Case: Scrubs+ Financial Statement Preparation

The December 31, 2011 balance sheet of Scrubs+, Inc., an importer of clothing and equipment for health professionals, is given below.

Scrubs+
Balance Sheet
as of December 31, 2011
Assets			Liabilities
Cash	$ 28,000		Accounts Payable	$ 57,000
Accounts Receivable	73,400		Salaries Payable	1,500
Inventory	59,000		Tax Payable	8,530
Total Current Assets	160,400		Total Current Liabilities	67,030
			Bank Loan Payable	40,000
			Total Liabilities	107,030
PP&E (gross)	42,000
Accumulated Depreciation	(11,600)		Equity
PP&E (net)	30,400		Common Stock	60,000
			Retained Earnings	23,770
			Total Owners Equity	83,770
Total Assets	$ 190,800		Total Liabilities & Equity	$ 190,800

The Company's chief executive provided the following information regarding activities in 2012:

Sales and customers:

a. Credit sales amounted to $332,000.

b. Cash collections from credit customers amounted to $285,000. (Hint: Collections were from transactions that took place both this year and last year.)

c. Cash sales $123,500.

Advance payment of $10,000 received from customer. At the end of 2012, the company still owed the goods to this customer.

Inventory and suppliers:

a. Purchases of inventory during 2012 amounted to $212,000. All purchases were on credit.

On December 31, 2012, the company had inventory on hand that had cost $62,000. Use this information (together with the beginning balance in the inventory account) to infer the total cost ($x) to the company of the inventory (goods) sold and shipped to customers during 2012. This amount is the Cost of Goods Sold Expense for 2012. Record an accounting entry to recognize the Cost of Goods Sold expense due to the outflow of inventory (so that there is a matching of revenues of goods sold and cost of goods sold in 2012).

c. During 2012, made payments to suppliers of $217,000.

3. During 2012 paid rent of $70,000 for all of 2012, and the first two months of 2013.

Utilities:

Utilities bills of $10,000 for services received during the year were paid.

The bill for December 2012s utilities received was estimated to be $2,000, but had not been received or paid by early January.

Salaries:

Wages and Salaries paid during the year were $80,000. This included payment in January 2012 for the $1,500 in salaries owed at the end of the prior year.

No wages or salaries were owed as of December 31, 2012.

Loan and interest:

a. The loan carries an interest rate of 12 percent per year or $4,800 for 2012.

b. Interest payments of $4,000 were made during 2012.

The $40,000 bank loan is due on June 30, 2013.

PPE and Depreciation:

a. A computer was purchased on January 1, 2012 for $5,000.

b. All other PP&E was still in use at the end of 2012.

c. All PP&E is estimated to have a useful life of 5 years, and no estimated salvage value.

A dividend of $6,000 was paid during 2012.

Taxes:

In January 2012 paid income taxes of $8,530 owed at the end of 2011.

Income taxes on 2012 income total $24,540, but had not been paid by December 31, 2012.

REQUIRED:

Using the worksheet provided, record the effects of the transactions above (in the corresponding columns) within the first tab of the worksheet. Put a positive number in the worksheet for transactions that increase an account and a negative amount that decrease an account. Assume that there were no other transactions during the year.

Note: When recording the transactions ensure that the Check on row 38 is zero for each column you enter amounts for each transaction

When requirement (a) above is complete, refer to the second tab of the worksheet. The tab outlines the financial statements that are derived from the information that you input in the first tab. Answer the following questions in the shaded cells within the 3^rd tab of the worksheet file:

What is the amount of Revenue for 2012?

Was the company profitable or loss making in 2012 and by how much?

Did retained earnings increase or decrease during 2012? What transactions impacted this account during 2012?

How much is due from customers at the end of 2012?