The December 31, Year 2, balance sheet for Shannons Lamps, Inc. (SLI) showed Cash of $64,000, Common

Question:

The December 31, Year 2, balance sheet for Shannon’s Lamps, Inc. (SLI) showed Cash of $64,000, Common Stock of $24,000, and Retained Earnings of $40,000. During Year 3, SLI experienced the following accounting events:
1. SLI purchased merchandise inventory (lamps) for $47,000 cash.
2a. SLI recognized revenue from selling inventory for $52,000 on account.
2b. SLI recognized $38,000 of cost of goods sold.
3. In a year-end adjusting entry, SLI recognized $1,520 of uncollectible accounts expense.
4. SLI paid $14,000 cash to purchase display equipment. The equipment had a four-year useful life and a $2,000 salvage value.
5. SLI recognized depreciation expense associated with the equipment purchased in Event 4.
6. On September 1, Year 3, SLI acquired $16,000 cash by issuing a note to the State Bank. The note had a 6 percent annual interest rate and a one-year term to maturity.
7. SLI recognized accrued interest expense for the note issued in Event 6.

Required
a. Record the events in T-accounts and determine the ending account balances.
b. Prepare an income statement, a balance sheet, and a statement of cash flows.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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