Excalibur Corporation sells video games for personal computers. The unadjusted t
ID: 2330180 • Letter: E
Question
Excalibur Corporation sells video games for personal computers. The unadjusted trial balance as of December 31, 2016, appears below. December 31 is the company’s fiscal year-end. The company uses the perpetual inventory system.
Debits
Cash 88,420
Accounts receivable 27,000
Supplies 0
Prepaid rent 0
Inventory 66,000
Office equipment 83,000
Cost of goods sold 132,500
Interest expense 0
Salaries and wage expense 53,950
Rent expense 17,600
Supplies expense 2,320
Utility expense 6,100
Credits
Accumulated depreciation—office equipment 10,790
Accounts payable 35,400
Salaries and wages payable 4,800
Note payable 31,200
Common stock 120,000
Retained earnings 19,700
Sales revenue 255,000
Totals 476,890 476,890
Cash dividends paid to shareholders during the year amounted to $9,000.
Information necessary to prepare the year-end adjusting entries appears below.
1. The office equipment was purchased in 2014 and is being depreciated using the straight-line method over an eight-year useful life with no salvage value.
2. Accrued salaries and wages at year-end should be $7,200.
3. The company borrowed $31,200 on September 1, 2016. The principal is due to be repaid in 10 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 10%.
4. The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $580.
5. Prepaid rent at year-end should be $1,300.
Required information 1. Complete the worksheet below.
2-a. Use the information in the worksheet to prepare an income statement for 2016.
2-b. Use the information in the worksheet to prepare a statement of shareholders’ equity for 2016.
2-c. Use the information in the worksheet to prepare a balance sheet as of December 31, 2016. (Amounts to be deducted should be indicated by a minus sign.)
Required information
3. Prepare the necessary closing entries assuming that adjusting entries have been correctly posted to the accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
Answer 1. EXCALIBUR CORPORATION Work Sheet For Year Ended Dec 31, 2016. Trial Balance Adjustments Adjusted Trial Balance Income Summary Balance Sheet Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Balance Sheet Accounts: Cash 88,420.00 88,420.00 88,420.00 Accounts Receivable 27,000.00 27,000.00 27,000.00 Supplies - 580.00 580.00 580.00 Prepaid Rent - 1,300.00 1,300.00 1,300.00 Inventory 66,000.00 66,000.00 66,000.00 Office Equipment 83,000.00 83,000.00 83,000.00 Accumulated Dep. - Office Equip. 10,790.00 10,375.00 21,165.00 21,165.00 Accounts Payable 35,400.00 35,400.00 35,400.00 Salaries & Wages Payable 4,800.00 2,400.00 7,200.00 7,200.00 Notes Payable 31,200.00 31,200.00 31,200.00 Interest Payable - 1,040.00 1,040.00 1,040.00 Common Stock 120,000.00 120,000.00 120,000.00 Retained Earnings 19,700.00 19,700.00 19,700.00 Sales Revenue 255,000.00 255,000.00 255,000.00 Cost of Goods Sold 132,500.00 132,500.00 132,500.00 Interest Expense - 1,040.00 1,040.00 1,040.00 Salaries & Wages Expense 53,950.00 2,400.00 56,350.00 56,350.00 Rent Expense 17,600.00 1,300.00 16,300.00 16,300.00 Supplies Expense 2,320.00 580.00 1,740.00 1,740.00 Utility Expense 6,100.00 6,100.00 6,100.00 Depreciation Expense 10,375.00 10,375.00 10,375.00 Total 476,890.00 476,890.00 15,695.00 15,695.00 490,705.00 490,705.00 224,405.00 255,000.00 266,300.00 235,705.00 Net Income 30,595.00 - - 30,595.00 Totals 255,000.00 255,000.00 266,300.00 266,300.00 - - - Depreciation Expense = $83,000 / 8 Years = $10,375 Interest Expense = $31,200 X 10% X 4/12 = $1,040 - - Answer 2a. EXCALIBUR CORPORATION Income Statement For Year Ended Dec 31, 2016 Sales Revenue 255,000.00 Cost of Goods Sold 132,500.00 Gross Margin 122,500.00 Expenses Salaries & Wages Expense 56,350.00 Rent Expense 16,300.00 Supplies Expense 1,740.00 Utility Expense 6,100.00 Depreciation Expense 10,375.00 90,865.00 Net Operating Income 31,635.00 Interest Expense 1,040.00 Net Income 30,595.00 Answer 2b. EXCALIBUR CORPORATION Statement of Shareholders' Equity Common Stock Retained Earnings Total Balance at Jan 1, 2016 120,000.00 28,700.00 148,700.00 Net Income - 30,595.00 30,595.00 Cash Dividends - (9,000.00) (9,000.00) Total 120,000.00 50,295.00 170,295.00 Answer 2c. EXCALIBUR CORPORATION Balance Sheet As on Dec 31, 2016 Assets Current Assets Cash 88,420.00 Accounts Receivable 27,000.00 Supplies 580.00 Prepaid Rent 1,300.00 Inventory 66,000.00 183,300.00 Property, Plant & Equipment Office Equipment 83,000.00 Accumulated Dep. - Office Equip. (21,165.00) 61,835.00 Total Assets 245,135.00 Liabilities & Stockholders' Equity Liabilities Current Liabilities Accounts Payable 35,400.00 Salaries & Wages Payable 7,200.00 Interest Payable 1,040.00 43,640.00 Long Term Liabilities Notes Payable 31,200.00 Total Liabilities 74,840.00 Total Stockholders' Equity 170,295.00 Total Liabilities & Stockholders' Equity 245,135.00 Answer 3. Closing Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-16 Sales Revenue 255,000.00 Income Summary 255,000.00 (To record the close of revenue accounts) 31-Dec-16 Income Summary 91,905.00 Interest Expense 1,040.00 Salaries & Wages Expense 56,350.00 Rent Expense 16,300.00 Supplies Expense 1,740.00 Utility Expense 6,100.00 Depreciation Expense 10,375.00 (To record the close of expense accounts) 31-Dec-16 Income Summary 30,595.00 Retained Earnings 30,595.00 (To record the net income)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.