Excalibur Corporation manufactures and sells video games for personal computers. The unadjusted trial balance as of December 31, 2011, appears below. December 31 is the company's fiscal year-end. The company uses the perpetual inventory system.
| Account Title |
Debits |
Credits |
| Cash |
23,300 |
|
| Accounts receivable |
32,500 |
|
| Allowance for uncollectible accounts |
|
100 |
| Supplies |
0 |
|
| Prepaid rent |
0 |
|
| Inventory |
65,000 |
|
| Equipment |
75,000 |
|
| Accumulated depreciation-equipment |
|
10,000 |
| Accounts payable |
|
26,000 |
| Wages payable |
|
3,000 |
| Note payable |
|
30,000 |
| Common stock |
|
80,000 |
| Retained earnings |
|
16,050 |
| Sales revenue |
|
180,000 |
| Cost of goods sold |
95,000 |
|
| Interest expense |
0 |
|
| Wage expense |
32,350 |
|
| Rent expense |
14,000 |
|
| Supplies expense |
2,000 |
|
| Utility expense |
6,000 |
|
| Bad debt expense |
0 |
|
|
|
|
| Totals |
345,150 |
345,150 |
|
|
|
|
|
Information necessary to prepare the year-end adjusting entries appears below. |
| 1. |
The equipment was purchased in 2009 and is being depreciated using the straight-line method over an eight-year useful life with no salvage value.
|
| 2. |
Accrued wages at year-end should be $4,500. |
| 3. |
The company estimates that 2% of all year-end accounts receivable will probably not be collected.
|
| 4. |
The company borrowed $30,000 on September 1, 2011. The principal is due to be repaid in 10 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 10%.
|
| 5. |
The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $500.
|
| 6. |
Prepaid rent at year-end should be $1,000. |
Prepare and complete the worksheet below. Use the information in the worksheet to prepare an income statement and a statement of shareholders' equity for 2011 and a balance sheet as of December 31, 2011. Cash dividends paid to shareholders during the year amounted to $6,000. Also prepare the necessary closing entries assuming that adjusting entries have been correctly posted to the accounts.