assistant, who maintains the payroll records, provides you with the payroll summary from which you prepare general journal entries to record the biweekly payroll and the employer's taxes on the payroll. The biweekly employees' paychecks are distributed on the following day, Tuesday. The general ledger chart of accounts is shown below: Account Account Number 101 105 200 Cash Petty Cash Accounts Receivable Allowance for doubtful accounts Notes receivable Interest receivable Inventory Office Supplies Prepaid insurance Prepaid rent Bond sinking fund Land Buildings Accumulated Depreciation - Buildings Trucks and lifts Accumulated Depreciation - Trucks and lifts Furniture and equipment Accumulated Depreciation - Furniture and equipment Notes payable Accounts payable Salaries and wages payable FICA taxes payable Federal withholding taxes payable State withholding taxes payable Federal unemployment taxes payable Sate unemployment taxes payable Dividends payable Interest payable Income taxes payable Mortgage notes payable Bonds payable Discounts on bonds payable Common stock Additional paid-in capital Retained earnings Dividends declared - Cash Dividends declared - Stock Treasury stock Income summary Sales 201 213 214 215 217 224 226 228 230 255 265 270 271 311 312 320 321 322 330 350 401 Account Account Number 412 413 505 610 630 Sales returns and allowances Sales discount Cost of goods sold Advertising expense Depreciation expense Trucks and lifts Insurance expense - selling Sales salaries and commissions Delivery and warehouse wages Warehouse rental expense Payroll taxes expense - Selling, Delivery and warehouses Delivery expense Depreciation expense - Buildings Bad debt expense Insurance expense- general Depreciation expense - Furniture and equipment Office and administrative salaries Office expense Payroll tax expense - office and administrative Utilities expense Income tax expense Interest expense Interest revenue Gain or loss on sale of assets 644 711 718 All transactions that took place up to November 30, 2019 were recorded and posted to the ledger. The trial balance on November 30, 2019 appears as follows: 30/11/2019 Dr. Cr. $ 249,930 150 317,420 $ 4,580 45,000 531,960 2,320 11,020 25,410 145,000 43,000 306.000 73,040 78,400 39.540 32,800 13,200 15,000 126,850 1,787 9,573 2,486 Trial Balance as of: 01/01/2019 Dr. Cr. Cash $ 40,620 Petty cash 150 Accounts receivable 253,643 Allowance for uncollectibles $ 13,520 Notes receivable 40.000 Interest receivable 580 Inventory 450,960 Office supplies 470 Prepaid insurance 2,560 Prepaid rent 3,630 Bond sinking fund 130,000 Land 43,000 Buildings 306,000 Accumulated depreciation - Buildings 73,040 Trucks and lifts 78,400 Accumulated depreciation - Trucks and lifts 39,540 Furniture and equipment 32,800 Accumulated depreciation - Furniture and equipment 13,200 Notes payable 15,000 Accounts payable 86,352 Salaries and wages payable 1,906 FICA Taxes payable 781 Federal withholding taxes payable 5,148 State withholding taxes payable 1.595 Federal unemployment taxes payable 216 State unemployment taxes payable 1.323 Dividends payable 23.100 Interest payable 15,165 Income taxes payable 15,789 Mortgage notes payable 43,000 Bonds payable (issued March 1, 2013) 275,000 Discount on bonds payable 4,400 Common stock (6,300 shares, stated value $30) 189,000 Additional paid-in capital 256,400 Retained earnings 362.748 Treasury stock 44.610 Sales Sales returns and allowances Sales discounts Cost of goods sold Advertising expense Sales salaries and commissions Delivery and warehouse wages Payroll taxes expense-Selling, delivery, and warehouse Delivery expense Office and administrative salaries Office expenses Payroll taxes expense-Office and administration Utilities expense Income tax expense Interest expense Interest Revenue Total $ 1,431,823 $ 1,431,823 400 2.600 113,000 275,000 4,400 189,000 256,400 362.748 44,610 5,234.940 9,380 73,044 3,648,722 6,578 132,990 110,616 15.915 17,732 689,516 1,540 67,001 16,270 72,000 24,570 3,150 $ 6,723.294 $ 6,723,294 Subsidiary ledger account balances as of November 30, 2019 are as follows: Accounts receivable subsidiary ledger on 30 November 2019 Boecker Builders The Potts Company Swanson Brothers Construction Trudy's Plumbing Coconino Contractors, Inc. Rankin Plumbing Corp. Beverly's Building Products Bilder Construction Company Iwanaga Plumbing and Heating Total $ 62,920 50,300 24,050 15,100 27,800 74,350 14,000 45,200 3,700 $ 317,420 Accounts Payable subsidiary ledger on 30 November 20179 Phoenix Plastics Edward's Plumbing Supplies, Inc. Oxenford Copperworks Smith Pipe Company Ron & Rod's Plumbing Products Khatan Steel Corp. Total $ 17,450 20,050 26,400 38,100 14,850 10,000 $ 126,850 December 2019 M T W T F S S 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 The December 2019 Transactions December 3 Received a check in the amount of $23,569 from Swanson Brother Construction in full payment of invoice No. 1120 dated November 26 in the amount of $24,050. 3 Sold sewer and drainage pipe to Beverly's Building Products on account, invoice No. 1201 for $13,150 Purchased copper tubing and fittings from Edward's Plumbing Supplies Inc, on account, purchase order No. 315 for $24,320, terms n/60 4 Issued Check No. 1580 for $26,400 to Oxford Copperworks in settlement of the balance owed on Purchase order No. 280. A court notice indicates that Iwanaga Plumbing and Heating is bankrupt and payment of its account improbable; the president orders the account to be written off as a bad debt (invoice No. 780) Sold bathroom fixtures to Bilder Construction Company on account, invoice No. 1202 for $44,900. Received a check in the amount of $49,294 from the Potts Company in full payment of invoice No. 1128 dated November 27 for $50,300. Sold plumbing supplies and plastic pipe to Coconino Contractors, Inc. on account, invoice No. 1203 for $10,300. Issued check No. 1581 for $810 to Standard Oil Co. in payment for gas, oil, and truck repair from Tierney's Standard Services. 6 Issued check No. 1582 for $9,900 to Khatan Steel Corp. in full settlement of purchase order No. 312 for $10,000. Issued check No. 1583 for $10,486 to Phoenix Plastics in full payment of Phoenix's invoice dated November 28 in the amount of $10,700, for purchase order No. 313, terms 2/10, n/30 Received a check in the amount of $72,863 from Rankin Plumbing Corp. in full payment of invoice No. 1129 dated November 28 for $74,350. Sold cast pipe to Trudy's Plumbing on account, invoice No. 1204 for $26,300. 7 Received a check in the amount of $27,800 from Coconino Contractors, Inc. in full pay- ment of invoice No. 1091 dated October 20. Purchased bathroom fixtures from Phoenix Plastics, on account, purchase order No. 316 for $52,700 terms 1/10, n/30. 10 Received a check in the amount of $29,000 from Boecker Builders in partial payment of balance outstanding covering invoice Nos. 1050 and 1071. 10 Teen Issued check No. 1584 for $6,750 to Phoenix Plastics, in payment of Phoenix's invoice dated November 12 in the amount of $6,750, our purchase order No. 299. 10 Issued check No. 1585 for $600 to Scooter Gordon for lettering and sign painting on some delivery trucks. 11 Issued check No. 1586 for $37,719 to Smith Pipe Company in full payment of their invoice dated November 28, terms 1/15, n/60, our purchase order No. 314. 11 Received a check in the amount of $15,100 from Trudy's Plumbing in full payment of invoice No. 1106 dated November 7. 11 Sold Pipe, fixtures, and accessories to Trudy's Plumbing on account, invoice No. 1205 for $24,850 11 The payroll summary for the biweekly pay period ended Friday, December 7 contained the following information: Delivery and warehouse wages FICA taxes withheld Federal income taxes withheld State income taxes withheld Net pay Employer's payroll taxes: FICA taxes Federal unemployment tax State unemployment tax $4,860 350 900 190 $3,420 $350 12 Sold plumbing supplies and copper tubing to the Potts Company on account, invoice No. 1206 for $31.450 12 Received a check in the amount of $33,920 from Boecker Builders in full payment of invoice No. 1071 12 Cash sales to date totaled $12,292 12 Received a check in the amount of $25,774 from Trudy's Plumbing in payment of invoice No. 1204. 12 Sold plumbing fixtures and supplies to Boecker Builders, on account, invoice No. 1207 for $19.730. 13 The Potts Company returned defective copper tubing that it purchased on December 12. A credit memo in the amount of $4,680 is issued relative to invoice No. 1206. The copper tubing had a cost of $3,550. 13 The defective copper tubing is returned to Edward's Plumbing Supplies, Inc. along with a debit memo in the amount of $3,550 in reduction of purchase order No. 315. 13 Issued check No. 1588 for $399 in payment of November telephone bill to Northern Illinois Communications. 14 Issued check No. 1589 in the amount of $11,360 in payment of federal withholding taxes, $9,573, and FICA taxes, $1,787, payable on November salaries and wages; the check is remitted to the Winnebago County Bank as the depository. 14 Issued check No. 1590 for $52,173 to Phoenix Plastics, Inc. in payment of purchase order No. 316. 17 The president informs you that Bilder Construction Company agrees to convert the $45,200 overdue accounts receivable (invoice No. 1120) to a 14% note due six months from today. 17 Purchased plumbing materials from Smith Pipe Company on account, purchase order No. 317 for $45,800 terms 1/15, n/60. 18 Sold drain tile, plastic pipe, and copper tubing to A & B Hardware on account, invoice No. 1208 for $7.920. 19 Sold fixtures and materials to Coconino Contractors, Inc. on account, invoice No. 1209 for $42,780. 19 An invoice in the amount of $1,021 was received from S. White Trucking Company for freight on purchase order No. 317 and paid by issuing a check No. 1591. 20 Received a check in the amount of $24,353 from Trudy's Plumbing in payment of invoice No. 1205. 21 Purchased office supplies from the Pen & Pad, issuing check No. 1592 in the amount of $1,360. (Note: debit an asset account). 21 Purchased a new Faith computer for $6,100 from Business Basics, Inc. purchase order No. 318, paying $600 down through check No. 1593 with the balance due in thirty days (n/30). The computer has an estimated useful life of five years with a salvage value of $1,300. 21 Purchased bathroom and kitchen fixtures from Phoenix Plastics, on account, purchase order No. 319 for $48,330, terms 1/10, n/30. 24 The payroll summary for the biweekly pay period ended Friday, December 21 contained the following information: Delivery and warehouse wages $5,770 FICA taxes withheld 415 Federal income taxes withheld 1,067 State income taxes withheld 225 Net pay $4,063 Employer's payroll taxes: FICA taxes $415 Federal unemployment tax State unemployment tax Issued check No. 1594 for the amount of the net pay and deposited it in the payroll bank account. Individual payroll checks were then prepared for distribution to the biweekly employees on Monday, December 24. 24 Received a bill from DeKalb Transport for $2,300 for freight costs incurred during the last 30 days, terms n/30. 26 The board of directors voted to purchase 1,000 shares of its own shares from stockholder Dionne Schivone at $83 per share and issued check No. 1595 in payment. Stock repur- chases are recorded at cost. Rockford is purchasing these shares because Ms. Schivone had been a valuable employee. 26 The board of directors declared $2.70 per-share cash dividends payable on January 14 to stockholders of record on December 26 (after they purchased the stock above). 26 The president informs you that Beverly's Building Products agrees to convert the $14,000 overdue accounts receivable invoice No. 1119) balance to a 12% note due six months from today. 27 A half-acre parcel of land adjacent to the building is acquired in exchange for 600 shares of unissued common stock. The land has a fair value of $54,000 and will be used immediately as an outside storage lot and parking lot. 27 An invoice in the amount of $2,650 is received from Wayne McManus, Lawyer, for legal services involved in the acquisition of the adjacent parcel of land; check No. 1596 is issued in payment. 27 Sold pipe and plumbing materials to Boecker Builders on account, invoice No. 1210 for $42,040 27 Issued check No. 1597 in the amount of $500 to the Northern Star for advertisement run in the home building supplement of December 15. 27 Issued check No. 1598 in the amount of $925 to Standard Oil Co. in payment for gas, oil, and truck repairs from Tierney's Standard Services. 28 Purchased copper and cast iron pipe from Oxenford Copperworks on account, purchase order No. 320 for $58,940, terms 1/10, n/30. 28 Check No. 1599 for $15,000 is issued to the bond sinking fund trustee, Chicago Trust Co., for deposit in the sinking fund. 28 Received a check for $19,730 from Boecker Builders in payment of invoice No. 1207. 28 Sold plumbing supplies to Swanson Brothers Construction on account, invoice No. 1211 for $22.650. 28 Issued check No. 1600 for $45.342 to Smith Company in payment of purchase order No. 317. 31 The custodian of the petty cash fund submits the following receipts for reimbursement and reports a cash-on-hand count of $8. Postage stamps used United Parcel (transportation out) Cash on delivery postage (freight costs) Christmas office decorations Check No. 1601 is issued and cashed to reimburse the fund. 31 Sold an electric truck-lift to Leila Stierman Co. for $2.500 cash. The original cost was $7.900 with salvage value of $900, a life of 10 years, and accumulated depreciation recorded through 31 December 2018 of $4,550. The straight-line method is used. (Note: the com- pany follows the practice of recording a half year's depreciation in the year of acquisition and a half year in the year of disposal). First, bring the depreciation expense up to date in the general journal. Then journalize the entire entry for the sale in the cash receipts journal. 31 Sold bathroom fixtures and plumbing supplies to Trudy's Plumbing on account, invoice No. 1212 for $55,770. Because for some time the petty cash fund has been smaller than required for monthly expenditures, the fund is increased by $75 by cashing check No. 1602 and placing the money in the petty cash fund. 10 31 The payroll summary for the monthly paid employees is submitted so that December checks can be distributed before the year-end; the details are as follows: Sales salaries and commissions Office and administrative salaries Federal income taxes withheld State income taxes withheld FICA taxes withheld Net pay $16.000 24.900 7.196 1,517 2.120 $30.067 Issued check No. 1603 for the amount of the net pay and deposited it in the payroll bank account. Individual payroll checks were prepared for distribution to all monthly employees by the end of the day. $2,120 Employer's payroll taxes: FICA taxes (all office and administrative) Federal unemployment tax State unemployment tax 31 Cash sales since December 12 total $22,980. Instructions 1. Prepare all journal entries for the month of December 2019. 2. Prepare an unadjusted trial balance as of December 31, 2019. Use the following information to prepare adjusting entries (round all calculations to the nearest dollar): a. The annual provision for doubtful accounts receivable is recorded by providing a charge to bad debt expense in an amount equal to 2% of net sales. b. An inventory count of the office supplies revealed $830 of supplies on hand at year end. (Debit office expense for supplies used). c. The insurance premium outstanding on January 1, 2019, covers the period January 1 through August 31, 2019. The insurance premium of $8,460 recorded in August covers the period of September 1, 2019 through August 31, 2020. Rockford estimates that 75% of the premiums are attributable to general activities and 25% to selling activities d. The payroll summary for the employees who are paid biweekly shows the following information at December 31, 2019: Delivery and warehouse wages $5,600 FICA taxes payable 375 Federal withholding taxes 1,036 State withholding taxes 218 Net pay $3,971 e. The employer's share of FICA tax ($375) must be accrued; no state or federal unem- ployment tax is incurred during the fourth quarter because all wages and salaries earned during the last quarter exceed the maximum subject to unemployment tax. f. Interest has accrued at 8% on the mortgage notes payable since July 1, 2019. The next six-month interest payment at 9% on the bonds is due on March 1, 2020. The discount on bonds payable has not been amortized for any part of 2019; the bonds are dated March 1, 2013, and mature March 1, 2023. Use straight line amortization for bonds discount and premiums. g. The interest accrued to 31 December 2019 on notes receivable is composed of the following: Platteville Plumbers, 12%, 6 months, due March 31, 2020 $1,350 Bilder Construction, 14%, 6 months, due June 14,2020 295 Beverly's Building, 12%, 6 months, due June 26, 2020 23 Total $1.668 Note that the balance in notes receivable account of $45,000 that appeared on the trial balance on November 30, 2019 is a note receivable from Platteville Plumbers. The interest accrued at December 31, 2019 on notes payable of $15,000 @ 12% is $1,800. Interest is payable on January 2, 2020 and the note is due in 2020. h. A warehouse lease payment of $10,890 was made on September 1, 2019 fro rental through February 28, 2020. The prepaid rent account is for advance lease payments on the warehouse. i. $530 is owed to Northern Electric Co. and $279 is owed to City of Rockford for utility services provided during December 2019. j. Plant and equipment to be depreciated are composed of the following: Estimated Usage or Life Assets Date Acquired 1/7/2015 1/4/2016 1/9/2018 17/8/2012 Cost $306,000 28,000 33,000 7,900 25 Years 60,000 miles 60,000 miles 10 years Salvage Depreciation Value method $20,000 Sum-of-the-years' digits 3,100 miles driven 4,200 miles driven 900 straight-line Building Truck No. 1 Truck No. 2 Lift No. 1 Sold 30/12/2019 Lift No. 2 Lift No. 3 Furniture & Equipment Computer 29/3/2016 9/16/2017 All prior to 1/1/2019 21/12/2019 4,500 5,000 32,800 10 years 10 years 7 years 500 500 2,000 straight-line straight-line straight-line 6,100 10 years 1,300 Double-declining balance Truck No. 1 has been driven 45,000 miles prior to 1/1/2019 and truck No. 2 has been driven 30,500 miles prior to 1/1/2019. During 2019 truck No. 1 was driven 12,000 miles and truck No. 2 was driven 14,000 miles. Remember that Rockford Company takes a half-year depreciation in the year of acquisition and a half-year in the year of sale. Compute the State of Illinois Corporate income taxes at 4% of pretax income. The state income tax is deductible on the federal tax return, and the federal tax in not deductible on the Illinois return. Assume federal corporate income tax on income subject to federal tax is as follows: First $50,000 15% next 25,000 25% remainder Q34% HINT: Corporations subject to federal income taxes must make estimated tax payments throughout the year. At the time of the payment, the account Income Tax Expense is debited and cash is credited. To determine the taxable income at year end, net the total debits and the total credits from the income statement. Note that the estimated income tax expense is listed as a debit and must be subtracted from total debits when determining taxable income since it is not a deductible item. 5. Prepare the journal entry for income taxes. 6. Prepare schedules of subsidiary accounts receivable and accounts payable and determine that the total per each subsidiary schedule agrees with the related control accounts. Prepare an income statement assuming that the weighted average number of shares out- standing for the year 2019 is 5,600 shares. Assume that bad debt expenses are adminis- trative expenses. 8. Prepare a statement of retained earnings 9. Prepare a balance sheet (Hint: combine cash and petty cash for balance sheet purposes). Prepare a statement of cash flows using the indirect approach. Hint: combine Petty Cash with Cash for purposes of determining changes in cash. 11. Prepare and post closing entries. 12. Prepare a post-closing trial balance