Here is the 1/1/12 balance sheet of ABC Corporation: Cash 3,500 Accts payable 2,
ID: 2367258 • Letter: H
Question
Here is the 1/1/12 balance sheet of ABC Corporation: Cash 3,500 Accts payable 2,950 Accts Rec 5,700 Accrued interest 156 Allowance for Doubtful accts (570) Notes payable 1,400 Inventory 5,805 Bonds payable-current 500 Prepaid Ins 1,800 Current liabilities 5,006 Current assets 16,235 Bonds payable-long-term 4,000 Equipment 6,500 Buildings 10,000 long-term liabilities 4,000 Accum depr (2,542) Total liabilities 9,006 Net P, P and E 13,958 common stock (par $1.00) 2,500 Total assets 30,193 paid in capital 5,300 retained earnings 13,387 Total equity 21,187 total liabilities and equity 30,193 Additional data: 1. The equipment is made up of the following purchases: 5/1/10 $3,200 8/1/11 $3,300 2. The buildings were purchased on 7/1/11 3. Depreciation is recorded using straight line and a 25 year life for the buildings and double declining balance with a 5 year life for the equipment. No salvage is expected. 4. The beginning inventory is recorded using LIFO and is made up of as: 300 units @ 10.25 3,075 260 units @ 10.50 2,730 5. The allowance for doubtful accounts is calculated using 10% of accounts receivable. 6. The note payable is due on 10/31/12. It was issued on 8/31/11. It bears interest at 9% which is due on Feb 1, May 1, Aug 1 and Nov 1 7. The prepaid insurance policy was issued on 10/1/11 and was a 12 month policy. 8. The bonds are 10 year bonds which were sold on 1/1/11 for 5,000, par was 5,000. They bear interest at 6% and interest is paid on Jan 1 and July 1. Principal is retired each July 1 (1/10 each year) During the year the following transactions transpired: 9. Sales were 1,000 units for 27,000, all credit, terms net 30 10. Cash collections on these sales were 20,250 11. Purchases of inventory on credit: 230 units @ 10.45 300 units @ 10.55 360 units @ 10.80 12. Salaries of 5,300 were paid in cash 13. On Sep 1, 2012 a 12 month insurance policy was purchased for 4,200 in cash 14. Payments to vendors on account were 5,500 15. 35 shares of common stock were sold for 675 cash 16. Dividends of 750 cash were paid 17. New equipment costing $5,000 was purchased on 9/1/12 for cash 18. The equipment purchased on 5/1/10 was sold for 1,300 cash on 8/1/12 19. Accounts receivable in the amount of 700 were written off during the year. Required: 1. Prepare all journal entries and accruals necessary for the year 1/1/12 to 12/31/12 2. Prepare an income statement, statement of retained earnings and cash flow statement for the year ended December 31, 2012. Prepare a classified balance sheet at December 31, 2012 3. Compute as many of the ratios from the text as there is information to do so. Include any analysis/interpretation of these ratios also.Explanation / Answer
These are the transactions that affect liabilities, the rest are irrelevant.
(1) On January 3, ABC Company purchased inventory costing $30,000 on account.
Dr Inventory 30,000
Cr Accounts Payable 30,000
(5) On January 18, ABC Company paid off one-half of its bank loan plus $2,000 of interest.
I'm assuming the bank loan is the notes payable 82,000
Dr Notes Payable 41,000
Dr Interest Expense 2,000
Cr Cash 43,000
(9) At January 31, ABC Company's employees had earned salaries totaling $12,000 for January. However, ABC Company will not pay the employees
until February 3.
Dr Salaries Expense 12,000
Cr Salaries Payable 12,000
Liabilities
Accounts Payable 58,000 + 30,000 = 88,000
Salaries Payable 12,000
Notes Payable 82,000 - 41,000 = 41,000
Total Liabilities = 88,000 + 12,000 + 41,000 = $141,000