Part 1:
At November 30, 2012, Silver Traders Company had the following trial balance. There is detailed information on the next page about December 2012 transactions that need to be recorded.
Silver Traders Company
Trial Balance
11/30/12
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Dr
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Cr
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Cash
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281,000
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Accounts Receivable
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62,000
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Allowance for Doubtful Accounts
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5,000
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Short Term Note Receivable
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24,000
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Supplies
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6,000
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Inventory
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65,000
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Equipment
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195,000
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Building
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0
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Accumulated Depreciation
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75,000
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Copyright
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44,000
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Accounts Payable
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45,000
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Dividends Payable
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0
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Interest Payable
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0
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Unearned Revenue
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40,000
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ST Note Payable
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15,000
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LT Mortgage Payable
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0
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Bonds Payable
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200,000
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Premium on Bonds Payable
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26,840
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Common Stock - $1 par
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3,000
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Paid In Capital In Excess of Par - CS
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86,000
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Preferred Stock - $5 par
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1,000
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Paid In Capital In Excess of Par - PS
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50,000
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Treasury Stock
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0
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Retained Earnings
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105,000
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Dividends
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5,000
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Sales Revenue
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819,000
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Sales Returns & Allowances
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3,840
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Sales Discounts
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9,000
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Cost of Goods Sold
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380,000
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Bad Debts Expense
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5,000
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Depreciation Expense
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50,000
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Wages Expense
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260,000
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Rent Expense
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63,000
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Insurance Expense
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16,000
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Supplies Expense
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6,000
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Interest Revenue
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1,000
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Interest Expense
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8,000
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Gain on Sale of Equipment
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15,000
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Income Tax Expense
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4,000
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Total
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1,486,840
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1,486,840
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Instructions: You must turn in the work performed on the sheets printed with this page. This WILL NOT BE ACCEPTED ON PLAIN PAPER.
- Write the journal entries (on the following General Journal page) required for each of the events described below. Write the entries in the order described below (#1 - #8).
- Use ONLY the accounts listed on the trial balance for your journal entries.
- Post the transactions to individual T-accounts and prepare an adjusted trial balance for Silver Traders Company as of December 31, 2012.
1. The company purchased a building December 1, 2012 with a LT Mortgage Payable of $200,000 at 12% interest. (Record the purchase of the building.)
2. The company issued 500 shares of Common Stock for $4,000 on December 25, 2012. (Hint: Remember to consider the par value per share!)
3. On December 29, 2012 the company declared a cash dividend of $2.00 per share of common stock (including the additional 500 shares issued on December 25th.)
4. The terms of the LT mortgage payable from #1 above require the company to make monthly installment payments over the term of the loan. Each payment consists of interest on the unpaid balance of the loan and a reduction of loan principal. Record the first monthly payment of $3,000 on the LT Mortgage Payable on December 31, 2012.
5. The company last paid interest on the ST note payable on November 30, 2012. Record the accrued interest expense for the last 1 month of 2012. The annual interest rate is 8%.
6. The Bonds Payable and related Premium amounts on the Nov. trial balance relate to the Jan. 1, 2012 issuance of the following bonds: On Jan. 1, 2012, the company issued 10%, 10-year bonds when the market rate for similar investments was 8%. The company pays interest each year on January 1st. On Dec. 31, 2012, use the effective interest method of amortizing the premium on bonds payable to accrue the interest expense for 2012. Round your interest expense calculation to the nearest whole dollar.
7. The Unearned Revenue amount on the Nov. trial balance relates to amounts that the company previously collected in cash for sales that were to be completed in the future. The company completed some of these sales during December and now owes only $15,000 of that unearned revenue. Record the necessary adjustment for December 31, 2012.
8. On December 31, 2012, the company purchased 50 shares of its own Preferred Stock for Treasury Stock for $12 per share.
Use the space below for T-accounts (REQUIRED).
(Specific instructions: Prepare T-accounts for each account affected by a journal entry. Write in the unadjusted balance for each of these accounts (from page 1)...the unadjusted balance might be a debit, a credit, or zero balance. Now you are ready to post your journal entries from page 3 onto the corresponding T-accounts and then calculate adjusted balances.)
1. What is the effect on the accounting equation when Treasury Stock is purchased? Assets = Liabilities + Stockholders' Equity
= + (fill in blanks with arrows to indicate what changes and in which direction)
2. How many Common Stock shares are outstanding at 12/31/2012? (HINT: Remember that the treasury shares purchased on 12/31/2012 were Preferred Shares, not Common Shares)
3. If this company had a common stock 3-1 stock split on Dec. 31, 2012:
a. How many shares would there be after the split?
b. What is the par value per share in dollars after the split?
4. Does the Carrying Value of the Bonds Payable and Premium increase or decrease over the life of the bonds?
5. What will be the balance in the Mortgage Payable Account at Jan. 31, 2013 after the second monthly payment is made?
6. The company is about to issue $2,000,000 of 5-year, 10% bonds. Interest will be paid semi- annually. The market interest rate for such securities is 12%. How much can the company expect to receive from the sale (issuance) of these bonds?
Part 2:
NOTE: This is a DIFFERENT COMPANY. Using the trial balance below, complete the Multi-Step Income Statement and prepare the Statement of Retained Earnings and Classified Balance Sheet on the pages which follow. To get full credit you must include all critical subtotals.
Jackson Company
Adjusted Trial Balance
December 31, 2015
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DEBIT
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CREDIT
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Cash
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3,800
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Accounts Receivable
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4,920
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Allowance for Doubtful Accounts
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1,340
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Short term Note Receivable
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400
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Interest Receivable
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40
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Supplies
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60
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Inventory
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6,000
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Prepaid Expenses
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300
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Equipment
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21,440
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Accumulated Depreciation
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3,940
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Copyrights
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1,200
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Accounts Payable
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1,340
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Interest Payable
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40
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Unearned Revenue
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100
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Long Term Note Payable
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2,800
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Common Stock
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15,200
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Paid-in-Capital In Excess of Par - CS
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1,600
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Retained Earnings (1/1/15)
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6,320
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Dividends
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1,200
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Sales
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73,600
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Sales Returns & Allowances
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80
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Sales Discounts
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120
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Cost of Goods Sold
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44,400
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Bad debt expense
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60
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Depreciation Expense
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1,540
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Amortization Expense
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140
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Wages Expense
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16,000
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Rent Expense
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1,000
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Office Expense
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160
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Supplies Expense
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200
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Selling Expense
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1,600
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Interest Expense
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400
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Interest Revenue
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300
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Income Tax Expense
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1,520
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Totals
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106,580
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106,580
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