The following balance sheet is presented for J.D.F. Company as of December 31, 2017.

During 2018, J.D.F. entered into the following transactions.
1. Made credit sales of $1,350,000 and cash sales of $350,000. The cost of the inventory sold was $700,000.
2. Purchased $820,000 of merchandise inventory on account.
3. Made cash payments of $400,000 to employees for salaries. This amount includes the wages due employees as of December 31, 2017.
4. Purchased $110,000 of supplies inventory by issuing a six-month note that matures on March 12, 2019.
5. Collected $850,000 from customers in payment of open accounts receivable.
6. Paid suppliers $870,000 for payment of open accounts payable.
7. Sold a long-term investment for $37,000. The stock had been purchased for $30,000.
8. Paid $148,000 in cash for other operating expenses.
9. Issued additional common stock for $120,000 cash.
10. On September 30, 2018, a customer gave the company a note due on May 1, 2019, in payment of a $72,000 account receivable.
11. The company declared and paid a cash dividend of $50,000.
12. The company purchased stock in Microsoft as a long-term investment for $50,000.
J.D.F. used the following information to prepare adjusting journal entries on December 31, 2018.
(a) 40 percent of the prepaid insurance on January 1 was still in effect as of December 31, 2018.
(b) A physical count of the supplies inventory indicated that the company had $40,000 on hand as of December 31, 2018.
(c) A review of the company€™s advertising campaign indicates that of the expenditures made during 2018 for other operating expenses, $25,000 applies to promotions to be undertaken during 2019.
(d) The company is charged at a rate of $3,500 per month for certain legal expenses. It paid $36,000 for these expenses during the year, which are part of other operating expenses and must now be reclassified as legal expense.
(e) The company owes employees $43,000 for wages as of December 31, 2018.
(f) The $72,000 note receivable accepted in payment of an account receivable (see [10] above) specifies an annual interest rate of 9 percent.
(g) Equipment has an estimated useful life of 10 years, and machinery has an estimated useful life of 20 years. The patent originally cost $125,000 and had an estimated useful life of 10 years. The company uses the straight-line method to depreciate and amortize all property, plant, equipment, and intangibles.
(h) The note issued by the company (see [4] above) has a stated rate of 10 percent and was issued on September 12, 2018.

REQUIRED:
a. Prepare the journal entries.
b. Prepare the t-accounts.
c. Prepare the worksheet.
d. Prepare the adjusting entries.
e. Prepare the closing entries.
f. Prepare an income statement, a statement of shareholders€™ equity, a balance sheet, and a statement of cash flows using the direct form of presentation.
g. Prepare the operating section of the statement of cash flows under the indirect method.

Transcribed Image Text:

J.D.F. Company Balance Sheet December 31, 2017 ASSETS $ 170,000 Cash Accounts receivable 188,000 Inventory 200,000 Prepaid insurance 74,000 Supplies 40,000 Long-term investments 160,000 $480,000 Equipment Less: Accumulated depreciation 98,000 382,000 $950,000 Machine Less: Accumulated depreciation 720,000 230,000 Patents 75,000 $2,009,000 Total assets LIABILITIES AND SHAREHOLDERS' EQUITY $ 220,000 Accounts payable Salaries and wages payable 73,000 300,000 Mortgage payable Bonds payable 500,000 Common stock 500,000 Retained earnings 416,000 $ 2,009,00 Total liabilities and shareholders' equity