Brando is a small company and records adjusting entries & closing entries only a
ID: 2498622 • Letter: B
Question
Brando is a small company and records adjusting entries & closing entries only at fiscal (calendar) year end. Connecting and adjusting entries have not been recorded. Notes Receivable is a 3-months, 6% note accepted on November 1, 2014. Long Term Notes Payable is a 5-year, 5% note, that was signed on July 1, 2014 Interest is payable annually. Building is depreciated at 3% per year. There is no salvage value. Equipment is depreciated at 15% year. There is no salvage value. Brando discovered, on December 30th, that the inexperienced bookkeeper recorded in the general journal and general ledger that day's $1,500 cash sales as a debit to Accounts Receivable and a credit to Sales Revenue. The year-end physical count for Merchandise Inventory reflected a value of $51,500. Any difference in value will not be considered theft or loss. Salaries for the last half of December, payable in January, amount to $5,500. Brando estimates that of the Accounts Receivable 5% will not be collectable. Prepare a classified balance sheet for the year ended December 31, 2014 Prepare in journal form, the closing entries for the year ended December 31, 2014Explanation / Answer
Brando Corp. Statement of Financial Position Dec 31, 2014 ASSETS Current assets Cash 45,000.00 Accounts receivable 52,000.00 Less : Allowance for doubtful accounts (2,600.00) Merchandise Inventory 51,500.00 Notes receivable 31,200.00 Total current assets 177,100.00 Fixed assets Goodwill 26,000.00 Land & Building 170,000.00 Accumulated Depreciation, Building (19,050.00) Office equipment 50,000.00 Accumulated Depreciation, Equipment (25,350.00) Total non-current assets 201,600.00 Total assets 378,700.00 LIABILITIES AND EQUITY Accounts payable 32,375.00 Total current liabilities 32,375.00 Long term Notes payable 75,000.00 Total non-current liabilities 75,000.00 Total liabilities 107,375.00 Shareholders’ Equity Common stock, $10 par , 2000 shares authorized & outstanding 20,000.00 Retained earnings 251,325.00 Total equity 271,325.00 Total liabilities and equity 378,700.00 JournalEntries ason31stDecember,2014 Debit Credit a Notes receivable 1200 Retained earnings 1200 ( Interest on notes receivable accrued from Nov 01 - Dec 31) (30000*6%*2/3) b Retained earnings 1875 Accounts payable 1875 ( Interest on long term Notes accrued from July 01 - Dec 31) (75000*5%*6/12) c Retained earnings 4050 Accumulated Depreciation, Building 4050 Depreciation provided for the year ((150000-15000)*3%) d Retained earnings 4350 Accumulated Depreciation, Equipment 4350 Depreciation provided for the year ((50000-21000)*15%) e Cash 1500 Accounts receivable 1500 (rectified entry for recording cash sales) f Cost of Goods Sold 3500 Merchandise Inventory 3500 (being adjusting entry passed ) g Salaries expense 5500 Accounts payable 5500 ( being expenses recorded) h Retained earnings 2600 Allowance for doubtful accounts 2600 being doubtful debts provided on rectified balance on accounts receivable (53500-1500(cash sales )) = (52000*5%)