ACTG 1P12 Lecture Notes - Lecture 9: Employee Benefits, Financial Instrument
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The Green Thumb Gardener is a retail store that sells plants,soil, and decorative pots. On December 31, 2019, the firm's generalledger contained the accounts and balances that appearbelow.
| ACCOUNTS ANDBALANCES | |||||
| Cash | $ | 5,200 | Dr. | ||
| Accounts Receivable | 2,100 | Dr. | |||
| Allowance for DoubtfulAccounts | 47 | Cr. | |||
| Merchandise Inventory | 10,800 | Dr. | |||
| Supplies | 1,150 | Dr. | |||
| Prepaid Advertising | 960 | Dr. | |||
| Store Equipment | 7,800 | Dr. | |||
| Accumulated DepreciationâStoreEquipment | 1,450 | Cr. | |||
| Office Equipment | 1,300 | Dr. | |||
| Accumulated DepreciationâOfficeEquipment | 230 | Cr. | |||
| Accounts Payable | 2,575 | Cr. | |||
| Social Security Tax Payable | 380 | Cr. | |||
| Medicare Tax Payable | 83 | Cr. | |||
| Federal Unemployment TaxPayable | |||||
| State Unemployment TaxPayable | |||||
| Salaries Payable | |||||
| Beth Argo, Capital | 22,927 | Cr. | |||
| Beth Argo, Drawing | 19,500 | Dr. | |||
| Sales | 87,548 | Cr. | |||
| Sales Returns andAllowances | 1,050 | Dr. | |||
| Purchases | 44,900 | Dr. | |||
| Purchases Returns andAllowances | 380 | Cr. | |||
| Rent Expense | 5,500 | Dr. | |||
| Telephone Expense | 540 | Dr. | |||
| Salaries Expense | 13,600 | Dr. | |||
| Payroll Taxes Expense | 1,220 | Dr. | |||
| Income Summary | |||||
| Supplies Expense | |||||
| Advertising Expense | |||||
| Depreciation ExpenseâStoreEquipment | |||||
| Depreciation ExpenseâOfficeEquipment | |||||
| Uncollectible AccountsExpense | |||||
ADJUSTMENTS
a.âb. Merchandise inventory on December 31,2019, is $11,821.
During 2019, the firm had net credit sales of $30,000; the firmestimates that 0.6 percent of these sales will result inuncollectible accounts.
On December 31, 2019, an inventory of the supplies showed thatitems costing $250 were on hand.
On October 1, 2019, the firm signed a six-month advertisingcontract for $960 with a local newspaper and paid the full amountin advance.
On January 2, 2018, the firm purchased store equipment for$7,800. At that time, the equipment was estimated to have a usefullife of five years and a salvage value of $550.
On January 2, 2018, the firm purchased office equipment for$1,300. At that time, the equipment was estimated to have a usefullife of five years and a salvage value of $150.
On December 31, 2019, the firm owed salaries of $1,780 that willnot be paid until 2020.
On December 31, 2019, the firm owed the employerâs socialsecurity tax (assume 6.2 percent) and Medicare tax (assume 1.45percent) on the entire $1,780 of accrued wages.
On December 31, 2019, the firm owed federal unemployment tax(assume 0.6 percent) and state unemployment tax (assume 5.4percent) on the entire $1,780 of accrued wages.
Required:
Prepare the Trial Balance section of a 10-column worksheet. Theworksheet covers the year ended December 31, 2019.
Enter the adjustments above in the Adjustments section of theworksheet.
Complete the worksheet.
Analyze:
By what amount were the assets of the business affected byadjustments?
I have done all the adjusting entries and was wondering ifsomeone could take a look at them. I would really appreciate it ifyou could give me some feedback if any are wrong and how to fixthem. Two that I am real unsure about are "b." and "q." but againif you could look at them all I would be very grateful. ThankYou
| DeeDee DoubleEntry, Incorporated | ||||||
| End of Period Worksheet | ||||||
| For the Year Ended December31, 2017 | ||||||
| Unadjusted | Adjusted | |||||
| Account Title | Trial Balance | Adjustments | Trial Balance | |||
| DR | CR | DR | CR | DR | CR | |
| Cash | 240,300 | - | 27,000 | 213,300 | ||
| Restricted Cash | 27,000 | 27,000 | ||||
| Accounts Receivable | 925,000 | - | 925,000 | |||
| Allowance for Doubtful Accounts | - | 49,000 | 67,000 | 18,000 | ||
| Interest Receivable | - | 688 | 688 | |||
| Merchandise Inventory | 187,500 | - | 3,700 | 191,200 | ||
| Prepaid Insurance | 9,000 | - | 5,211 | 3,789 | ||
| Prepaid Advertising | - | - | 12,000 | 12,000 | ||
| Prepaid Rent | - | - | 7,500 | 7,500 | ||
| Office Supplies | 7,800 | - | 2,941 | 4,859 | ||
| Note Receivable | 75,000 | - | 75,000 | |||
| Available for Sale Securities | 380,000 | - | 380,000 | |||
| Office Building | 4,250,000 | - | 4,250,000 | |||
| Accumulated Depreciation - OfficeBuilding | - | 221,500 | 38,750 | 260,250 | ||
| Storage Building | 1,650,000 | - | 1,650,000 | |||
| Accumulated Depreciation - StorageBuilding | - | - | 46,667 | 46,667 | ||
| Land | 450,000 | - | 450,000 | |||
| Leasehold Improvements | 190,000 | - | 5,459 | 195,459 | ||
| Accumulated Depreciation - LeaseholdImprovements | - | - | 728 | 728 | ||
| Office Equipment | 125,000 | - | 125,000 | |||
| Accumulated Depreciation - OfficeEquipment | - | 42,000 | 16,600 | 58,600 | ||
| Patent | 250,000 | - | 250,000 | |||
| Accumulated Amortization | 31,250 | 31,250 | ||||
| Accounts Payable | - | 145,000 | 145,000 | |||
| Sales Tax Payable | - | - | 19,821 | 19,821 | ||
| Salaries Payable | - | - | 39,249 | 39,249 | ||
| Payroll Taxes Payable | - | - | 3,251 | 3,251 | ||
| Interest Payable | - | - | 127,750 | 127,750 | ||
| Income Tax Payable | - | - | 245,756 | 245,756 | ||
| Unearned Rent Revenue | - | 96,000 | 25,263 | 70,737 | ||
| Loan Payable - Onstar Bank | - | 500,000 | 500,000 | |||
| Loan Payable - Coldstar Bank | - | 2,250,000 | 2,250,000 | |||
| Common Stock | - | 425,000 | 425,000 | |||
| Additional Paid in Capital | - | 2,800,000 | 2,800,000 | |||
| Retained Earnings | - | 1,379,420 | 1,379,420 | |||
| Accumulated Other ComprehensiveIncome | - | 8,500 | 8,500 | |||
| Dividends | 280,000 | - | 280,000 | |||
| Sales | - | 4,380,250 | 19,821 | 4,360,429 | ||
| Sales Returns and Allowances | 19,500 | - | 19,500 | |||
| Sales Discounts | 14,600 | - | 14,600 | |||
| Cost of Goods Sold | 1,817,900 | - | 3,700 | 1,814,200 | ||
| Amortization Expense | 31,250 | 31,250 | ||||
| Sales Salaries Expense | 676,400 | - | 25,500 | 701,900 | ||
| Office Salaries Expense | 434,000 | - | 17,000 | 451,000 | ||
| Advertising Expense | 54,000 | - | 12,000 | 42,000 | ||
| Depreciation Expense - OfficeBuilding | - | - | 38,750 | 38,750 | ||
| Depreciation Expense - StorageBuilding | 46,667 | 46,667 | ||||
| Depreciation Expense - LeaseholdImprovements | - | - | 728 | 728 | ||
| Depreciation Expense - OfficeEquipment | - | - | 16,600 | 16,600 | ||
| Leasing Expense - Stores | 132,000 | - | 132,000 | |||
| Miscellaneous Selling Expense | 16,950 | - | 5,459 | 11,491 | ||
| Rent Expense - Storage Facility | 18,000 | - | 7,500 | 10,500 | ||
| Insurance Expense | 2,000 | - | 5,211 | 7,211 | ||
| Office Supplies Expense | 28,500 | - | 2,941 | 31,441 | ||
| Warranty Expense | 5,000 | 5,709 | 10,709 | |||
| Miscellaneous Administrative Expense | 9,220 | - | 9,220 | |||
| Rent Revenue | - | - | 25,263 | 25,263 | ||
| Interest Revenue on Note Receivable | - | - | 688 | 688 | ||
| Dividend Revenue on AFS Securities | - | 18,000 | 18,000 | |||
| Warranty Liability | 5,709 | 5,709 | ||||
| Income Tax Expense | 245,756 | 245,756 | ||||
| Interest Expense | 127,750 | 127,750 | ||||
| Bad Debt Expense | 67,000 | - | 67,000 | |||
| 12,314,670 | 12,314,670 | 732,292 | 732,292 | 12,822,067 | 12,822,067 | |
| DeeDee DoubleEntry, Incorporated | |||
| Adjusting Journal Entries | |||
| For the Year Ended December31, 2017 | |||
| Item | Account Title | Dr. | Cr. |
| a. | Restricted Cash | 27,000 | |
| Cash | 27,000 | ||
| b. | Allowance for Doubtful Accounts | 67,000 | |
| Bad Debt Expense | 67,000 | ||
| c. | Office Supplies Expense | 2941 | |
| Office Supplies | 2941 | ||
| d. | Prepaid Rent | 7500 | |
| Rent Expense - Storage Facility | 7500 | ||
| e. | Interest Receivable | 688 | |
| Interest Revenue on Note Receivable | 688 | ||
| f. | Insurance Expense | 5211 | |
| Prepaid Insurance | 5211 | ||
| g. | Depreciation Expense - Office Building | 38750 | |
| Accumulated Depreciation - Office Building | 38750 | ||
| h. | Office Salaries Expense | 17000 | |
| Sales Salaries Expense | 25500 | ||
| Salaries Payable | 39249 | ||
| Payroll Taxes Payable | 3251 | ||
| i. | Prepaid Advertising | 12000 | |
| Advertising Expense | 12000 | ||
| j. | Unearned Rent Revenue | 25263 | |
| Rent Revenue | 25263 | ||
| k. | Accumulated Other Comprehensive Income | 89000 | |
| Available for Sale Securities | 89000 | ||
| l. | Depreciation Expense - Office Equipment | 16600 | |
| Accumulated Depreciation - Office Equipment | 16600 | ||
| m. | Sales | 19821 | |
| Sales Tax Payable | 19821 | ||
| n. | Amortization Expense | 31250 | |
| Accumulated Amortization | 31250 | ||
| o. | Depreciation Expense - Storage Building | 46667 | |
| Accumulated Depreciation - Storage Building | 46667 | ||
| p. | Leasehold Improvements | 5459 | |
| Miscellaneous Selling Expense | 5459 | ||
| Depreciation Expense - Leasehold Improvements | 728 | ||
| Accumulated Depreciation - Leasehold Improvements | 728 | ||
| q. | Interest Expense | 17500 | |
| Interest Payable | 17500 | ||
| Interest Expense | 110250 | ||
| Interest Payable | 110250 | ||
| r. | Warranty Expense | 5709 | |
| Warranty Liability | 5709 | ||
| s. | Merchandise Inventory | 3700 | |
| Cost of Goods Sold | 3700 | ||
| t. | Income Tax Expense | 245,756.00 | |
| Income Tax Payable | 245,756.00 | ||
DeeDee does banking at three different financial institutions.The details are as DeeDee Double Entry
| Bank | Account # | Balance |
| Coterica | 123456 | 175,000 |
| Coterica | 123457 | (10,000) |
| 4th BAnk | 345689 | 82,000 |
Bank Two | 397567 | (6,700) |
a. You also note the Board of Directors has restricted $27,000of cash for future expansion. This $27,000 is part of the cashbalance. The future expansion will not occur for several moreyears.
b. Based on your inquiries, you note that $67,000 of accountsreceivable had been written off during the year. The clerk haddebited bad debt expense for $67,000 and credited AccountsReceivable for $67,000. When $15,000 of accounts previously writtenoff had been collected, the accountant debited cash and creditedsales. The company uses the allowance method based on the aging ofaccounts receivable. Based on this method, DeeDee determines thatuncollectible accounts are $89,000 at the end of 2017. (Replace theX with the last digit of your student number).
c. Per a physical count of office supplies, $4,859 (enter thelast two digits of your student number) of supplies remained at theend of 2017. The balance on the worksheet in the office suppliesaccount represents last years ending balance. During the year,$28,500 of office supplies were purchased and immediatelyexpensed.
d. Because of strong demand and a need for additional inventory,DeeDee needed some temporary additional storage space so on June 1,2017 they rented a unit for an annual rate of $18,000 and they paidthe entire amount up front.
e. On November 1st, 2017, (Enter your birthday month) DeeDeeloaned a key supplier, $75,000. A promissory note was signed andissued. The agreed upon interest rate was 5.5% and the key supplierhas agreed to pay interest and $15,000 of the principle eachJanuary 1st. The note was recorded in Notes Receivableand is the only note outstanding.
f. On February 1, 2017, DeeDee renewed a 19 month insurancepolicy for $9,000. All cash was paid at the time the policy wassigned and prepaid insurance was increased. (Replace the X with thelast digit of your student number.) All other transactionsinvolving insurance were properly recorded.
g. The office building was bought in January 1, 2015 by DeeDeeand DeeDee originally planned to use the building for 40 years andestimated no salvage value. DeeDee depreciates the building on a straightline basis. Now in 2017, DeeDee estimates the total life to remain at 40 years,but believes the salvage will be $900,000. (Replace theX with the last digit of your student number.)
h. DeeDee is open seven days a week and has a daily payroll of$8500. Employees are paid every Friday, December 31 is a Wednesday.40% of the payroll is for office employees, 60% of payroll is forsales employees. The employer portion of FICA expense is 7.65% andno employee has reached the maximum. DeeDee records payroll taxexpenses in salary expense.
i. On December 1, 2017 DeeDee paid ABC Advertising $16,000 for afour month campaign of advertising services. Equal services areprovided each month. All other advertising paid forduring the year has been consumed.
j. On August 1, 2017, DeeDee rented a portion of one store toMarketing Majors Inc. The contract was for 19 (enter the last digitof your student number) months and DeeDee required all of the cashup front. The rent is being earned equally each month. This is theonly item in which rent is being earned by the company.
k. As of 12/31/2017 the Available for Sale Securities have afair value of $291,000 (enter the last digit of your student numberin place of the X). Due to the market conditions, the company doesnot plan on selling the assets in 2017, but their intent is to sellat some point in time. You can ignore the tax effect onunrealized gains and losses. (Hint: Unrealized Gains andLosses are closed to Accumulated Other Comprehensive Income at theend of the year.)
l. DeeDee uses the DDB method to depreciate office equipment. Nooffice equipment was added during 2017. It is estimated that theoffice equipment has a useful life of 10 years with a salvage valueof $2,000. Prior depreciation was correctly calculated based onperiod of time held.
m. After reviewing details of sales, you note that the salestaxes collected on the last week of Decemberâs sales were includedin sales revenue. Sales recorded the last week of December thatincluded the sales tax of 12% (enter your birthday month plus 1)amounted to $185,000.
n. On November 1, 2017 (enter your birthday month), DeeDeerecorded a patent in the amount of $250,000. The company paidoutside legal fees of $120,000 to have the patent registered. Theother $130,000 represents internal costs in developing the patent.The patent is good for 20 years, but the company estimates that thepatent will have a useful life of 8 years with no residual value.No one knows what to do with this information so no amortizationhas been recorded for 2017. Amortization is straight line and thecompany depreciates using partial years for intangible assets.
o. The storage building was self-constructed this year byDeeDee. The Company had their initial expenditure of $700,000 onJanuary 1. They paid an additional $500,000 on March 1st, $300,000 on June 1st, and then the final payment of$150,000 on August 1st. when the building was completedand occupancy occurred. Payments to contractor were properlycapitalized. The company has decided to use S/L method fordepreciation. The storage building is estimated to have a life of30 years and a savage value of $250,000. The companywill take a full year of depreciation in year of acquisition.
p. You note that Leasehold Improvements have not beendepreciated for this year. DeeDee started to lease some new retailspace in 2017 and added shelving and fixtures to this leased space.Based on your review of invoices, the previous accountantcapitalized the cost of fixtures but did not capitalize theshipping and installation costs of $5,459 ((enter the last threedigits of your student number in place of the XXX). . These costswere expensed and recorded as a miscellaneous administrativeexpense. DeeDee has decided to use double declining balance (DDB)depreciation for this item and to take a full year of depreciationin the year of acquisition. The leasehold improvements have auseful life of 15 years with a salvage value of$10,000.
q. DeeDee Double Entry has two loans outstanding as of12/31/2017. Interest is paid annually on January 1st. The facts on each loan are asfollows: Onstar Bank Loan â outstanding since January 1, 2017 with a 3.5%interest rate. This loan was taken out to finance the constructionof the Storage Building. Interest for the year and 15% of theprinciple will be paid to the bank on January 1, 2018. Except forrecording the initial cash received and loan, no additional entries have beenmade. Coldstar Bank Loan â also outstanding all of 2017 with a 4.9% interest rate (enter the last digit of your student number).Interest is due on January 1, 2018. Principle is due on January 1,2023. Since interest will not be paid to the Bank until 2018,DeeDeeâs office staff did not accrue any interest.
r. DeeDee added a one-year warranty to one of its computer gamesthis year. It is estimated that the total cost of servicing thewarranties on the 2017 sales will be $10,459 (enter the last threedigits of your student number). During 2017, $4,750 wasrefunded to customers for warranty issues on 2017 sales andrecorded as warranty expense.
s. DeeDee uses the FIFO Inventory Method in valuing inventory.The inventory balance of $187,500 was based on a physical count at12/31/2017. Based on your analysis, you have noted that $12,500 ofmarketing games that belonged to Marketing Majors Inc. was includedin the account. You also note that goods were in transit from avendor on December 31, 2017. The cost of the inventory was $16,200and the goods were shipped f.o.b. shipping point on December 29,2017.
t. DeeDee has a straight tax rate of 28%. Income tax expense isNet Income before taxes times 28%. (Hint: Prepare the IncomeStatement up to Net Income before Taxes and then record thisadjusting journal entry.
Prepare a Classified Balance Sheet on theproper worksheet as of 12/31/17. Your Statement should beformatted. You should use formulas in all cells, not constantnumbers.
Stuck on this.... any help would be appreciated.
| DeeDee DoubleEntry, Incorporated | ||||||
| End of Period Worksheet | ||||||
| For the Year Ended December31, 2017 | ||||||
| Unadjusted | Adjusted | |||||
| Account Title | Trial Balance | Adjustments | Trial Balance | |||
| DR | CR | DR | CR | DR | CR | |
| Cash | 240,300 | - | 27,000 | 213,300 | ||
| Restricted Cash | 27,000 | 27,000 | ||||
| Accounts Receivable | 925,000 | - | 925,000 | |||
| Allowance for Doubtful Accounts | - | 49,000 | 67,000 | 18,000 | ||
| Interest Receivable | - | 688 | 688 | |||
| Merchandise Inventory | 187,500 | - | 3,700 | 191,200 | ||
| Prepaid Insurance | 9,000 | - | 5,211 | 3,789 | ||
| Prepaid Advertising | - | - | 12,000 | 12,000 | ||
| Prepaid Rent | - | - | 7,500 | 7,500 | ||
| Office Supplies | 7,800 | - | 2,941 | 4,859 | ||
| Note Receivable | 75,000 | - | 75,000 | |||
| Available for Sale Securities | 380,000 | - | 380,000 | |||
| Office Building | 4,250,000 | - | 4,250,000 | |||
| Accumulated Depreciation - OfficeBuilding | - | 221,500 | 38,750 | 260,250 | ||
| Storage Building | 1,650,000 | - | 1,650,000 | |||
| Accumulated Depreciation - StorageBuilding | - | - | 46,667 | 46,667 | ||
| Land | 450,000 | - | 450,000 | |||
| Leasehold Improvements | 190,000 | - | 5,459 | 195,459 | ||
| Accumulated Depreciation - LeaseholdImprovements | - | - | 728 | 728 | ||
| Office Equipment | 125,000 | - | 125,000 | |||
| Accumulated Depreciation - OfficeEquipment | - | 42,000 | 16,600 | 58,600 | ||
| Patent | 250,000 | - | 250,000 | |||
| Accumulated Amortization | 31,250 | 31,250 | ||||
| Accounts Payable | - | 145,000 | 145,000 | |||
| Sales Tax Payable | - | - | 19,821 | 19,821 | ||
| Salaries Payable | - | - | 39,249 | 39,249 | ||
| Payroll Taxes Payable | - | - | 3,251 | 3,251 | ||
| Interest Payable | - | - | 127,750 | 127,750 | ||
| Income Tax Payable | - | - | 245,756 | 245,756 | ||
| Unearned Rent Revenue | - | 96,000 | 25,263 | 70,737 | ||
| Loan Payable - Onstar Bank | - | 500,000 | 500,000 | |||
| Loan Payable - Coldstar Bank | - | 2,250,000 | 2,250,000 | |||
| Common Stock | - | 425,000 | 425,000 | |||
| Additional Paid in Capital | - | 2,800,000 | 2,800,000 | |||
| Retained Earnings | - | 1,379,420 | 1,379,420 | |||
| Accumulated Other ComprehensiveIncome | - | 8,500 | 8,500 | |||
| Dividends | 280,000 | - | 280,000 | |||
| Sales | - | 4,380,250 | 19,821 | 4,360,429 | ||
| Sales Returns and Allowances | 19,500 | - | 19,500 | |||
| Sales Discounts | 14,600 | - | 14,600 | |||
| Cost of Goods Sold | 1,817,900 | - | 3,700 | 1,814,200 | ||
| Amortization Expense | 31,250 | 31,250 | ||||
| Sales Salaries Expense | 676,400 | - | 25,500 | 701,900 | ||
| Office Salaries Expense | 434,000 | - | 17,000 | 451,000 | ||
| Advertising Expense | 54,000 | - | 12,000 | 42,000 | ||
| Depreciation Expense - OfficeBuilding | - | - | 38,750 | 38,750 | ||
| Depreciation Expense - StorageBuilding | 46,667 | 46,667 | ||||
| Depreciation Expense - LeaseholdImprovements | - | - | 728 | 728 | ||
| Depreciation Expense - OfficeEquipment | - | - | 16,600 | 16,600 | ||
| Leasing Expense - Stores | 132,000 | - | 132,000 | |||
| Miscellaneous Selling Expense | 16,950 | - | 5,459 | 11,491 | ||
| Rent Expense - Storage Facility | 18,000 | - | 7,500 | 10,500 | ||
| Insurance Expense | 2,000 | - | 5,211 | 7,211 | ||
| Office Supplies Expense | 28,500 | - | 2,941 | 31,441 | ||
| Warranty Expense | 5,000 | 5,709 | 10,709 | |||
| Miscellaneous Administrative Expense | 9,220 | - | 9,220 | |||
| Rent Revenue | - | - | 25,263 | 25,263 | ||
| Interest Revenue on Note Receivable | - | - | 688 | 688 | ||
| Dividend Revenue on AFS Securities | - | 18,000 | 18,000 | |||
| Warranty Liability | 5,709 | 5,709 | ||||
| Income Tax Expense | 245,756 | 245,756 | ||||
| Interest Expense | 127,750 | 127,750 | ||||
| Bad Debt Expense | 67,000 | - | 67,000 | |||
| 12,314,670 | 12,314,670 | 732,292 | 732,292 | 12,822,067 | 12,822,067 | |