33:010:272 Lecture Notes - Lecture 1: Trial Balance, Financial Statement, Accounts Payable
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Forten Company, a merchandiser, recently completed itscalendar-year 2015 operations. For the year, (1) all sales arecredit sales, (2) all credits to Accounts Receivable reflect cashreceipts from customers, (3) all purchases of inventory are oncredit, (4) all debits to Accounts Payable reflect cash paymentsfor inventory, and (5) Other Expenses are paid in advance and areinitially debited to Prepaid Expenses. The company's incomestatement and balance sheets follow.
FORTEN COMPANY Comparative Balance Sheets December 31, 2015 and 2014 | ||||||
2015 | 2014 | |||||
Assets | ||||||
Cash | $ | 49,800 | $ | 74,000 | ||
Accounts receivable | 65,900 | 59,000 | ||||
Inventory | 277,000 | 252,500 | ||||
Prepaid expenses | 1,500 | 1,700 | ||||
Total current assets | 394,200 | 387,200 | ||||
Equipment | 158,500 | 106,500 | ||||
Accum. depreciationâEquipment | (36,375) | (46,000) | ||||
Total assets | $ | 516,325 | $ | 447,700 | ||
Liabilities and Equity | ||||||
Accounts payable | $ | 54,325 | $ | 113,000 | ||
Short-term notes payable | 9,000 | 8,000 | ||||
Total current liabilities | 63,325 | 121,000 | ||||
Long-term notes payable | 65,000 | 48,000 | ||||
Total liabilities | 128,325 | 169,000 | ||||
Equity | ||||||
Common stock, $5 par value | 162,500 | 150,750 | ||||
Paid-in capital in excess of par, common stock | 35,250 | 0 | ||||
Retained earnings | 190,250 | 127,950 | ||||
Total liabilities and equity | $ | 516,325 | $ | 447,700 | ||
FORTEN COMPANY Income Statement For Year Ended December 31, 2015 | |||||
Sales | $ | 582,500 | |||
Costof goods sold | 287,000 | ||||
Gross profit | 295,500 | ||||
Operating expenses | |||||
Depreciation expense | $ | 20,000 | |||
Other expenses | 132,000 | 152,000 | |||
Other gains (losses) | |||||
Loss on sale ofequipment | (5,250) | ||||
Income before taxes | 138,250 | ||||
Income taxes expense | 24,250 | ||||
Netincome | $ | 114,000 | |||
Additional Information on Year 2015Transactions |
a. | Net income was$114,000. |
b. | Accountsreceivable increased. |
c. | Inventoryincreased. |
d. | Prepaid expensesdecreased. |
e. | Accounts payabledecreased. |
f. | Depreciationexpense was $20,000. |
g. | Sold equipment costing $46,500, with accumulated depreciation of$29,625, for $11,625 cash. This yielded a loss of $5,250. |
h. | Purchased equipment costing $98,500 by paying $25,000 cash and(i.) by signing a long-term note payable for thebalance. |
j. | Borrowed $1,000cash by signing a short-term note payable. |
k. | Paid $56,500cash to reduce the long-term notes payable. |
l. | Issued 2,350shares of common stock for $20 cash per share. |
m. | Declared andpaid cash dividends of $51,700. |
Required: |
Prepare a complete statement of cash flows using a spreadsheet;report its operating activities using the indirect method.(Enter all amounts as positive values.) |
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Terrific Temps fills temporary employment positions for localbusinesses. Some businesses pay in
advance for services; others are billed after services have beenperformed. Advanced payments are
credited to an account entitled Unearned Fees. Adjusting entriesare performed on a monthly basis.
An unadjusted trial balance dated December 31, 2015, follows. (Bearin mind that adjusting entries
have already been made for the first 11 months of 2015, but not forDecember.)
TERRIFIC TEMPS UNADJUSTED TRIAL BALANCE DECEMBER 31, 2015 | |||||
Cash | $ | 27,020 | |||
Accounts receivable | 59,200 | ||||
Unexpired insurance | 900 | ||||
Prepaid rent | 3,000 | ||||
Office supplies | 600 | ||||
Equipment | 60,000 | ||||
Accumulated depreciation: equipment | $ | 29,500 | |||
Accounts payable | 4,180 | ||||
Notes payable | 12,000 | ||||
Interest payable | 320 | ||||
Unearned fees | 6,000 | ||||
Income taxes payable | 4,000 | ||||
Unearned revenue | 20,000 | ||||
Retained earnings | 49,000 | ||||
Capital stock | 25,000 | ||||
Dividends | 3,000 | ||||
Feesearned | 75,000 | ||||
Travel expense | 5,000 | ||||
Insurance expense | 2,980 | ||||
Rentexpense | 9,900 | ||||
Office supplies expense | 780 | ||||
Utilities expense | 4,800 | ||||
Depreciation expense: equipment | 5,500 | ||||
Salaries expense | 30,000 | ||||
Interest expense | 320 | ||||
Income taxes expense | 12,000 | ||||
$ | 225,000 | $ | 225,000 | ||
Other Data | |
1. | Accrued butunrecorded fees earned as of December 31, 2015, amount to$1,500. |
2. | Records showthat $2,500 of cash receipts originally recorded as unearned feeshad been earned as of December 31. |
3. | The companypurchased a six-month insurance policy on September 1, 2015, for$1,800. |
4. | On December 1,2015, the company paid its rent through February 28, 2016. |
5. | Office supplieson hand at December 31 amount to $400. |
6. | All equipment was purchased when the business first formed. Theestimated life of the equipment at that time was 10 years (or 120months). |
7. | On August 1, 2015, the company borrowed $12,000 by signing asix-month, 8 percent note payable. The entire note, plus sixmonths' accrued interest, is due on February 1, 2016. |
8. | Accrued butunrecorded salaries at December 31 amount to $2,700. |
9. | Estimated incometaxes expense for the entire year totals $15,000. Taxesare due in the first quarter of 2016. |
Instructions |
a. | For each of thenumbered paragraphs, prepare the necessary adjusting entry.(If no entry is required for a transaction/event, select"No journal entry required" in the first accountfield.) |
Journal Entry Worksheet
Record the accrued but uncollected fees earned.
Record fees earned as of December 31st.
Record the December insurance expense.
Record the December rent expense.
Record the offices supplies used in December.
Record the December depreciation expense.
Record the interest accrued in December.
Record the salaries accrued in December.
Record the income taxes accrued in December.
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*Enter debits before credits
1. | Fees earned | |
2. | Travel expense | |
3. | Insurance expense | |
4. | Rent expense | |
5. | Office supplies expense | |
6. | Utilities expense | |
7. | Depreciation expense: equipment | |
8. | Interest expense | |
9. | Salaries expense | |
10. | Income taxes expense |
. | The unadjusted trial balance reportsdividends of $3,000. As of December 31, 2015, have these dividendsbeen paid? | ||||
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