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ABC Corporation is a new company that buys and |
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Given on the first two tabs are ABC’s 12/31/12 |
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1. Make |
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2. Post |
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Link |
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T-ACCOUNTS REPRESENT THE UNADJUSTED BALANCES AS OF 12/31/12. |
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3. Once |
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may |
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4. Use |
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For |
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Interest Expense, Interest Revenue, and any other Gains/Losses are NOT |
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Link your financial statements to your Adjusted Trial Balance. Use the Income Statement and Balance Sheet |
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of |
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If |
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completing Chapter 23 to help with the preparation of the Statement of |
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the |
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5. When |
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6. When |
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journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from |
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finished posting your adjusting journal entries to the accounts in the |
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closing entries and then just relabel the tab as “Post-Close |
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workbook before you do this since you can’t have two worksheets with |
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7. The |
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8. |
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-Adjusted Trial Balance: Make sure debit column and credit column total |
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-Net income from the income statement will |
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-Ending Retained Earnings from the Statement |
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-Ending Cash balance from the Balance Sheet |
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-The Post-Closing Trial Balance should not |
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-Check figure 1: Income from operations = $251,056. |
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-Check figure 2: Income before income taxes = $221,477. |
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-Check figure 3: Total Assets = $1,719,716. |
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-Check figure 4: Cash flow used by operating activities = |
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-Check figure 5: Adjusted Trial Balance debit and credit |
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-Remember: |
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Otherwise, management may send back to you for |
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-Include your work at the bottom of each tab |
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-Ask questions prior to the day/night before |
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-Utilize formulas and worksheet linkings in |
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-Please take advantage of Excel by using |
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Final comments: This project is intended to make sure that |
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studied during your |
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comprehensive problem |
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ABC Corporation |
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Unadjusted Trial Balance |
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December 31, 2012 |
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Debit |
Credit |
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Cash |
$ |
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Short |
170,000 |
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Fair |
– |
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Accounts |
256,500 |
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Allowance |
$ |
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Inventory |
– |
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Purchases |
343,800 |
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Prepaid |
18,000 |
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LT |
138,913 |
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Land |
52,000 |
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Building |
108,000 |
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Accumulated |
2,850 |
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Equipment |
51,900 |
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Accumulated |
17,300 |
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Patent |
30,000 |
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Accounts |
52,690 |
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Notes |
150,000 |
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Income |
66,000 |
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Unearned |
30,000 |
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Bonds |
1,000,000 |
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Premium |
77,214 |
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Common |
80,000 |
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PIC In |
25,000 |
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Retained |
– |
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Treasury |
25,000 |
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Dividends |
50,000 |
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Sales |
651,250 |
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Advertising |
3,900 |
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Wages |
56,800 |
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Office |
6,900 |
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Depreciation |
20,150 |
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Utilities |
19,400 |
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Insurance |
54,000 |
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Income |
66,000 |
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$ |
###### |
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1 On March
1, ABC purchased a one-year liability insurance policy for $72,000.
Upon
purchase, the following journal entry was made:
Dr
Prepaid insurance 72,000
Cr
Cash 72,000
The
expired portion of insurance must be recorded as of 12/31/12.
Notice
that the expired portion from March through November has been recorded already.
Make
sure that the Prepaid Insurance balance after the adjusting entry is correct.
2 Depreciation
expense must be recorded for the month of December.
The
building was purchased with cash on February 1, 2012 for $108,000 with a
remaining useful life of 30 years and a salvage value of $5,400.
The
method of depreciation for the building is straight-line.
The
equipment was purchased with cash on February 1, 2012 for $51,900 with a
remaining useful life of 5 years and a salvage value of $1,000.
The
method of depreciation for the equipment is double-declining balance.
Depreciation
has been recorded for the building and equipment for months February through
November.
3 On
December 1, XYZ Co. agreed to rent space in ABC’s building for $10,000 per
month,
and XYZ
paid ABC on December 1 in advance for the first three months’ rent.
The
entry made on December 1 was as follows:
Dr
Cash 30,000
Cr
Unearned rent revenue 30,000
The
unearned revenue account must be adjusted to reflect the amount earned as of
12/31/12.
4 Per
timecards, from the last payroll date through December 31, 2012, ABC’s
employees have worked a total of 250 hours.
Including
payroll taxes, ABC’s wage expense averages about $50 per hour. The next payroll date is January 5, 2013.
The
liability for wages payable must be recorded as of 12/31/12.
5 On
November 30, 2012, ABC borrowed $150,000 from American National Bank by issuing
an interest-bearing note payable.
This
loan is to be repaid in three months (on February 28, 2013), along with
interest computed at an annual rate of 6%.
The
entry made on November 30 to record the borrowing was: (for Statement of Cash
Flow purposes, consider a financing item)
Dr
Cash 150,000
Cr
Notes payable 150,000
On
February 28, 2013 ABC must pay the bank the amount borrowed plus interest.
Assume
the beginning balance for Notes Payable is correct.
Interest
through 12/31/12 must be accrued on the$150,000 note.
6 ABC uses
a periodic inventory system, and the ending inventory for each year is
determined by taking a complete
physical
inventory at year-end. A physical count
was taken on December 31, 2012, and the inventory on-hand at
that
time totaled $165,000.
Record
the 2012 Cost of Goods Sold and the 12/31/12 Inventory adjustment. (This includes closing Purchases.)
7 It would
be unusual for a company to have an asset impairment in Year 1, but for the
sake of this example, ABC realized
that
their intangible asset might be impaired on December 31, 2012. Record the impairment if any.
The
expected future net cash flows for this intangible asset totals $25,000, and
the fair value of the asset is $20,000.
8 On
7/1/12, ABC purchased 5,000 shares of its own stock from existing stockholders
as treasury stock. The cost of the
treasury
stock
was $5 per share, or $25,000 in total.
The effects of this transaction are already shown in the unadjusted
trial balance. On 12/31/12,
ABC
reissued these 5,000 shares of treasury stock at $7 per share. Record the journal entry required for the
reissuance of the treasury stock.
9 On
12/31/12, ABC issued 4,500 shares of $1 par value common stock at the closing
market price of $8 per share. Prepare
ABC’s journal entry
to reflect the issuance of the stock on
12/31/12.
10 On 7/1/12,
ABC sold 12% bonds having a maturity value of $1,000,000 for $1,077,214,
resulting in an effective yield of 10%.
The bonds are
dated
7/1/12, and mature 7/1/17. Interest is
payable semiannually on July 1 and January 1.
ABC uses the effective interest method of
amortization
for bond premium or discount. Record the
adjusting entry for the accrual of interest and the related amortization on
12/31/12.
Hint: Develop an abbreviated amortization schedule
to accurately determine the interest expense.
11 The
following information is available for ABC Corporation at 12/31/12 regarding
its investments in stocks of other companies.
Securities Cost Fair Value
2,000
shares of Toyota Corporation Common Stock
$100,000 $115,000
1,000
shares of G.M. Corporation Common Stock $70,000 $67,500
$170,000 $182,500
Prepare
the adjusting entry (if any) for 2012, assuming the securities are classified
as trading.
12 On 1/1/12,
ABC Corporation purchased, as a held-to-maturity investment, $150,000 of the
9%, 5-year bonds of Intuit Corporation for $138,913,
which
provides an 11% return. Prepare ABC’s
12/31/12 journal entry to reflect the receipt of annual interest and discount
amortization.
Assume
the bond investment pays interest annually on 12/31 each year and that
effective interest amortization is used.
13 ABC
Corporation prepares an aging schedule on 12/31/12 that estimates total
uncollectible accounts at $20,000.
Assuming that the allowance method is used,
prepare
the entry to record bad debt expense.
14 On 1/1/12,
ABC Corporation signed a 5-year noncancelable lease for a delivery
vehicle. The terms of the lease called
for ABC to Corporation to make
annual
payments of $8,668 at the beginning of each year, starting January 1,
2012. The delivery vehicle has an
estimated useful life of 6 years and a $5,000
unguaranteed
residual value. The delivery vehicle
reverts back to the lessor at the end of the lease term. ABC Corporation uses the straight-line method
of
depreciation for the delivery vehicle.
ABC Corporation’s incremental borrowing rate is 10%, and the Lessor’s
implicit rate is unknown. No entries
have yet
been
made concerning this lease arrangement.
After determining the type of lease arrangement (capital or operating),
prepare the necessary multiple-part journal
entry
for 2012 for ABC Corporation.
(Hints: You will need to compute
the present value of the minimum lease payments and 4 separate sub-entries for
this
lease transaction. Also, for Statement
of Cash Flow purposes, the principal portion of lease payments are correctly
categorized as a financing activity.)
15 ABC
Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made
to correctly account for this type of pension
plan
given the following items of information for the 2012 plan year, including the
recording of pension expense and the employer’s contribution to the pension
plan in 2012.
Pension
asset/liability (January 1) $0
Actual
return on plan assets $10,000
Expected
return on plan assets $10,000
Contributions
(funding) in 2012 $25,000
Fair
value of plan assets (December 31) $35,000
Settlement
rate 10%
Projected
benefit obligation (January 1) $0
Service
cost $22,500
Benefits
paid in 2012 $0
*For
purposes of financial statement presentation, consider Pension Expense as an
operating item and any resulting Pension Asset/Liability as long-term in
nature.
Do this
step after preparing the Income Statement except for the Income taxes line:
16 Corporate
taxes are due in four estimated quarterly payments on April 15, June 15,
September 15, and December 15.
However,
for the purposes of this ABC illustration, we will assume that estimates are
not paid, and that the tax is paid in full
on the
return’s March 15, 2013 due date.
ABC’s
income tax rate is 35%. The entire
year’s income tax expense was estimated at the beginning of 2012 to be $72,000,
so
January through November income tax expense recognized amounts to $66,000
(11/12 months).
Since
we are assuming estimates are not made during the year, the balance in Income
taxes payable represents
tax
accrued for January through November.
Assume no deferred tax assets or deferred tax liabilities.
Based
on the income before income taxes figure from the income statement, record
December’s income tax expense
so that
the entire year’s tax expense is correct.
12/31/12 Adjusting
Journal Entries
JE # Account
Titles Debits Credits
1
2 DB LIFE
0 30
0 5
3
4
5
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Inventory |
Purchases |
Prepaid insurance |
Land |
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– |
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343,800 |
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18,000 |
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bb |
52,000 |
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– |
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343,800 |
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18,000 |
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52,000 |
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Allowance for doubtful accounts |
LT (Debt) investments (HTM) |
Bonds Payable |
Premium on Bonds Payable |
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– |
bb |
bb |
138,913 |
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1,000,000 |
bb |
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77,214 |
bb |
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1,000,000 |
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– |
138,913 |
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77,214 |
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Equipment |
Accumulated depreciation: equipment |
Patent |
Accounts payable |
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bb |
51,900 |
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17,300 |
bb |
bb |
30,000 |
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52,690 |
bb |
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51,900 |
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17,300 |
30,000 |
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52,690 |
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Unearned rent revenue |
Common stock |
Retained earnings |
Dividends |
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30,000 |
bb |
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80,000 |
bb |
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– |
bb |
bb |
50,000 |
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30,000 |
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80,000 |
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– |
50,000 |
<
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