HAMPTON CORPORATION Balance Sheet December 31, 2011 Cash $ 24,600 Accounts payab

Question

HAMPTON CORPORATION Balance Sheet December 31, 2011 Cash $ 24,600 Accounts payable $ 25,600 Accounts receivable 45,500 Common stock ($10 par) 80,000 Allowance for doubtful Retained earnings 127,400 accounts (1,500) $233,000 Supplies 4,400 Land 40,000 Buildings 142,000 Accumulated depreciation buildings (22,000) $233,000 During 2012, the following transactions occurred. 1. On January 1, 2012, Hampton issued 1,200 shares of $40 par, 7% preferred stock for $49,200. 2. On January 1, 2012, Hampton also issued 900 shares of the $10 par value common stock for $21,000. 3. Hampton performed services for $320,000 on account. 4. On April 1, 2012, Hampton collected fees of $36,000 in advance for services to be performed from April 1, 2012, to March 31, 2013. 5. Hampton collected $276,000 from customers on account. 6. Hampton bought $35,100 of supplies on account. 7. Hampton paid $32,200 on accounts payable. 8. Hampton reacquired 400 shares of its common stock on June 1, 2012, for $28 per share. 9. Paid other operating expenses of $188,200. 10. On December 31, 2012, Hampton declared the annual preferred stock dividend and a 1.20 per share dividend on the outstanding common stock , all payable on January 15, 2013 11. An account receivable of $1700 which originated in 2011 is written off as uncollectiable. Adjustment data: 1. A count of supplies indicates that $5,900 of supplies remain unused at year-end. 2. Recorded revenue earned from item 4 above. 3. The allowance for doubtful accounts should have a balanceof $3,500 at year end. 4. Depreciation is recorded on the building on astraight-line basis based on a 30-year life and a salvage value of $10,000. 5. The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.) Instructions: a.) Create the trial balance. b.) Create the closing entries

Explanation / Answer

31st December 2011 Additions 2012 Unadj Trial Balance Adjustments Adjusted Trial Balance Income summary Post closing TB TRIAL BALANCE Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit cash 24600 150600 175200 175200 175200 accounts receivable 45500 42300 87800 87800 87800 allowance for doubtful accounts 1500 1700 -200 3700 3500 -3500 supplies 4400 35100 39500 33600 5900 5900 land 40000 40000 40000 40000 buildings 142000 142000 142000 142000 accumulated depn-buildings -22000 -22000 4400 -26400 -26400 accounts payable 25600 2900 28500 28500 28500 unearned service revenue 36000 36000 27000 9000 9000 preferred stock 48000 48000 48000 48000 addl paid in capital-preferred 1200 1200 1200 1200 common stock 80000 9000 89000 89000 89000 addl paid in capital - common 12000 12000 12000 12000 retained earnings 127400 13560 113840 113840 195810 treasury stock 11200 11200 11200 -11200 service revenue earned 320000 320000 27000 347000 347000 other operating expenses 188200 188200 188200 188200 preferred dividend payable 3360 3360 3360 3360 common stock dividend payable 10200 10200 10200 10200 income tax payable 35130 35130 supplies expense 33600 33600 33600 bad debts expense 3700 3700 3700 depreciation expense 4400 4400 4400 income tax expense 35130 35130 Net Income 81970 234500 234500 442660 442660 661900 661900 68700 68700 700730 700730 347000 347000 421000 421000 INCOME STATEMENT: service revenue earned 347000 less: expenses other operating expenses 188200 supplies expense 33600 bad debts expense 3700 depreciation expense 4400 229900 profit before tax 117100 tax @ 30% 35130 profit after tax 81970 CLOSING ENTRIES: income summary 265030 other operating expenses 188200 supplies expense 33600 bad debts expense 3700 depreciation expense 4400 income tax expense 35130 (expenses closed to income summary) service revenue earned 347000 income summary 347000 (revenue closed to income summary) income summary 81970 retained earnings 81970

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