numbers about 30,000. In a sample of 24 protein coding genes in the present-day population , only three loci were polymorphic. The level of polymorphism was much higher in the southern elephant seal population, that was not reduced to very low population size. In the northern population, the population size has increased, but the level of genetic variation has not. The northern and southern elephant seals are different species and separated geographically, so migration between the northern and southern populations cannot replenish genetic variation in the northern elephant seals. What is the only force that can replenish genetic variation in the Northern elephant seal population? Why hasn’t this force been able to replenish genetic variation in >100 years? Answer: the only force of evolution that can replenish genetic variation in the population is mutation. Mutations rates are so low that it will take thousands of generations for mutation to replenish genetic variation in the northern elephant seal population. A similar example is discussed in Campbell (pp.493-494).
Problem Set 9
Use your lecture notes, lecture slides, and Campbell text to answer the questions below.
1. Use class notes and Campbell’s section on Hierarchical Classification (pp. 552-553) to answer the following. Explain the Linnaean system of classification used to organize biological diversity. This system of classification is a hierarchical system. What does that mean? Define a Genus. What is a Family, and why would members of several genera be placed in the same family? You could answer the same for higher level groups up the taxonomic hierarchy. How do biosystematists (biologists who classify organisms, also sometimes called “taxonomists”) decide where to place a newly described species within the hierarchy? Answer: a systematist who is an expert in a particular group (a Family of beetles for example) analyzes the phenotypic and genetic similarity of the new species to existing known species in the Family to decide in which Genus to place the new species).
2. Explain how species are defined under the Biological Species Concept (BSC) (see class notes and Campbell pp. 505-508). Reproductive isolation is an important part of the BSC. What is meant by reproductive isolation of two species? Note that the test of the BCS is that two species must be reproductively isolated in Nature. Horses and donkeys can mate and produce a hybrid mule offspring that is sterile. Why are horses and donkeys considered different species under the BSC? How do the different diploid numbers in the two species help explain hybrid sterility? (Note that to produce a mule horses and donkeys are forced to mate by humans and this only occurs under domestication, not in nature).
3. Explain in general terms geological theory of uniformitarianism originally proposed by Hutton and later supported by Lyell. Why did this theory suggest that the age of the earth was many millions of years? Lyell was a contemporary and friend of Darwin.
S18: We did not discuss the theory of uniformitarianism this year, but geologists before and during Darwin’s time had proposed that the earth was far older than the 6,000 year age accepted by biblical creationists of the time (and accepted by most of the scientific “establishment”). Briefly, the geological theory of Uniformitarianism proposed that the monumental geological formations that we observe on earth today (the Grand Canyon for example) were produced over extremely long periods of time by the same slow gradual geological processes (erosion, deposition of sediments, volcanism) that we see operating around us today. Based on his observations and calculations Lyell (a geologist and friend of Darwin) estimated that the earth was more that 300 million years old. Today geologists using modern methods estimate the age of the earth at approximately 4.6 billion years. Darwin was strongly influenced by Lyell’s writings on uniformitarianism and used the idea of slow gradual change over long periods of geologic time in his explanation of how complex adaptations form from originally simple forms. The idea of uniformitarianism was also important because it provided the time scale necessary for process of evolution to produce the diversity of life that we observe around us and in the fossil record.
In: Biology
The Queen of the Snows started a business, Winter Carnival Co., a company that specializes in merchandise for ice-fishing, snow-sliding, treasure-hunting and other winter activities. In 2017, the company had the following beginning balances (in dollar). Accounts receivable $60,000 Accounts payable $30,000 Allowance for doubtful accounts $6,000 Accumulated depreciation – machine $50,000 Cash $25,000 Common stock $100,000 Inventory $300,000 Machine $150,000 Prepaid advertisement $27,000 Notes payable $200,000 Salary payable $5,000 Retained earnings $171,000 During 2017, the following transactions occurred. 1.Winter Carnival acquired additional merchandise, totaled $90,000, of which $60,000 was on account. 2.Winter Carnival delivered merchandise and earned sales revenue, totaled $550,000, of which $150,000 was on credit. Cost, to Winter Carnival Co., of the merchandise sold, totaled $300,000. 3.Winter Carnival collected a total of $120,000 on its accounts receivable from its various customers. 4.Winter Carnival borrowed $50,000 on May 1, 2017 from a local bank, on a 6% note for 5 years. Winter Carnival would pay interest semi-annually on each May 1 and November 1. 5.In addition, Winter Carnival signed a sales contract with a customer, Mini-Soda Company to deliver a total of $100,000 merchandise January 2018. Winter Carnival collected $10,000 cash in advance from this customer on November 17, 2017. 6.Winter Carnival paid $70,000 on its accounts payable to its suppliers. 7.Winter Carnival incurred insurance expenses of $12,000, all paid in cash in 2017. 8.Winter Carnival paid its employees $95,000 cash for their salary. At the end of year 2017, the company still owed $3,000 salary payable to its employees. The following information was also available during 2017 for Winter Carnival Co. 9.Its existing “notes payable” at the beginning of the year 2017 had a due date in 2020 and an interest rate of 3%. The interest would be paid in cash at the end of each calendar year. 10.The ending balance of “allowance for doubtful accounts” was estimated to be 10% of the ending balance of its “accounts receivable” at the end of 2017. 2 11.Its ‘prepaid advertisement’ had 18 months remaining at the beginning of the year 2017. 12.The existing machine had an estimated life of 15 years with no residual value and had been depreciated using the straight-line method. And lastly, 13.The income tax rate was 20% for Winter Carnival and the company would pay its income tax in the first quarter of 2018. Required: 1.Based on above transactions, prepare journal entries and adjusting entries in 2017 for Winter Carnival. 2.Set up T-accounts and post your journal entries and adjusting entries to T-accounts. (A kind reminder: Don’t forget the beginning balances.) 3.Prepare a pre-closing trial balance, as of December 31, 2017. 4.Prepare an income statement, in a good format, for the year ended December 31, 2017 for Winter Carnival. 5.Prepare a statement of retained earnings, in a good format, for the same period for Winter Carnival. 6.Prepare a balance sheet, in a good format, as of December 31, 2017 for Winter Carnival. 7.Prepare closing entries and a post-closing trial balance, as of December 31, 2017.
In: Accounting
The Queen of the Snows started a business, Winter Carnival Co.,
a company that specializes in merchandise for ice-fishing,
snow-sliding, treasure-hunting and other winter activities. In
2017, the company had the following beginning balances (in
dollar).
Accounts receivable $60,000 Accounts payable $30,000 Allowance for
doubtful accounts $6,000 Accumulated depreciation – machine $50,000
Cash $25,000 Common stock $100,000 Inventory $300,000 Machine
$150,000 Prepaid advertisement $27,000 Notes payable $200,000
Salary payable $5,000 Retained earnings $171,000
During 2017, the following transactions occurred.
1. Winter Carnival acquired additional merchandise, totaled
$90,000, of which $60,000 was on account.
2. Winter Carnival delivered merchandise and earned sales revenue,
totaled $550,000, of which $150,000 was on credit. Cost, to Winter
Carnival Co., of the merchandise sold, totaled $300,000.
3. Winter Carnival collected a total of $120,000 on its accounts
receivable from its various customers.
4. Winter Carnival borrowed $50,000 on May 1, 2017 from a local
bank, on a 6% note for 5 years. Winter Carnival would pay interest
semi-annually on each May 1 and November 1.
5. In addition, Winter Carnival signed a sales contract with a
customer, Mini-Soda Company to deliver a total of $100,000
merchandise January 2018. Winter Carnival collected $10,000 cash in
advance from this customer on November 17, 2017.
6. Winter Carnival paid $70,000 on its accounts payable to its
suppliers.
7. Winter Carnival incurred insurance expenses of $12,000, all paid
in cash in 2017.
8. Winter Carnival paid its employees $95,000 cash for their
salary. At the end of year 2017, the company still owed $3,000
salary payable to its employees.
The following information was also available during 2017 for Winter
Carnival Co.
9. Its existing “notes payable” at the beginning of the year 2017
had a due date in 2020 and an interest rate of 3%. The interest
would be paid in cash at the end of each calendar
year.
10. The ending balance of “allowance for doubtful accounts” was
estimated to be 10% of the ending balance of its “accounts
receivable” at the end of 2017.
2
11. Its ‘prepaid advertisement’ had 18 months remaining at the
beginning of the year 2017.
12. The existing machine had an estimated life of 15 years with no
residual value and had been depreciated using the straight-line
method. And lastly,
13. The income tax rate was 20% for Winter Carnival and the company
would pay its income tax in the first quarter of
2018.
Required:
1. Based on above transactions, prepare journal entries and
adjusting entries in 2017 for Winter Carnival.
2. Set up T-accounts and post your journal entries and adjusting
entries to T-accounts. (A kind reminder: Don’t forget the beginning
balances.)
3. Prepare a pre-closing trial balance, as of December 31,
2017.
4. Prepare an income statement, in a good format, for the year
ended December 31, 2017 for Winter Carnival.
5. Prepare a statement of retained earnings, in a good format, for
the same period for Winter Carnival.
6. Prepare a balance sheet, in a good format, as of December 31,
2017 for Winter Carnival.
7. Prepare closing entries and a post-closing trial balance, as of
December 31, 2017.
In: Accounting