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Question: The following items should be considered in adjusting the accounts for financial statement prepar...
December utilities totaled $1,143 and remain unrecorded at December 31, 2017.
2- PREPARE ADJUSTING ENTRIES
3- PREPARE INCOME STATEMENT
4- PREPARE STATEMENT OF RETAINED EARNING
5- CLOSING ENTRIES
6- PREPARE BALANCE SHEET
7 - RATIOS
- working capital
- current ratio
The following items should be considered in adjusting the accounts for financial statement preparation: 1. Franklin Products acquired a 8.4% bank loan for $65,550 on August 1, 2017, due in 1 year. 2. Prepaid insurance is the cost of a 18-month insurance policy, effective February 1. 3. Franklin Products rents warehouse storage for its seasonal heavy equipment. On November 1, 2017, Franklin Products paid $4,140 for a 6-month lease. 4. The physical inventory count of Merchandise Inventory indicated an amount $64,686. 5. Supplies on hand at December 31, 2017 total $3,918. 6. Equipment is depreciated on a straight-line basis; residual value is estimated to be $7,500 with an estimated service life of 7 years. The assets were held the entire year. 7. On October 1, Franklin Products issued Evergreen Industries a 6-month note receivable at a 6.4% annual interest rate. 8. The aging schedule of accounts receivable indicates total estimated bad debt will be $8,166. 9. Salaries & Wages of $1,498 are accrued and unpaid at December 31, 2017. 10.December utilities totaled $1,143 and remain unrecorded at December 31, 2017.
End of Period Worksheet For the Year Ended December 31, 2017 Unadjusted Adjusted Account Title Trial Balance Adjustments Trial Balance Income Statement Balance Sheet DR CR DR CR DR CR DR CR DR CR Cash 23,414 Accounts Receivable 92,552 Allowance for Doubtful Accounts 451 Interest Receivable Note Receivable 5,290 Merchandise Inventory 66,516 Prepaid Insurance 2,484 Prepaid Rent 4,140 Supplies 10,488 Equipment 94,392 Accumulated Depreciation - Equipment 10,212 Accounts Payable 9,669 Salaries & Wages Payable Interest Payable Utilities Payable Note Payable (final payment due 2020) 65,550 Common Stock 27,600 Retained Earnings 78,200 Dividends 22,540 Sales 989,690 Sales Returns and Allowances 5,520 Sales Discounts 11,868 Cost of Goods Sold 681,214 Salaries & Wages Expense 149,868 Depreciation Expense - Equipment Bad Debt Expense Insurance Expense Rent Expense Supplies Expense Utilities Expense 11,086 Interest Revenue Interest Expense 1,181,372 1,181,372 Net Income2- PREPARE ADJUSTING ENTRIES
3- PREPARE INCOME STATEMENT
4- PREPARE STATEMENT OF RETAINED EARNING
5- CLOSING ENTRIES
6- PREPARE BALANCE SHEET
7 - RATIOS
- working capital
- current ratio
Explanation / Answer
End of Period Worksheet For the Year Ended December 31, 2017 Unadjusted Adjusted Account Title Trial Balance Adjustments Trial Balance Income Statement Balance Sheet DR CR DR CR DR CR DR CR DR CR Cash 23,414 23,414 - 23,414 - Accounts Receivable 92,552 92,552 - 92,552 - Allowance for Doubtful Accounts 451 8166 8,617 - 8,617 Interest Receivable 84.64 85 85 - Note Receivable 5,290 5,290 - 5,290 - Merchandise Inventory 66,516 1830 64,686 64,686 - Prepaid Insurance 2,484 1518 966 966 - Prepaid Rent 4,140 1380 2,760 2,760 - Supplies 10,488 6570 3,918 3,918 - Equipment 94,392 94,392 - 94,392 - Accumulated Depreciation - Equipment 10,212 10954.28 21,166 - 21,166 Accounts Payable 9,669 9,669 - 9,669 Salaries & Wages Payable 1498 1,498 - 1,498 Interest Payable 2294.25 2,294 - 2,294 Utilities Payable - - - Note Payable (final payment due 2020) 65,550 65,550 - 65,550 Common Stock 27,600 27,600 - 27,600 Retained Earnings 78,200 78,200 - 174,208 Dividends 22,540 22,540 22,540 - Sales 989,690 - 989,690 - 989,690 Sales Returns and Allowances 5,520 5,520 - 5,520 - Sales Discounts 11,868 11,868 - 11,868 - Cost of Goods Sold 681,214 1830 683,044 - 683,044 - Salaries & Wages Expense 149,868 1498 151,366 - 151,366 - Depreciation Expense - Equipment 10954.28 10,954 - 10,954 - Bad Debt Expense 8166 8,166 - 8,166 - Insurance Expense 1518 1,518 - 1,518 - Rent Expense 1380 1,380 - 1,380 - Supplies Expense 6570 6,570 - 6,570 - Utilities Expense 11,086 11,086 - 11,086 - Interest Revenue 84.64 - 85 - 85 Interest Expense 2294.25 2,294 - 2,294 - 1,181,372 1,181,372 34,295 34,295 1,204,369 1,204,369 893,767 989,775 310,603 310,603 Net Income 96,008 1 bank loan interest from august to december 5 months 65550*8.4%*5/12 2294.25 Interest Expenses Dr 2294.25 To Interest Payable 2294.25 Interest is accrued at the period end shown as interest payable and expenes in revenue statement 2 Prepaid insurance is to be booked as expenses from Feb to december 11 months 2484*11/18 1518 Insurance Expenses Dr. 1518 To Prepaid Insurances 1518 prepaid insurance for 11 months booked as insurance expenses for the period and debited as less from balance in balance sheet 3 Warehouse rent is booked for 2months in expenses till period ending december 4140*2/6 1380 Rent Dr. 1380 To Prepaid Rent 1380 4&5 Difference of opening and closing stock of supplies and Merchandise inventory booked into cost of goods sold 6 Depriciation calculated as follows Book value as on Jan-17 Book value - depriciation accumulated 94392-10212 84180 Depriciation formula in streight line method (Asset Value- Salvage value)/ estimated usful life Depriciation (84180-7500)/7 10954.42 Depriciation Dr. 10954.42 To Accumulated Depriciation 10954.42 7 6 month note receivable interest booked as income and interest recevable from Oct to Dec 3 months. 5290*6.4%*3/12 84.64 Interest Receivable Dr. 84.64 To Interest Income 84.64 8 Bed debts booked as expenses as well as provisions for 8166 Bed Debts 8166 To Allowance for Doubtful accounts 8166 9 Salaries & wages accrued booked as period expenses and added to liablities as unpaid /accrued expenses Salary & wages Dr. 1498 To Salary & wages Payable 1498 3 Income Statement as per table above , Balancing Fugure from Dr to Cr will be profit for the year 4--5 Retained Earnings & closing Entry Opening Balance 78200 Period Profit 96008 174208 Profit & loss A/c Dr. 96008 To Retained Earnings 96008 Being Profit for the year transffered to retained earnings 6 Balance sheet as per Table 7 Ratios A Working Capital Formula Current Assets-Current Liablities in this case Cash 23414 Accounts Receivable 92552 Allowance for Doubtful Accounts -8617 Interest Receivable 84.64 Note Receivable 5290 Merchandise Inventory 64686 Prepaid Insurance 966 Prepaid Rent 2760 Total Current Assets 181135.6 Accounts Payable 9669 Salaries & Wages Payable 1498 Interest Payable 2294.25 Note Payable (final payment due 2020) 65550 Assumed as bank loan payable in 1 year Total Current Liabilities 79011.25 Working Capital 102124.4 B current Ratio Current Assets/Current Liabilities 181135.6/79011.25 2.292
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