ADMS 2500 Chapter Notes - Chapter 4: Debits And Credits, Limited Liability, Legal Personality
ADMS 2500 Full Course Notes
Get access
Related Documents
Related Questions
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 âAdjusting Journal Entriesâ 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 |
Ace Lawn Care Module 5 Mini PracticeProblem
In June, Jim made several purchases to accommodate his growingbusiness.
June2 Jim purchased a storage location for lawn care equipment, paid$45,000 for a building on 1 acre. The land is appraised at $8,000.The building has an estimated life of 10 years with a $5,000salvage value. Jim paid $2,000 down and financed the remainingpurchase price with a 5% 5 year note.
June4 Jim purchased a trailer to haul lawn care equipment for $2,300;estimated life is 5 years with no salvage value. Jim paid for thepurchase in cash.
June5 Jim purchased a gas powered trimmer for $1,200 and a commercialleaf-blower for $1,500. Jim estimates they will each have a twoyear life and no salvage value. Jim paid for both of these piecesof equipment on account.
These are in addition to the three assets Jim acquired inMay:
Date Item Cost Estimated Life Salvage Value
May 2 Truck $7,000 5 years $500
5 LawnMower $300 2 years $0
5 Aerator $500 2years $0
Depreciation was recorded in May for these assets using thestraight-line method however Jim is considering other depreciationmethods and has asked you to prepare a comparison of thestraight-line method with the double declining balance (200% DDB)method before he decides.
Instructions:
Using the chart of accounts provided below and the Exceltemplate provided with this assignment, record the transactions forthe new assets purchased in June, 2014. Start with Page7 for the journal entries. Explanations are optional.
Prepare a monthly schedule of depreciation for each of the sevenassets for 2014 using 1) straight-line and 2) 200% DDB. (Assumeassets purchased before the 15th of the month will bedepreciated as if owned for the entire month). Remember that youare calculating monthly depreciation, not annual and adjust yourdepreciation rate. Carry your depreciation rate to four decimalsand round the depreciation expense to two decimals.
Jim has decided that equipment will be depreciated usingstraight-line and the building using 200% DDB. Prepare theadjusting journal entries for depreciation for the month of June,2014. Start with Page 8 for the adjusting journalentries. Explanations are optional.
Ace Lawn Care
Chart of Accounts
Classification | Account Number | Account Name |
---|---|---|
ASSETS | 101 | Cash |
110 | Accounts Receivable | |
112 | Allowance for Doubtful Accounts | |
115 | Notes Receivable | |
116 | Interest Receivable | |
120 | Supplies | |
130 | Prepaid Insurance | |
140 | Inventory | |
150 | Equipment | |
152 | Land | |
153 | Building | |
155 | Accumulated Depreciation â Equipment | |
156 | Accumulated Depreciation - Building | |
LIABILITIES | 201 | Accounts Payable |
220 | Notes Payable | |
225 | Interest Payable | |
OWNERâS EQUITY | 301 | Ownerâs Capital |
305 | Ownerâs Drawings | |
310 | Income Summary | |
REVENUES | 401 | Lawn Service Revenue |
410 | Sales Revenue | |
415 | Sales Returns and Allowances | |
420 | Interest Income | |
COST OF GOODS SOLD | 501 | Purchases |
505 | Purchase Returns and Allowances | |
EXPENSES | 620 | Supplies Expense |
630 | Fuel Expense | |
640 | Repair and Maintenance Expense | |
650 | Advertising Expense | |
660 | Insurance Expense | |
670 | Depreciation Expense | |
680 | Interest Expense | |
690 | Bad Debt Expense | |
695 | Miscellaneous Expense |
Asset Information: Truck, $7,000 cost, 5 year life, $500salvage value | ||||||
Computation | End of Year | |||||
Month | Depreciable | Depreciation | = | Monthly | Accumulated | Book |
May-14 | ||||||
Jun-14 | ||||||
Jul-14 | ||||||
Aug-14 | ||||||
Sep-14 | ||||||
Oct-14 | ||||||
Nov-14 | ||||||
Dec-14 | ||||||
Asset Information: Lawn Mower, $300 cost, 2 year life,$0 salvage value | ||||||
Computation | End of Year | |||||
Month | Depreciable | Depreciation | = | Monthly | Accumulated | Book |
May-14 | ||||||
Jun-14 | ||||||
Jul-14 | ||||||
Aug-14 | ||||||
Sep-14 | ||||||
Oct-14 | ||||||
Nov-14 | ||||||
Dec-14 | ||||||
Asset Information: Aerator, $500 cost, 2 year life, $0salvage value | ||||||
Computation | End of Year | |||||
Month | Depreciable | Depreciation | = | Monthly | Accumulated | Book |
May-14 | ||||||
Jun-14 | ||||||
Jul-14 | ||||||
Aug-14 | ||||||
Sep-14 | ||||||
Oct-14 | ||||||
Nov-14 | ||||||
Dec-14 | ||||||
Asset Information: Building, $37,000 cost, 10 year life,$5,000 salvage value | ||||||
Computation | End of Year | |||||
Month | Depreciable | Depreciation | = | Monthly | Accumulated | Book |
Jun-14 | ||||||
Jul-14 | ||||||
Aug-14 | ||||||
Sep-14 | ||||||
Oct-14 | ||||||
Nov-14 | ||||||
Dec-14 | ||||||
Asset Information: Trailer, $2,300 cost, 5 year life, $0salvage value | ||||||
Computation | End of Year | |||||
Month | Depreciable | Depreciation | = | Monthly | Accumulated | Book |
Jun-14 | ||||||
Jul-14 | ||||||
Aug-14 | ||||||
Sep-14 | ||||||
Oct-14 | ||||||
Nov-14 | ||||||
Dec-14 | ||||||
Asset Information: Trimmer, $1,200 cost, 2 year life, $0salvage value | ||||||
Computation | End of Year | |||||
Month | Depreciable | Depreciation | = | Monthly | Accumulated | Book |
Jun-14 | ||||||
Jul-14 | ||||||
Aug-14 | ||||||
Sep-14 | ||||||
Oct-14 | ||||||
Nov-14 | ||||||
Dec-14 | ||||||
Asset Information: Leaf Blower, $1,500 cost, 2 yearlife, $0 salvage value | ||||||
Computation | End of Year | |||||
Month | Depreciable | Depreciation | = | Monthly | Accumulated | Book |
Jun-14 | ||||||
Jul-14 | ||||||
Aug-14 | ||||||
Sep-14 | ||||||
Oct-14 | ||||||
Nov-14 | ||||||
Dec-14 |