Use the following financial statements and additional information. SANCHEZ INC.
ID: 2414041 • 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.
Using the income statement, the comparative balance sheet, and the additional information given above, reconstruct the entries for the summarized activity of the current fiscal year to make a GENERAL JOURNAL.
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) Note Payable
Note Payable Dr 43000
Cash Cr 43000
2) Acqutition of Equipment
Equipment Dr 75000
Cash Cr 75000
3) Sale of Equipment
Cash Dr 67200
Equipment Cr 62000
Gain on sale of Equipment Cr 5200
4) Sales
Account Receivable Dr 940000
Sales Cr 940000
5) Cost of Goods Sold
Cost of Goods Sold Dr 575000
Accounts Payable Cr 575000
6) Depreciation
Depreciation Dr 77000
Accumulated Depreciation Cr 77000
7) Other Expenses
Other Expense Dr 1400
Prepaid Expense Cr 1400
Wage Payable Dr 10000
Other Expense Cr 10000
P/L Dr 93000
Other Expense Cr 93000
Other Expense account Dr 101600
Cash Cr 101600
8) Income tax
Incometax Payable Dr 400
Income tax Expense Cr 400
P/L Dr 61280
Incometax Expense Cr 61280
Income tax Expense Dr 61680
Cash Cr 61680
9) Retained Earnings
P/L Dr 138920
Retained Earnings Cr 138920
10) Dividend Paid
Shareholders Dr 127520
Cash Cr 127520
11) Common Stock issued
Cash Dr 70000
Common Stock Cr 70000
12) Account Payable
Account Payable Dr 582000
Cash Cr 582000
13) Inventory
Cash Dr 27000
Inventory Cr 27000
14) Account Receivable
Cash Dr 925000
Account Receivable Cr 925000
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