Bust-a-Move Snowboard, Inc. was founded in Burlington, VT and is a privately held company with stock not
Question:
Bust-a-Move Snowboard, Inc. was founded in Burlington, VT and is a privately held company with stock not traded on the public markets. They have enjoyed incredible success with emerging snowboarders, ages 10 and under. They have positioned themselves as a industry leader with a unique combination of hip feel that kids love and a safety focus that parents have come to appreciate. They are a manufacturer of snowboards and service rental equipment for area resorts, including Smugglers' Notch, Stowe, and Bolton Valley. While there are many better known snowboarding companies based in Burlington, Bust-a-Move has a competitive internship program and an interesting way that they vet their applicant pool.
Account Title | Debit | Credit | ||
Cash | 124,000 | |||
Acct Receivable | 96,000 | |||
Allowance for Doubtful Accts | 2,400 | |||
Inventory | 54,115 | |||
Prepaid Rent | 24,000 | |||
Supplies | 6,000 | |||
Land | 48,000 | |||
Bulding | 250,000 | |||
Equipment | 75,000 | |||
Accumulated Depreciation; Building | 50,000 | |||
Accumulated Depreciation; Equipment | 21,000 | |||
Goodwill | 35,500 | |||
Patent | 15,500 | |||
Accounts Payable | 132,715 | |||
Notes Payable | 178,000 | |||
Unearned Service Revenue | 122,000 | |||
Common Stock | 96,000 | |||
Retained Earnings | 126,000 | |||
Revenue | 689,000 | |||
Salary Expense | 440,000 | |||
Cost of Goods | 201,000 | |||
Advertising Expenses | 15,000 | |||
Rent Expense | 32,000 | |||
Miscellaneous Expense | 1,000 | |||
TOTALS | 1,417,115 | 1,417,115 |
A. Supplies on hand at year-end are $1,200.
B. Six months of rent ($24,000) was paid in advanced on September 1st. No rent expense has been recorded since that date.
C. Depreciation expense has not been recorded on the building for 2018. The building has a useful life of 20 years. Bust-a-Move Snowboard uses straight-line depreciation for all asset classifications.
D. Depreciation expense has not been recorded for the equipment for 2018. The equipment has a useful life of 10 years and a salvage value of $5,000. E. Employees work Monday through Friday. The weekly payroll is $7,500 and is paid every Friday. December 31st is a Wednesday.
F. Revenue of $24,000 must be accrued (Note: The earnings process is complete but the amount has not been received from customer.)
G. Smugglers' Notch (a customer) paid $36,000 in advance on September 1, 2018 for services to be provided evenly from October 1, 2018 through March 31, 2019. None of the revenue has yet been recorded.
H. Management has been made aware that $5,000 of the current accounts receivable is deemed uncollectible. Management has asked that this amount be written off immediately.
I. 1,000 snowboard helmets in the amount of $25,000 were ordered on December 15th and were shipped fob shipping point on December 21st. To date the inventory has not been received. The invoice has not yet been received.
J. On December 31st, Management decides to sell one piece of equipment with a historical cost of $15,000, and accumulated depreciation of $3,000. At the end of its useful life this equipment was previously deemed to have no salvage value. Cash proceeds on this sale were $10,000. Transaction has not been recorded.
K. No amortization has been recorded for Bust-A-Move Snowboard's intangible assets. Goodwill was acquired through Bust-A-Move Snowboard's purchase of TJX Shoppe in 2010. The Company has made the election prospectively in the current year to amortize per the PCC guidance. No impairment has been noted.
L. The patent was acquired in 2018 after years of research and development. Legal fees for the patent were $15,500 on January 1, 2018. On that date patent was deemed to have a useful life of 5 years. On December 1, 2018 Bust-a-Move Snowboard, Inc. successfully defended its patent from Burton Snowboards. The costs incurred amounted to $15,000. This transaction has not yet been recorded and has extended the useful life of the patent for 8 years from the date of defense. Any costs incurred were paid in cash.
M. In accordance with Generally Accepted Accounting Principles, Bust-a-Move Snowboard must record their inventory in accordance with the Lower Cost or Market concept. Use the indirect method when recording your proposed entry. Inventory is inclusive of the following:
Inven item | # of Items | Costs | Replace Cost | Selling Price | Cost to Sell | Profit Margin |
Bindings | 58 | 52.00 | 55.00 | 65.00 | 5.00 | 23% |
Snowboards | 345 | 131.00 | 127.50 | 250.00 | 15.00 | 48% |
Boots | 144 | 41.00 | 55.00 | 55.50 | 5.00 | 28% |
Helments | 1000 | 25.00 | 20.00 | 35.00 | 2.50 | 29% |
4. Prepare an adjusted trial balance.
5. Prepare the multiple step Income Statement, Statement of Retained Earnings, and classified Balance Sheet. 6. Prepare and post all closing entries. 7. Prepare a post closing trial balance.