Use the following financial statements and additional information. SANCHEZ INC.
ID: 2413386 • Letter: U
Question
Use the following financial statements and additional information.
SANCHEZ INC.
Comparative Balance Sheets
June 30, 2017 and 2016
2017
2016
Assets
Cash
$
101,300
$
48,900
Accounts receivable, net
68,000
53,000
Inventory
69,000
96,000
Prepaid expenses
5,700
7,100
Total current assets
244,000
205,000
Equipment
179,000
166,000
Accum. depreciation—Equipment
(45,000
)
(15,000
)
Total assets
$
378,000
$
356,000
Liabilities and Equity
Accounts payable
$
33,000
$
40,000
Wages payable
7,000
17,000
Income taxes payable
3,600
4,000
Total current liabilities
43,600
61,000
Notes payable (long term)
43,000
85,000
Total liabilities
86,600
146,000
Equity
Common stock, $5 par value
250,000
180,000
Retained earnings
41,400
30,000
Total liabilities and equity
$
378,000
$
356,000
SANCHEZ INC.
Income Statement
For Year Ended June 30, 2017
Sales
$
940,000
Cost of goods sold
575,000
Gross profit
365,000
Operating expenses
Depreciation expense
$
77,000
Other expenses
93,000
Total operating expenses
170,000
195,000
Other gains (losses)
Gain on sale of equipment
5,200
Income before taxes
200,200
Income taxes expense
61,280
Net income
$
138,920
Additional Information
a. A $43,000 note payable is retired at its $43,000 carrying (book) value in exchange for cash.
b. The only changes affecting retained earnings are net income and cash dividends paid.
c. New equipment is acquired for $75,000 cash.
d. Received cash for the sale of equipment that had cost $62,000, yielding a $5,200 gain.
e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
f. All purchases and sales of inventory are on credit.
Make a Journal entry worksheet
1. Reconstruct the journal entry for cash receipts from customers, incorporating the change in the related balance sheet account(s), if any.
2. Reconstruct the journal entry for cash payments for inventory, incorporating the change in the related balance sheet account(s), if any.
3. Reconstruct the journal entry for depreciation expense, incorporating the change in the related balance sheet account(s), if any.
4. Reconstruct the journal entry for cash paid for operating expenses, incorporating the change in the related balance sheet account(s), if any.
5. Reconstruct the journal entry for the sale of equipment at a gain, incorporating the change in the related balance sheet account(s), if any.
6. Reconstruct the journal entry for income taxes expense, incorporating the change in the related balance sheet account(s), if any.
7. Reconstruct the entry to record the retirement of the $43,000 note payable at its $43,000 carrying (book) value in exchange for cash.
8. Reconstruct the entry for the purchase of new equipment.
9. Reconstruct the entry for the issuance of common stock.
10. Close all revenue and gain accounts to income summary.
11. Close all expense accounts to income summary.
12. Close Income Summary to Retained Earnings.
13. Reconstruct the journal entry for cash dividends paid.
SANCHEZ INC.
Comparative Balance Sheets
June 30, 2017 and 2016
2017
2016
Assets
Cash
$
101,300
$
48,900
Accounts receivable, net
68,000
53,000
Inventory
69,000
96,000
Prepaid expenses
5,700
7,100
Total current assets
244,000
205,000
Equipment
179,000
166,000
Accum. depreciation—Equipment
(45,000
)
(15,000
)
Total assets
$
378,000
$
356,000
Liabilities and Equity
Accounts payable
$
33,000
$
40,000
Wages payable
7,000
17,000
Income taxes payable
3,600
4,000
Total current liabilities
43,600
61,000
Notes payable (long term)
43,000
85,000
Total liabilities
86,600
146,000
Equity
Common stock, $5 par value
250,000
180,000
Retained earnings
41,400
30,000
Total liabilities and equity
$
378,000
$
356,000
Explanation / Answer
1. Cash receipt from customers Account Title Debit Credit Cash 925000 Accounts Receivable 925000 (Cash received from the sale) Accounts receivable, July 1, 2016 53000 Sales during the year 940000 Total 993000 Accounts receivable, June 30, 2017 -68000 Cash receipts from customers 925000 2. Cash payments for inventory Account Title Debit Credit Accounts Payable 555000 Cash 555000 (Cash paid for inventory) Inventory, June 30, 2017 69000 Cost of goods sold 575000 Total 644000 Inventory, July 1, 2016 -96000 Purchase of inventory during the year 548000 Accounts Payable, July 1, 2016 40000 Total 588000 Accounts Payable, June 30, 2017 -33000 Cash paid for inventory during the year 555000 3. Depreciation Expense for the year Account Title Debit Credit Depreciation Expense 77000 Accumulated Depreciation 77000 4. Cash paid for operating expenses Account Title Debit Credit Operating Expenses 110000 Cash 110000 Accounts Payable, July 1, 2016 40000 Wages Payable , July 1, 2016 17000 Other expenses for the year 93000 Total 150000 Minus: Accounts Payable, June 30, 2017 33000 Wages Payable , June 30, 2017 7000 40000 Cash paid for operating expenses 110000 5. Entry for sale of equipment at a gain Account Title Debit Credit Cash 20200 Accumulated Depreciation (Sale) 47000 Gain on sale of equipment 5200 Equipment (Sale) 62000 Cost of equipment sold Equipment, July1, 2016 166000 Plus : Purchases during the year 75000 Total 241000 Minus: Equipment, June 30, 2017 179000 Value of equipment sold 62000 Depreciation on equipment sold Acumulated Depreciation , July 1, 2016 15000 Depreciation expense for the year 77000 Total 92000 Minus : Accumulated Depreciation , June30, 2017 45000 Depreciation on the equipment sold 47000 Net value of the equipment sold (62,000 - 47,000) 15000 Gain on sale of equipment 5200 Cash received on sale of equipment 20200 6. Cash paid for income taxes Account Title Debit Credit Income Tax payable 61680 Cash 61680 Income Taxes Payable, June 30, 2016 4000 Income tax expense for the year 61280 Total 65280 Income Taxes Payable, July 31, 2017 -3600 Cash paid for income tax 61680 7. Retirement of note payable Account Title Debit Credit Note Payable 42000 Cash 42000 As per the balance sheet, the retirement is $42,000 (85,000 - 43,000) 8. Purchase of equipment Account Title Debit Credit Equipment 75000 Cash 75000 9. Issue of 14,000 shares of common Stock of $5 par value Account Title Debit Credit Cash 70000 Common stock 70000 10. Closing revenue and gain accounts to income summary Account Title Debit Credit Sales 940000 Gain on sale of equipment 5200 Income Summary 945200 11. Closing expense acounts to income summary Account Title Debit Credit Income Summary 806280 Cost of goods sold 575000 Depreciation Expense 77000 Operating expenses 93000 Income tax expense 61280 12. closing income summary to retianed earnings Account Title Debit Credit Income Summary 138920 Retained Earnings 138920 13. Cash dividends paid Account Title Debit Credit Retained Earnings 127520 Cash 127520 Retained earnings , July 1, 2016 30000 Net income for the year 138920 Total 168920 Retained Earnings , June 30, 2017 41400 Cash dividends paid 127520
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.