JACK TUPP AUTO REPAIR
Jack Tupp Auto Repair opened on September 1, 2016. The following account balances existed:
Cash - $ 80,010
Carburetor Inventory (210 units @ $60/unit) - 12,600
Equipment - 62,500
Accounts payable (Great Wattage) - 19,000
Common stock (108,888 shares) - 136,110
The following events and transactions occurred through December 31, 2016.
9/2 Signed a 6-month contract to repair delivery vans owned by Walter Melon Grocery for $72,000, which was paid immediately. Work is to be performed equally each month.
9/3 Sold 20 carburetors to Phil Rupp Fuel for $160.00 each. Phil Rupp Fuel paid cash.
9/4 Purchased 300 additional carburetors for its inventory, on account, from Pep Boys for 24,000. Terms were 4/10, n/30.
9/7 Phil Rupp Fuel returned 5 damaged carburetors, and received a refund.
9/9 Paid the correct amount on the invoice related to the 9/4 transaction.
9/10 Sold 60 carburetors to Tim Burr Logging for $5,400, terms of 3/10, n/30.
9/15 Paid the accounts payable balance due to Great Wattage of $19,000 in full.
9/16 Received a check from Tim Burr Logging for the correct amount related to the 9/10 sale.
9/17 Sold 150 carburetors to Iona Carr Autohaus for its new dealership for $28,500, on account. Payment terms were 5/10, n/20.
9/29 Received a check from Iona Carr Autohaus for the correct amount related to the 9/17 sale.
10/2 Issued 300 6% $1,000 face-value 4-year bonds to new investors at 96. The bonds pay interest quarterly on January 1, April 1, July 1 and October 1.
11/13 Purchased a building for $328,800. The building was purchased with a 30-year mortgage from the Eighth Mono Bank, bearing interest at 5% per annum. A previous month's accrued interest is due and payable on the first day of the next month. Make sure to prorate any interest due for November 2015 based on a 12-month year. (Hint: it's 17 days of interest). Principal payments of $17,500 are to be paid on the last day of each year.
11/17 Sold 100 carburetors to Phil Rupp Fuel for $180.00 each, terms 5/10, net 30.
12/1 Pays the Eighth Mono Bank for November 2016 interest owed on the mortgage from 11/13.
12/28 Declared $100 of dividends to shareholders, payable on 1/2/2017.
12/29 Redeemed all of the bonds issued on 10/2 at 103. Assume 3 months of interest were paid at this time on these redeemed bonds.
12/30 Wrote a check to the Monocle for five months of future advertising for $2,000.
12/31 Incurred the following expenses at year-end which are not due and payable until 1/30/17:
Telephone $ 362 Utilities $ 955
Fuel 349 Postage 120
Other additional information:
1) Don't forget to journalize the beginning balances as of September 1, 2016.
2) Presume the same unit costs apply to all items of inventory when calculating cost of goods sold. Jack Tupp Auto Repair uses the periodic inventory system and FIFO.
3) Don't forget to accrue the mortgage interest owed for December 2016, and to record the principal payment made at the end of the year.
4) Don't forget to post adjusting entries for any necessary items, including bond interest.
5) Allowance for doubtful accounts is calculated using the percentage of sales method. As of December 31, 2016, the percentage of sales estimated to be uncollectible is 4%.
6) All common stock is owned by Jack Tupp. Par value is $1.00 per share.
7) For all equipment, depreciation is calculated using units-of-activity method, with a total estimated useful life of 5,000 units. 1,200 units were used in 2016. (Equipment owned on September 1, 2016 of $62,500 has a salvage value is $2,500.)
8) For the building, depreciation is calculated using double-declining balance with a 20-year useful life. Estimated salvage value is $28,800. (For 2016, calculate depreciation for 1½ months)
9) Don't forget to allocate liabilities between current liabilities and long-term liabilities.
10) Other than the transactions listed in the facts, assume no other cash or check transactions have occurred. There are no outstanding checks nor deposits in transit at year-end.
11) Round all amounts to the nearest dollar.
Instructions:
1) Using the General Journal, journalize all transactions which occurred in 2016. (Don't forget to journalize the beginning balances, too.)
2) Post all journal entries to the Trial Balance.
3) Complete the:
a. Balance Sheet as of December 31, 2016
b. Income Statement for the year ending December 31, 2016
c. Statement of Cash Flows for the year ending December 31, 2016