Problem - End of the year balances (12/31/2015): Cash $100,000. Equipment $300,000. Building $400,000. Treasury Stock $10,000. Notes Payable (ST) $30,000. Mortgage Payable (LT) $30,000. APIC $200,000. Accounts Payable $25,000. Tax Payable (ST) $10,000.
Other info:
Inventory includes the following: Beginning balance of $22,000 (1000 units at $22). Purchases included: 1000 units of inventory occurred on June 1 for $23/unit; and 1000 units on December 1 for $24/unit. 2000 units were sold for $80/unit on December 20th ($120,000 in cash was received and the remaining will be collected in the following year). The net realizable value for receivable after the aging method indicated a $30,000 value. Both Accounts receivable and the related Allowance have a zero beginning balance. The company uses LIFO.
Supplies at the beginning of the year was $0. The amount of supplies purchased during 2015 was $30,000. End of the year supply count showed that there was still $18,000 remaining of supplies on hand.
Equipment was purchased at the beginning of the year for $300,000. There was an estimated $20,000 salvage/residual value. Straight-line depreciation is used over a 10 year life. Building was purchased at the beginning of the year for $400,000. Salvage/residual value of $20,000 exists. Straight-line is used over a 20 year life.
We sold equipment in 2015 that was purchased in 2014. At the time of the sale, the asset was on the books at a historical cost of $30,000; the related accumulated depreciation on the books at the time of the sale was $5,000. We sold it for $45,000 (we received cash)
We needed funds, so we signed a note on 7/1/2015 for $30,000. We agreed to pay back the note at the end of next year, including 10% interest, payable each 12/30. This is a short-term note.
We needed more capital so we issued bonds at 95% of par value (par = $100,000) on 12/31/15, meaning we received $95,000 of cash. We wonât amortize or accrue interest since we issued at the end of the year. Market rate was 9% and our stated rate of interest was 8%
For purposes of the balanced sheet we have authorized 500,000 shares of stock, but only 400,000 shares of common stock are issued. The par value was $1.00
Retained earnings at the beginning of year was $35,500. Dividends paid during the year were $35,000.
Returns for defective items amounted to $2,000. Sales discounts totaled $8,000.
Tax expense totaled $10,000
1. Prepare Origination Entries and Closing Entries.
2. Prepare Income Statement and Balance Sheet for the above information.