Lloyd Christmas, Ltd.'s accounting records reflect the following account balances at January 1, 2005 : Equipment $160,000 Unearned Revenues $50,000 Inventory $ 95,000 Accounts Payable $60,000 Accounts Receivable $ 20,000 Accumulated Depreciation - Equipment Building $100,000 Accumulated Depreciation - Bldg Cash $ 150,000 Note Payable $140,000 Supplies $ 12,000 Capital Stock $150,000 Prepaid Rent $ 15,000 Retained Earnings, beg. bal. $172,000 Land $100,000 This company uses the perpetual inventory system. Make the following adjustments for the year ended December 31, 2005: Example: The company made a sale of services on credit.
1) The Prepaid Rent for Lloyd Christmas Ltd. was paid on December 31, 2004. The lease was for two years. Make the adjustment for the expired rent at December 31, 2005.
2) The note payable was taken out last year. The note carries an annual interest rate of 7%. Interest needs to be accrued for the entire year. The interest will be paid February 8th, 2006. Record the adjustment necessary at December 31, 2005.
3) Employee salaries in the amount of $55,000 were incurred for the year. Of that amount, $50,000 had been paid in cash, the remainder was still owed to employees at the end of the year. Record the journal entry necessary at December 31, 2005 to account for both the paid and unpaid portion of salaries.
4) At the end of the year, $5,000 of the supplies remained on hand. Record the adjustment necessary at December 31, 2005.
5) The company paid $20,000 on their accounts payable during the year. Record the entry.
6) The company made sales of merchandise to customers for a total $235,000. The sales were made half on credit, and half in cash. The inventory sold had originally cost the company $90,000.
7) The company provided the services associated with the Unearned Revenues balance at the beginning of the year. Record the adjustment necessary for the year 2005.
8) At December 31, the company had earned $35,000 in tax consulting revenue, but had not yet received payment from their customer. Record the adjustment necessary at December 31, 2005.
9) On December 31, received $15,000 in cash representing advance payment for services to be provided in February of 2006. Record the adjustment necessary at December 31, 2005.
10) The building has a useful life of 25 years and no salvage value. The equipment has a useful of 10 years and has a $30,000 salvage value. Record the adjustments necessary at December 31, 2005.
11) Taxes for the year totaled $35,000. The taxes will be paid next year. Record the adjustment necessary at December 31, 2005. Required:
A. Determine the effect on the accounting equation of the preceding transactions. Use the table below. Record the accounts affected each transaction at left.
B. Record the transactions from step A. in the ledger
C. Prepare an income statement for Lloyd Christmas for 2005. Remember to calculate the running total for the accounts after you record the adjustments in part a.
D. Prepare a statement of retained earnings for the year ended December 31, 2005.
E. Prepare a classified balance sheet for Lloyd Christmas at December 31, 2005. Remember to calculate the running total for the accounts after you record the adjustments in part a. Include the beginning balances above.