General Background of the Compan Total Plumbing Corporation is a wholesale plumbing supply distributor. The corporation was organized in 1981, under the laws of the State ofIllinois, with an authorized capitalization of 10,000 shares ofno-par common stock with a stated value of S30 per share. The common stock is sold over the counter in the local area. You have been hired as of December 1, 2018, to replace the controller, who has resigned. As controller, you are responsible for the corporation's accounting records, preparation of the financial statements, safeguarding the corporate assets, and providing management with financial information to set prices and to monitor and control operations. You have an assistant who keeps the payroll records, the plant asset ledger, and the perpetual inventory. There is an inventory subsidiary ledger that is posted to daily for purchases and sales. This ledger is not included in this project. The corporation secretary maintains the stockholder records, and the receptionist/secretary acts as the petty cashier Total Plumbing Corporation closes its books annually on December 31 but prepares financial statements quarterly. Adjusting entries are posted to the general ledger only at year-end; at the end of the first, second, and third quarter the adjustments are entered and reversed as soft close adjusting transactions. Therefore, the adjusting entries to be recorded on December 31 are annual adjustments that you must journalize and thein post to the general ledger accounts before preparing the financial statements Total Plumbing Corporation maintains a perpetual inventory system and takes a physical count each year to adjust the inventory carrying amount. Purchases are recorded at the gross amount (discounts taken are recognized at the date of payment) of the supplier's invoice, and the terms vary with each supplier. Sales on account are subject to terms of 2/10, n/30. Discounts are taken and granted only when the terms are met. The cost of all inventory sold in December was 80% of the sales price. The corporation uses the following journals and ledgers 1) You will begin with the correct figures for the Unadjusted Trial Balance as of December 31 Unadjusted DR CR Account 279,953 225 275.280 Cash Petty Cash Accounts Receivable Allowance for Doubtful Accounts Notes Receivable Interest Receivable Inventory Supplies 880 104,200 452,502 3,680 11,020 25,410 160,000 99,650 306,000 aid insurance Prepaid Rent Other Assets Land Buildings Accumulated Depreciation - Buildings 73,040 38,900 uipment Accumulated Depreciation - Equipment Trucks Accumulated Depreciation -Trucks Notes Payable Accounts Payable Salaries & Wages Payable FICA Taxes Payable Income Taxes Pavable Federal Withholding Taxes Payable State Withholding Taxes Pavable FUTA Taxes Payable SUTA Taxes Payable Interest Payable 13,200 70,500 34,990 15,000 180,740 8,170 9,663 4,418 400 2,600 Dividends Payable Notes Pavable LT Liabilities Bonds Payable Discount on Bonds Payable Common Stock Paid-in Capital in Excess of Stated Value 8,740 113,000 275,000 6,400 207,000 292,400 362,748 or 354,008 if using Retained Earning for JE Retained Earnings Treasury Stock Dividends Sales Revenue Sales Returns and Allowances Sales Discounts Cost of Goods Sold Advertising Expense Bad Debt Expense Supplies Expense Freight-out Miscellaneous Expense Depreciation Expense Insurance Expense Salaries & Wages Expense Rent Expense Payroll Tax Expense Utilities Expense Interest Revenue Gain on Disposal of Plant Assets Interest Expense Loss on Disposal of Plant Assets Income Tax Expense 125,610 8,740 or 0 if using Retained Earning for JE 5,655,052 14,060 77,281 3,981,262 7,678 1,608 19,490 350 989,652 87,001 16,669 3,150 24,570 500 72,000 Totals 7,260.191 7.260.191 2) From the following information prepare adjusting journal entries (AJEs): The annual provision for doubtful accounts receivable is recorded in an amount equal to 5% of gross accounts receivable less the ending Allowance account balance. a. b. An inventory count of the office supplies revealed $830 of supplies on hand at year-end. The insurance premium outstanding on January 1,2018, covers the period January 1 through August 31, 2018. The insurance premium of $7,800 recorded in August covers the period of September 1, 2018 through August 31, 2019. Total Plumbing estimates that 75% of the premiums are attributable to general activities and 25% to selling activities. (Use Miscellaneous Expense) c. d. The payroll summary for the employees who are paid biweekly shows the following information at | December 31, 2018: Delivery and Warehouse Wages FICA Taxes Payable Federal Withholding Taxes State Withholding Taxes Net pay $6,100 440 1,036 $4406 e. The employer's share of the FICA tax ($440) must be accrued; no state or federal unemployment 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 7% on the long-term notes payable since July 1, 2018. The next six-month interest payment at 6% on the bonds is due on March 1, 2019. The discount on bonds payable has not been amortized for any part of 2018; the bonds are dated March 1, 2012, and mature March 1, 2022. (Use straight-line.) The interest accrued to 12/31/18 on notes receivable is composed of the following: g. Platteville Plumbers, 10%, 6 months, due March 31, 2019 Bilder Construction, 8%, 6 months, due June 17, 2019 Beverly's Building, 9%, 6 months, due June 26, 2019 $1,125 139 17 $1281 The interest accrued at 12/31/18 on the note payable of $15,000 @ 10% is $1,500. Interest is payable on January 2, 2019. (The note is due in 2019.) h. A warehouse lease payment of $10,500 was made on September 1, 2018, for rental through February 28, 2019. (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 2018 j. Plant and equipment to be depreciated are composed of the following Estimated Usage or Life Salvage Value Date Acquired Cost Depreciation Method Assets Building $306,000 25 years $20,000 Sum of years' digits Truck No. 1 28,000 60,000 3,100 miles driven miles 33,000 Truck No. 2 60,000 miles 4,200 miles driven 7,900 Lift No.1 (Sold 12/31/18) 900 straight-line years 3/29/14 9/16/16 All prior to Lift No.'2 straight-line 4,500 500 years 5,000 32,800 500 2,000 Lift No..3 Office Equipment Computer 10 years straight-line straight-line years 12/22/18 6,100 4 1,300 Double-declining balance years Truck No. 1 has been driven 45,000 miles prior to l/1/18 and truck No. 2 has been driven 30,500 miles prior to 1/1/18. During 2018 truck No. 1 was driven 12,000 miles and truck No. 2 was driven 14,000 miles. Remember that the Total Plumbing Company takes a half-year's depreciation in the year of acquisition and a half-year in the year of sale k. Federal and state income taxes are $52,938 3) Prepare in good form the following financial statements for the year ending December 31, 2018 a) Multi-step Income Statement (assume the weighted-average number of shares outstanding for the year 2018 is 5,600 shares). Assume that bad debt expense and depreciation expense are administrative expenses b) Classified Balance Sheet (Hint: combine Petty Cash with Cash for balance sheet purposes) c) Statement of Cash Flows 4) You will be creating a document with the following structure for answering what cycle corresponds to the numbered December transaction (there will be 62 transactions). You will be using the December Transactions document from Financial Statement Project Part I and Attachment A - Cycle Information for this section. December Transaction Item # December Transactio Item Cycle Cycle 32