Hampton Corporation’s balance sheet at December 31, 2011, is presented below. HA
ID: 2500134 • Letter: H
Question
Hampton Corporation’s balance sheet at December 31, 2011, is presented below.
HAMPTON CORPORATION BALANCE SHEET DECEMBER 31, 2011
Cash $24,600
Accounts Receivable 45,500
Allowance for doubtful accounts (1,500)
Supplies 4,400 Land 40,000 Buildings 142,000
Accumulated depreciation-buildings (22,000)
Total $233,000
Accounts payable $25,600
Common stock ($10par) 80,000
Retained earnings 127,400 Total $233,000
During 2012, the following transactions occurred.
1. On January 1, 2012, Hampton issued 1,200 share 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 frees 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 $1,700 which originated in 2011 is written of as uncollectible.
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 balance of $3,500 at year end.
4. Depreciation is recorded on the building on a straight-line basis based on a 30-year life and 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) Prepare journal entries for the transactions listed above, and adjusting entries.
B) Prepare an adjusted trial balance at December 31, 2012.
C) Prepare an income statement and a retained earnings statement for the year ending December 31, 2012, and a classified balance sheet as of December 31, 2012.
Explanation / Answer
1) Cash ................Dr
To Common Stock
To 7% Preferred stock
(Being 1200 common stock issued 40 par and 7% preferred stock issued)
2) Cash A/c ..............dr 21000
To common stock 9000
To premium on issue of common stock13000
(being 900 common stock 10par issued at 21000)
3) Accounts Receivable..................dr 320000
To sale of services 320000
(being services performed on account)
4) Cash A/c ..............................dr 36000
To advanced received from customers 36000
(being amount received in advance)
5) Cash A/c ............................dr 276000
To accounts receivable 276000
( Being amount received from customers on account)
6) Supplies a/c....................dr 35100
To accounts payable 35100
(being supplies received on from suppliers)
7) Accounts payable a/c .................dr 32200
To cash 32200
(being amount paid to accounts payable)
8) Common stock ...............dr 4000
Loss on buy back ..........dr 7200
To cash 11200
(being shares bought back)
9) Operating expenses ................dr 188200
To cash 188200
(being operating expenses paid)
11) Bad debt expenses ..............dr 1700
To accounts receivable 1700
(being bad debts incurred)
Particulars Amount Revenue from services 320000 Less: Operating expenses paid 188200 Less : Purchases of supplies (4400+35100-5900) 33600 Less: Bad debt expenses 1700 Less: Depreciation 4400 Less: Allowance for doubtful accounts 3500Related Questions
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