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 accounts (1,500) Retained earnings 127,400 Supplies 4,400 Land 40,000 Buildings 142,000 Accumulated depreciation buildings (22,000) 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 Income statement b. Retained Earnings c. Balance sheet d. trail balance e. adjusted trail balance

Explanation / Answer

opening trial balance Dr Cr Cash 24600 Accounts payable 25600 Accounts receivable 45500 common stock 80000 Allowance for doubtful accounts -1500 Retained earnings 127400 Supplies 4400 Land 40000 Buildings 142000 Accumulated depriciaion - Building -22000 233000 233000 In 2012 1-Jan Cash Dr 49200            7% Preferred stock Cr 48000            Additional paid in capital - preferred stock Cr 1200 Cash Dr 21000            Common stock Cr 9000            Additional paid in capital - common stock Cr 12000 Accounts receivable Dr 320000              Service Revenue Cr 320000 1-Apr Cash Dr 36000               unearned revenue Cr 36000 Cash Dr 276000              Accounts receivable Cr 276000 Supplies Dr 35100                Accounts payable Cr 35100 Accounts payable Dr 32200                     Cash Cr 32200 Treasury stock Dr 11200              Cash Cr 11200 operating expenses Dr 188200             Cash Cr 188200 Dividend Dr 3360          Dividend payable Cr 3360 Retained earnings Dr 10680             Dividend payable Cr 10680 ( ( 8000 + 900) * 1.20) Allowance for doubtful accounts Dr 1500 bad debts Dr 200             Accounts receivable Cr 1700 Supplies expense Dr 33600             Supplies Cr 33600 (4400+35100-5900) unearned revenue Dr 27000            service revenue Cr 27000 (36000/12*9) Bad debts Dr 3500            Allowance for uncollectibles Cr 3500 Depriciation - Building Dr 4400              Accumulated depriciation - Building Cr 4400 (142000 -10000)/30 a) Income statement Service revenue 347000 Less operating expenses 188200 Dividend 3360 Bad debts 3700 supplies expense 33600 depriciation 4400 233260 Net Income 113740 Tax @ 30% 34122 Net Income transferred to retained earnings 79618 d & e) trial balance           opening        for the year         closing Dr Cr Dr Cr Dr Cr Cash 24600 150600 175200 Accounts payable 25600 2900 28500 Accounts receivable 45500 44000 1700 87800 common stock 80000 9000 89000 Allowance for doubtful accounts -1500 -2000 -3500 Retained earnings 127400 10680 79618 196338 Supplies 4400 1500 5900 Land 40000 40000 Buildings 142000 142000 Accumulated depriciaion - Building -22000 -4400 -26400 Service revenue 347000 347000 0 operating expenses 188200 188200 0 Dividend 3360 3360 0 Bad debts 3700 3700 0 supplies expense 33600 33600 0 depriciation 4400 4400 0 Unearned revenue 9000 9000 Dividend payable 14040 14040 Treasury stock 11200 11200 Income tax 34122 34122 Tax payable 34122 34122 Preferred stock 48000 48000 Additional paid in capital; - preferred 1200 1200 Additional paid in capital; - common 12000 12000 233000 233000 825962 825962 432200 432200 b) Retained earnings Dr 267382           operating expenses Cr 188200            Dividend Cr 3360             Bad Debts Cr 3700             Supplies expense Cr 33600             Depriciation - building Cr 4400            Income tax Cr 34122 Service revenue Dr 347000               Retained earnings Cr 347000 c) Balance sheet Current Assets Cash 175200 Accounts receivable 87800 Allowance for doubtful accounts -3500 Supplies 5900 Total Current Assets 265400 Land 40000 Buildings 142000 Accumulated depriciaion - Building -26400 Net Fixed Assets 155600 Total Assets 421000 Current Liabilities Accounts payable 28500 Dividend payable 14040 Tax payable 34122 Unearned revenue 9000 Total current Liabilities 85662 Preferred stock 48000 common stock 89000 Less : treasury stock 11200 Retained earnings 196338 Additional paid in capital; - preferred 1200 Additional paid in capital; - common 12000 335338 Total liabilities & stockholders equity 421000

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