Indigo Corporation's unadjusted trial balance at December 1, 2017, is presented below. Debit Credit Cash $26.300 Accounts Receivable 35,000 9,000 Notes Receivable Interest Receivable 0 Inventory 36,270 Prepaid Insurance 3,900 Land 20,700 Buildings 156,600 61,000 Equipment Patent 9.720 $600 Allowance for Doubtful Accounts Accumulated Depreciation-Buildings Accumulated Depreciation-Equipment 52,200 24,400 27,000 0 11,700 Accounts Payable Salaries and Wages Payable Notes Payable (due April 30, 2018) Income Taxes Payable Interest Payable Notes Payable (due in 2023) Common Stock 0 0 35.200 53,400 48,590 Retained Earnings Dividends 12,500 Sales Revenue 925,500 0 Interest Revenue Gain on Disposal of Plant Assets 0 Bad Debt Expense 0 0 637,500 Bad Debt Expense Cost of Goods Sold Depreciation Expense Income Tax Expense 0 0 0 0 Insurance Expense Interest Expense Other Operating Expenses Amortization Expense Salaries and Wages Expense 61.600 108,500 Total $1,178,590 $1,178,590 The following transactions occurred during December. Dec 2 Purchased equipment for $17,400, plus sales taxes of $1,200 (paid in cash). 2 Indigo sold for $3,600 equipment which originally cost $5,400. Accumulated depreciation on this equipment at January 1, 2017, was $1,800; 2017 depreciation prior to the sale of equipment was $490. Indigo sold for $5,050 on account inventory that cost $3.490. Salaries and wages of $6,770 were paid. 15 23 Adjustment data: 1. 2. 3. 4. Indigo estimates that uncollectible accounts receivable at year-end are $3,840. The note receivable is a one-year, 8% note dated April 1, 2017 No interest has been recorded. The balance in prepaid insurance represents payment of a $3,900, 6-month premium on September 1, 2017. The building is being depreciated using the straight-line method over 30 years. The salvage value is $31,500. The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost. The equipment purchased on December 2, 2017, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,980. The patent was acquired on January 1, 2017, and has a useful life of 9 years from that date. 5. 6. 7. 7. 8. 9. The patent was acquired on January 1, 2017, and has a useful life of 9 years from that date. Unpaid salaries at December 31, 2017, total $2,010. Both the short-term and long-term notes payable are dated January 1, 2017, and carry a 10% interest rate. All interest is payable in the next 12 months. Income tax expense was $13,700. It was unpaid at December 31. 10 Prepare a 2017 income statement. INDIGO CORPORATION Income Statement For the Month Ended December 31, 2017 Sales Revenues $ Cost of Goods Sold Gross Profit Operating Expenses
