Question
Accounting 305 Homework Chapter 1 Problem 1 Start with the year-end 12/31/2012 balance sheet of Behrend Corp. illustrated in Exhibit 1.5. Based upon the following
Accounting 305
Homework Chapter 1
Problem 1
Start with the year-end 12/31/2012 balance sheet of Behrend Corp. illustrated in Exhibit 1.5. Based upon the following information, record entries for the year 2013 in accounting equation format:
SUMMARY ENTRIES
Purchased inventory on account from suppliers for $1,400,000.
b. Goods (inventory) are provided to customers on account for an aggregate selling price of $2,200,000. Assume that Behrends cost of the inventory transferred to customers is $1,320,000.
c. Cash of $2,150,000 is collected from customers on account.
d. Cash of $1,250,000 is paid to suppliers on accounts payable.
e. Employees are paid monthly in the month following the month of service. There is a one month time lag between employees providing services and Behrend paying them for those services. For example, employees are paid for work performed in December 2012 in January 2013, work performed in January 2013 is paid in February 2013, and work performed in December 2013 will not be paid by Behrend until January 2014. Behrend pays salaries and wages during 2013 in the amount of $720,000.
(Hint Remember that a portion of this payment ($60,000) relates to employee services that were provided in December 2012.)
f. Paid $10,000 for income taxes based upon estimated 2013 taxable income of $50,000 and tax rate of 20%.
SPECIFIC TRANSACTIONS AND EVENTS
g. Interest on outstanding debt is payable annually on 6/30 at a 10% rate. Interest is calculated as: PRINCIPAL x INTEREST RATE x PORTION OF YEAR. Interest for the one year period ending 6/30/13 is $40,000 ($400,000 x 10% x 12/12), of which is for the period 7/1/12-12/31/12, and the other is for the period 1/1/13 - 6/30/13. A principal payment of $80,000 is due for payment on 6/30/2014.
h. On 10/01/13 Behrend declared and paid a cash dividend to shareholders @ $.30/share x 150,000 shares = $45,000.
On 12/31/13 Behrend purchased 500 shares of IBM stock to be held as a short-term investment for a total cash payment of $60,000.
ADJUSTING ENTRIES
j. Recognize 2013 depreciation expense in the amount of $30,000.
k. Recognize interest expense incurred but not paid on outstanding debt.
l. Recognize salaries and wages expense for employee services provided in December 2013 that will be paid in January 2014. Assume that the December 2013 payroll is $80,000.
m. The actual amount of income tax due for 2013 is 20% of reported income before tax per the income statement. Make the appropriate adjustment by comparing the actual tax due (must be calculated) vs. the $10,000 estimated tax paid (in transaction f) by recognizing a current asset tax refund receivable or a current liability taxes due, depending upon whether there was overpayment or underpayment of tax for 2013.
Financial Statements:
Based on the entries prepared previously in the problem, prepare the following
a multi-step income statement for 2013,
a statement of stockholders equity for 2013,
a classified balance sheet at 12/31/13.
Submit both the entries and the financial statements. Use the excel template provided for the entries you may use excel or word for the financial statements.
Problem 2: (This problem is separate from problem 1 dont combine with problem #1s balances)
For each situation, provide the necessary year-end (12/31/13) adjusting entry in accounting equation format for Doran Corp.
On 5/1/13 Doran paid $2,400 for a one year fire insurance policy covering the period 45/1/13-5/30/14. The full amount was initially recorded as prepaid insurance.
On 12/1/13 Doran received $9,000 from a tenant that rents some vacant office space. The rent payment was for the three month period 12/1/13-2/28/14. Doran initially recorded the full amount as rent revenue.
Doran pays a 3% sales commission on all sales. Commissions are paid to salesmen in the month following the month of revenue recognition. The 2013 income statement will include December 2013 sales of $80,000. No entry has been made related to the $2,400 in sales commissions that will be paid in January 2014.
Use the excel template provided for your answers to #2 on same worksheet as problem #1 transactions.
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