Czar was authorized to issue 3,000,000 shares of $1 par Common Stock but has onl
ID: 2432206 • Letter: C
Question
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.
G- Because of a new product line, Czar needed some temporary additional storage space so on 3,1, 2018 they rented a unit for an annual rate of $13,600 and they paid the entire amount up front.
H- The storage building was self-constructing this year by Czar. The Company had their initial expenditure of $400,000 on January 1. They paid an additional $300,000 on May 1st, $200,000 on August 1st, and then the final payment of $120,000 on December 1st when the building was completed, and occupancy occurred. The company has decided to use S/L method for depreciation. The storage building is estimated to have a life of 40 years and a salvage value of $56,615. The company depreciates using partial years.
I- Czar has two loans outstanding as of 12/31/2018. Interest is paid annually on January 1st. The facts on each loan are as follows: First Trust Bank Loan – outstanding since January 1, 2018 with a 6.0% interest rate. This loan was taken out to finance the construction of the Storage Building. Interest for the year and 10% of the principle will be paid to the bank on January 1, 2019. Except for recording the initial cash received and loan, no additional entries have been made.Coldwell Bank Loan – also outstanding all of 2018 with 5.05 % interest rate Interest is due on January 1, 2019. Principle is due on January 1, 2025. Since interest will not be paid to the Bank until 2019, Czar’ office staff did not accrue any interest.
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 9,268,360Explanation / Answer
Date Particulars Debit($) Credit($)
31.12.2018 Bank Account 520000
To Share Application Account 520000
(Being share application money received on 520000 shares at a par value of $1)
31.12.2018 Prepaid Rent Account 13600
To Cash/Bank Account 13600
(Being rent for the entire year paid in advance for the unit taken on rent for business opeartions)
01.01.2018 Building Account 400000
To Cash/Bank Account 400000
(Being self construction capital expenditure done by Czar on Building so it will be capitalised ie added in the cost of the building)
01.05.2018 Building Account 300000
To Cash/Bank 300000
(Being self construction capital expenditure done by Czar on Building so it will be capitalised ie added in the cost of the building)
01.08.2018 Building Account 200000
To Cash/Bank 200000
(Being self construction capital expenditure done by Czar on Building so it will be capitalised ie added in the cost of the building)
01.12.2018 Building Account 120000
To Cash/Bank 120000
(Being self construction capital expenditure done by Czar on Building so it will be capitalised ie added in the cost of the building)
30.06.2018 Depriciation Account 48170
To Accumulated Depriciation Account 48170
(Being depriciation on building for 6 months.
Depriciation = Original Cost - Salvage Value/Useful life in years
=400000+300000+200000+120000-56615/40)
30.06.2018 Accumulated Depiciation Account 48170
To Building Account 48170
31.12.2018 Depriciation Account 48170
To Accumulated Depriciation Account 48170
(Being depriciation on building for 6 months.
Depriciation = Original Cost - Salvage Value/Useful life in years
=400000+300000+200000+120000-56615/40)
31.12.2018 Accumulated Depiciation Account 48170
To Building Account 48170
01.01.2018 Cash/Bank Account 520000
To Loan First Trust Payable Account 520000
(Being entry for loan taken recorded in the books.)
31.12.2018 Accrued Interest Expense Payable Account 3120
To Loan First Trust Payable Account 3120 (Being interest due on laon taken @ 6 per cent)
01.01.2019 Loan First Trust Payable Account 572000
Accrued Interest Payble Account 3120
To Cash/Bank Account 575120
(Being repayment entry for loan and interest made in books)
01.01.2018 Cash/Bank Account 1600000
To Loan Coldwell Bank Payable 1600000
(Being entry for loan taken recorded in the books.)
31.12.2018 Accrued Interest Expense Payable Account 80800
To Loan Coldwell Bank Account 80800 (Being interest due on loan taken @ 5.05 per cent per annum)
Date Particulars Debit($) Credit($)
31.12.2018 Bank Account 520000
To Share Application Account 520000
(Being share application money received on 520000 shares at a par value of $1)
31.12.2018 Prepaid Rent Account 13600
To Cash/Bank Account 13600
(Being rent for the entire year paid in advance for the unit taken on rent for business opeartions)
01.01.2018 Building Account 400000
To Cash/Bank Account 400000
(Being self construction capital expenditure done by Czar on Building so it will be capitalised ie added in the cost of the building)
01.05.2018 Building Account 300000
To Cash/Bank 300000
(Being self construction capital expenditure done by Czar on Building so it will be capitalised ie added in the cost of the building)
01.08.2018 Building Account 200000
To Cash/Bank 200000
(Being self construction capital expenditure done by Czar on Building so it will be capitalised ie added in the cost of the building)
01.12.2018 Building Account 120000
To Cash/Bank 120000
(Being self construction capital expenditure done by Czar on Building so it will be capitalised ie added in the cost of the building)
30.06.2018 Depriciation Account 48170
To Accumulated Depriciation Account 48170
(Being depriciation on building for 6 months.
Depriciation = Original Cost - Salvage Value/Useful life in years
=400000+300000+200000+120000-56615/40)
30.06.2018 Accumulated Depiciation Account 48170
To Building Account 48170
31.12.2018 Depriciation Account 48170
To Accumulated Depriciation Account 48170
(Being depriciation on building for 6 months.
Depriciation = Original Cost - Salvage Value/Useful life in years
=400000+300000+200000+120000-56615/40)
31.12.2018 Accumulated Depiciation Account 48170
To Building Account 48170
01.01.2018 Cash/Bank Account 520000
To Loan First Trust Payable Account 520000
(Being entry for loan taken recorded in the books.)
31.12.2018 Accrued Interest Expense Payable Account 3120
To Loan First Trust Payable Account 3120 (Being interest due on laon taken @ 6 per cent)
01.01.2019 Loan First Trust Payable Account 572000
Accrued Interest Payble Account 3120
To Cash/Bank Account 575120
(Being repayment entry for loan and interest made in books)
01.01.2018 Cash/Bank Account 1600000
To Loan Coldwell Bank Payable 1600000
(Being entry for loan taken recorded in the books.)
31.12.2018 Accrued Interest Expense Payable Account 80800
To Loan Coldwell Bank Account 80800 (Being interest due on loan taken @ 5.05 per cent per annum)
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