XS Company unadjusted trial balance at December 1, 2012 is presented below.
Account
Debit ( $)
Credit ( $)
Cash
142.000
Account Receivable
54,200
Inventory
32,700
Prepaid Insurance
24,000
Land
120.000
Buildings
250.000
Franchise rights
280,000
Allowance for doubtful accounts
13,000
Accumulated Depreciation - building
24.000
Account Payable
27.300
Notes payable ( due in 2016)
150.000
Capital
70,900
Drawing
20.000
Sales Revenue
1,500.000
Cost of Goods Sold
750,500
Other operating expenses
61.800
Salaries expenses
50.000
Total
1,785,200
1,785,200
The following transactions occurred during December:
Dec 2?Company accepted a 4 month, 8% note receivable from Alia Company in payment of Account receivable of $2,500.
Dec 5?Company collected $12,000 form customer on account
Dec 12?Company spent $120,000 in research and development cost to develop new product. A patent was granted for the product on December 15. Legal and other cost for the patent was $12,300.
Dec 15?Purchased a new machine that cost $140,000 on account. Company also pays cash for the following item: installation of $2,300; sales taxes of $750; lubricant oil $300; transportation cost of $1,200.
Dec 20?Paid $ 20,000 for the notes payable.
Dec 29?Purchased a rights to extract gold worth $15 million. The gold is estimated to be around 1,500,000 tons per year.
Adjustment data:-
1. Company use percentage of sales basis to estimate its bad debt. Company estimates 2% of net sales will be uncollectible at the end of the year.
2. Notes receivable is for one year, 8% note dated on April 1, 2012.
3. A one year Prepaid insurance was purchased on September 1, 2012
4. The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000.
5. The machine is being depreciated using double declining balance over 5 year period. The salvage value is 10% of the cost.
6. Franchise right will be amortized over a period of 20 years.
7. Patent will be amortized over a period of 40 years.
8. At the end of the year 350,000 tons of gold was extracted.
9. The note payable is dated June 30, 2012 with 10% interest rate.
10. Income taxes expenses were $15,000. It was unpaid at December 31, 2012.
Required:-
1. Prepare journal entry to record transactions for December.
2. Post the journal to ledger and prepare new unadjusted trial balance.
3. Prepare journal entry to record adjusting entry.
4. Prepare adjusted trial balance.
5. Prepare a 2012 income statement.