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19 Feb 2018

Czar was authorized to issue 3,000,000 shares of $1 par Common Stock but has only issued 520,000 shares of common stock as of 12/31/2018. No new shares were issued during 2018.

1. On the “Adjusting Journal Entries” worksheet, prepare in journal entry form all adjusting and correcting journal entries based on the following information. All information was provided to you as of 12/31/2018. (Round all numbers to the nearest dollar). Label journal entries a through t.

P- On 2,1, 2018, Czar rented a portion of one store to Pellston Inc. The contract was for 15 months and Czar required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company.

Q- Czar started to lease some new retail space in 2018 and added shelving and fixtures to this leased space. Based on your review of invoices, the previous accountant capitalized the cost of fixtures but did not capitalize the shipping and installation costs of $2,815. These costs were expensed and recorded as a miscellaneous selling expense. Czar has decided to use double declining balance (DDB) depreciation for this item and to take a full year of depreciation in the year of acquisition. The leasehold improvements have a useful life of 15 years with a salvage value of $12,000.

R- Czar uses the FIFO Inventory Method in valuing inventory. The inventory balance of $340,000 was based on a physical count at 12/31/2018. Based on your analysis, you have noted that $10,000 of marketing games that belonged to Pellston Inc. was included in the account. You also note that $5,600 of goods shipped to Czar f.o.b. destination were in transit on December 31, 2018 and included in the physical count.

Czar Incorporated
End of Period Worksheet
For the Year Ended December 31, 2018
Unadjusted Adjusted
Account Title Trial Balance Adjustments Trial Balance
DR CR DR CR DR CR
Cash 264,000 -
Accounts Receivable 555,984 -
Allowance for Doubtful Accounts - 13,600
Interest Receivable - -
Merchandise Inventory 340,000 -
Prepaid Insurance - -
LIFO Reserve - 25,600
Prepaid Advertising - -
Prepaid Rent 13,600 -
Office Supplies 4,800 -
Note Receivable 20,000
Available for Sale Securities 300,000 -
Office Building 3,000,000 -
Accumulated Depreciation - Office Building - 70,000
Storage Building 1,020,000 -
Accumulated Depreciation - Storage Building - -
Land 600,000 -
Leasehold Improvements 180,000 -
Accumulated Depreciation - Leasehold Improvements - -
Office Equipment 260,000 -
Accumulated Depreciation - Office Equipment - 52,000
Patent 120,000 -
Accounts Payable - 276,000
Sales Tax Payable - -
Salaries Payable - 113,600
Payroll Taxes Payable - 20,000
Interest Payable - -
Income Tax Payable - -
Unearned Rent Revenue - -
Loan Payable - First Trust - 520,000
Loan Payable - Coldwell Bank - 1,600,000
Common Stock - 520,000
Additional Paid in Capital - 1,599,000
Retained Earnings - 736,000
Accumulated Other Comprehensive Income - 20,000
Dividends 67,800 -
Sales - 3,622,560
Sales Returns and Allowances 33,800 -
Sales Discounts 15,400 -
Cost of Goods Sold 1,583,600 -
Sales Salaries Expense 349,120 -
Office Salaries Expense 219,200 -
Advertising Expense 12,800 -
Depreciation Expense - Office Building -
Depreciation Expense - Leasehold Improvements - -
Depreciation Expense - Office Equipment - -
Leasing Expense - Stores 105,600 -
Miscellaneous Selling Expense 18400 -
Research & Development Expense 12,000
Rent Expense - Storage Facility - -
Insurance Expense 12,000 -
Office Supplies Expense 28,000 -
Miscellaneous Administrative Expense 7,336 -
Rent Revenue - 60,000
Interest Revenue on Note Receivable - -
Dividend Revenue on AFS Securities - 20,000
Interest Expense - -
Bad Debt Expense 28,000 -
Amortization Expense - -
Income Tax Expense - -
Payroll Taxes Expense 96,920 -
Rebate Expense - -
Unrealized holding loss - -
Depreciation Expense-Storage Building - -
Loss on Impairment - -
Rebate Liability - -
Restricted Cash for Future Expansion - -
9,268,360 9,268,360

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Lelia Lubowitz
Lelia LubowitzLv2
21 Feb 2018

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