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Financial Statements Preparation Kid Fun Corporation is a recently established company that trades in all kids-related items, including toys, garments, feeding/eating necessities, food, furniture, travel

Financial Statements Preparation

Kid Fun Corporation is a recently established company that trades in all kids-related items, including toys, garments, feeding/eating necessities, food, furniture, travel systems. Periodic system is adopted in accounting for inventory. Building, equipment and motor vehicles are recorded at historical cost and their estimated useful lives are 40 years, 20 years and 10 years respectively and no residual value is expected. Depreciation for plant assets will be counted for a whole month in the month of its acquisition and no depreciation will be provided in the month of its disposal. Kid Fun prepares its financial statements on a monthly basis and its fiscal year ends on December 31st.Its chart of accounts is presented as follows.

Kid Fun Corporation

Chart of accounts

Account Names

Account Names

Accounts Payable

Merchandise inventory

Accounts Receivable

Miscellaneous Expense

Accumulated Depreciation - Building

Motor Vehicle

Accumulated Depreciation - Equipment

Ordinary Share Dividends Distributable

Accumulated Depreciation - Motor vehicle

Prepaid Insurance

Allowance for Doubtful Accounts

Prepaid Purchases

Bad Debt Expense

Purchase Discounts

Buildings

Purchase Returns and Allowances

Cash

Purchases

Depreciation Expense-Building

Rent Expense

Depreciation Expense-Equipment

Retained Earnings

Depreciation Expense-Motor Vehicle

Salaries Payable

Dividends Payable

Salaries Expense

Equipment

SalesRevenue

Freight-in

Sales Discounts

Freight-out Expense

Sales Returns and Allowances

Fuel Expense

Share Capital-Ordinary

Gain on Disposal

Share Capital-Preference

Insurance Expense

Share Premium-Ordinary

Interest Expense

Share Premium-Preference

Interest Payable

Share Premium-Treasury

Interest Receivable

Supplies

Interest revenue

Supplies Expense

Land

Treasury Shares

Long-term Investment

Unearned Revenue

Long-term notes payable

Utilities Expense

Loss on Disposal

Utilities Payable

In December, the following transactions took place:

Dec.

1

Kid Fun Corporation was set up by issuing 1,000,000 ordinary shares at $12 each.Authorized number of ordinary shares is 2,500,000 and each share is of $1 par value.

1

1

Purchased a delivery truck for own use, original price $250,000 and a 10% discount was obtained due to the immediate cash payment.

Received a building, valued at $28,000,000, from BeeGee Corporation as its investment into Kids-Care. It was agreed that BeeGee will have 200,000 6% preference shares. Authorized number of preference shares is 500,000 and each share is of $100 par value.

2

Purchased office equipment on account from REMAX at $180,000. Paid relevant delivery and installation of $8,000.

3

Hired a receptionist for the Head Office, agreed salary of $8,800. Ordered 5,500 kids' t-shirts from TeenGarments, list price $55 each.

4

Purchased from Color Gym, sports facilities at $112,000, FOB destination, terms 1/15, n/45. Also purchased from Princess Gadgets, 10,000 sets of party decoration.Listed price is $36 per set and a 5% discount is available for purchases over 5,000 sets. Payment has been made to Princess Gadgets.

5

Received an order from Vix Kindergarten for 2,000 sets of kids' tableware.Quotation was offered to Vix at $128 each set.

6

T-shirts from TeenGarments arrived, together with the bill. As TeenGarments was having promotion, Kid Fun got 10% off from the list price.Terms of this purchase: 1/10, n/30.

8

Ordered from BNM Plastics 2,000 sets kids' tableware for Vix Kindergarten, $58 each.

9

Sold sports facilities to KiddyGarden Company and DreamParties Ltd., relevant amounts were $182,000 and $176,000 respectively, terms 1/10, n/30.

10

Issued check to pay for the equipment purchased on the 2nd and the T-shirts arrived on the 6th.

10

Purchased infant toys from BoomBaby, total cost $89,000, terms 1/5, n/60.

15

Purchased office supplies, $3,500, with cash.Sold 1,600 T-shirts to Greens at $98 each. Greens paid with a check of $5,000 and promised to pay the rest within the next 20 days.

18

Received payment from KiddyGarden for the sports facilities sold on the 9th.

20

Sold infant toys to BabyUSA through website, total amount $58,600, terms 1/15, n/45, FOB shipping point. The delivery company charged $1,500 for this order.

21

Tableware for Vix Kindergarten from BNM arrived and a check was issued to pay for the order. Arranged a delivery company to send the tableware to Vix on the 30th, the delivery charge of $500 would be paid by Vix.

28

Received electricity bill of $8,000. According to the record from HRO, the total salary that should be paid for December was $165,880.

30

Delivered tableware to Vix Kindergarten as scheduled.

Otherinformation includes:

31

Cash sales of the month totaled at $351,000.

31

Physical inventory showed that supplies and inventories are $1,500 and $323,000 respectively.

31

The dividend for preference shares was declared for 1 month for the year end December 31st, 2019.

31

Paid fire insurance of $4,800, covering January to December of 2020.

31

Received $25,000 from BrilliantChildren as the down payment for tailor- made sportswear.

31

Informed by BabyUSA that part of the toys were of the wrong specifications and Kid Fun promised to provide $2,890 allowance to this client.

31

Allowance for bad debt is estimated based on 2.0% of the gross sales revenue for each period.

Required:

  1. Journalize, in general journal, all December transactions, including ALL necessary adjustments (no need to provide short explanations and round your answers to the nearest dollar).
  2. Do an income statement for the month ended December 31st, 2019, as well as a classified statement of financial position as at December 31st, 2019.

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