Safe and Sound Security, Inc. is a security business with the following account
ID: 2472761 • Letter: S
Question
Safe and Sound Security, Inc. is a security business with the following account balances as of 1/1/2015.
Cash $ 7,020
Petty cash 250
Accounts receivable 15,000
Allowance for doubtful accounts 3,000
Supplies inventory 500
Prepaid rent 6,000
Merchandise inventory (40 @ $400) 16,000
Equipment 4,000
Van 35,000
Accumulated depreciation 19,100
Sales tax payable 400
Federal income tax payable 750
FICA - Social Security tax payable 1,240
FICA - Medicare tax payable 270
Warranty payable 850
Unemployment tax payable 300
Interest payable 600
Note payable - State Bank 10,000
Common stock 20,000
Retained earnings 27,260
Note: although all accounts are shown with a positive balance, they have the normal debit or credit balance that accounts in their account type have (e.g. - assets have a debit balance, liabilities have a credit balance).
During 2015, Safe and Sound Security, Inc. experienced the following transactions:
1) Paid the sales tax payable from 2014.
2) Paid the balance of all the payroll liabilities due for 2014.
3) On January 1, 2015, purchased land and a building for $100,000. The building was appraised at $75,000 and the land at $25,000. Safe and Sound paid $10,000 cash and financed the balance. The balance was financed with a 10-year installment note. The note had an interest rate of 5% and annual payments of $11,655 (including both principal and interest) due on the last day of the year.
4) Purchased $1,000 of Supplies inventory.
5) Purchased 50 alarm systems at a cost of $375. Cash was paid for the purchase.
6) After numerous attempts to collect from customers, wrote off $2,000 of uncollectible accounts receivable.
7) Sold 80 alarm systems for $500 each plus sales tax of 6 percent. All sales were on account. (Be sure to compute cost of goods sold using the FIFO cost flow method).
8) Billed $100,000 of monitoring services for the year. Credit card sales amounted to $36,000, and the credit card company charged a 3% fee. The remaining $64,000 were sales on account. Sales tax is not charged on this service. Net credit card sales are posted to accounts receivable until cash is received from the credit card company.
9) Replenished the petty cash fund at June 30. The fund had $50 cash and receipts of $125 for yard mowing and $75 for office supplies expense.
10) Collected the amount due from the credit card company.
11) Paid the sales tax collected on $20,000 of the alarm sales.
12) Collected $115,000 of accounts receivable during the year.
13) Paid installers and other employees a total of $60,000 for salaries for the year. Use the current Social Security tax and Medicare rates of 6.2% and 1.45%, respectively. Federal income taxes withheld amounted to $6,000. The net amount of salaries was paid in cash. (Disregard unemployment taxes in this entry).
14) Paid $1,000 in warranty repairs during the year for systems installed in the previous year. Prior year warranty expense was estimated at 2% of sales.
15) On September 1, paid in full the note payable owed to State Bank plus $1,100 of interest. All interest payable at January 1 was owed to State Bank relating to this note payable.
16) Paid $9,000 of advertising expense during the year.
17) Paid payroll liabilities, both the amounts withheld from the salaries plus the employer share of Social Security tax and Medicare tax, on $50,000 of the salaries plus $5,000 of the federal income tax that was withheld. (Disregard unemployment taxes in this entry).
18) Payment was made on the building note payable.
Adjustments: 19) There was $500 of supplies inventory on hand at the end of the year.
20) Recognized the expired rent for the office building for the year. Twenty-four months of rent was originally paid at 1/1/2014.
21) Recognized the uncollectible accounts expense for the year using the allowance method. Safe and Sound now estimates that 2.0% of sales on account will not be collected.
22) Recognized depreciation expense on the equipment, van, and building. The equipment has a five-year life, the van has a four-year life, and the building has a 40-year life. The company uses straight-line method for all fixed assets. The equipment and van were purchased in 2013 and had a full year depreciation in both 2013 and 2014. Assume no residual value on any of the assets.
Required:
1) Prepare a trial balance.
2) Prepare an income statement, statement of stockholders’ equity, and balance sheet.
Explanation / Answer
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A/c Head Cash Petty cash Accounts Receivable Allowance for doubtful accounts Supplies Inventory Prepaid Rent Marchandies Inventory Equipment Van Accmulated Depreciation Sales Tax Payable Federal income tax payable FICA - Social Security tax payable FICA - Medicare tax payable Warranty payable Unemployment tax payable Interest payable Note payable - State Bank Common stock Retained earnings Building Land Sales Cost of Goods Sold Card fee Patty Csh Exp Salaries Advertisement Depreciation Purchases Opening Balance(DR/CR 7020 250 15000 3000 500 6000 16000 4000 35000 19100 400 750 1240 270 850 300 600 10000 20000 27260 S.no 1 -400 -400 2 -3410 -750 -1240 -270 -300 3 -10000 90000 75000 25000 3a 4500 4 -1000 1000 5 -18750 18750 6 -2000 -2000 7 ** 42400 2400 40000 8 100000 -1080 100000 1080 9 200 200 10 34920 -36000 -1080 11 -1200 -1200 12 115000 -115000 13 -49410 6000 3720 870 60000 14 -1000 -1000 14a 2800 -2800 15 -11100 500 -10000 -500 16 -9000 9000 17# -8825 -5000 -3100 -725 18 -11655 -4500 -7155 19 -1000 -1000 20 -6000 -6000 21## 2128 2128 22 * 9550 9550 Ending Inventory (40X400)+((50x375)-(40*400)-(40*375) Total 31190 450 8528 3128 500 0 3750 4000 35000 28650 1200 1000 620 145 2650 0 1100 82845 20000 13880 75000 25000 140000 0 0 200 60000 9000 9550 18750 # employer contribution is not given, so not considered ## (64000+42400 x 2%) *(4000/5)+(8750) **(40X400+40X375)Related Questions
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