Make journal entries for the following transactions. Unrealistically, the Company has made no journal entries since closing the books at the end of the prior year.

1. Purchases of $14,500,000 of Raw-Materials Inventory were made during the current year. With cash payments of $10,200,000 and the remainder charged to Accounts-Payable.

2. Raw-materials costing $17,900,000 was transferred to Work-In-Process Inventory during the current year.

3. Current year sales were 850,000 units. Each widget sold for $50 sales. Of the current year's sales, $32,000,000 were on account (credit sales) and $10,500,000 were for cash.

4. The cost of making a widget this current year is $35 per widget, and 750,000 units were produced. The Finished-Goods Inventory has a beginning layer of 100,000 units which cost $30 per widget to make. Record cost of goods sold related to the sale in transaction #3. See accounting policy #2.

5. Record the transfer of goods from Work-in-Process to Finished-Goods Inventory based on the facts presented in transaction #4. What should be the ending balance in finished goods inventory?

6. Payments were made on account to the Company (cash received as payment on credit sales) to the amount of $35,450,000. How could this be more than credit sales?

7. One large customer was granted a special discount of 2% of the invoice provided that this customer paid in cash within 30 days of the invoice date. This customer purchased $1,200,000 of goods and paid $1,176,000 in cash on time (which was accounted for at gross in #3 above). Where did the missing $24,000 go? Be careful not to double account for this payment.

8. During the current year, General Payroll of $8,000,000 was paid in cash and Factory Payroll of $8,950,000 was paid in cash. See accounting policy #2.

9. On 1 April current year, $9,600 was paid in cash for a one-year automobile insurance policy effective immediately. Gopher Manufacturing Company Accounting 5101

10. On 2 June, a machine with a historical cost of $160,000 and accumulated depreciation of $90,000 was sold for $50,000 in cash. Since the Company does depreciation as an adjusting journal entry, no depreciation for the current year had been recorded for this machine.

11. An assembly machine was purchased on August 1 by issuing a Note Payable for $1,500,000. The machine is assumed (consistent with accounting policies) to have a useful life of 25 years.

12. On 5 August, the Company contracted to rent a computer-controlled sheet metal cutter. The contract was for three years beginning when the cutter was installed (which was completed on 30 October). The contract called for monthly payments of $2,000 per month and the Company prepaid one full year ($24,000) on 30 October.

13. Mortgage payments are made on the first day of each month in cash. A Mortgage Amortization Table is given in the data for this case (the spreadsheet titled Mortgage). Assume that the current year covers January of year-2 through December of year-3 of the table. Again, unrealistically, no journal entries have been made for the mortgage this current year. Round cash payment, interest expense, and change in principal to the nearest dollar. What is the beginning balance in mortgage payable liability?

14. On 15 October, the two original shareholders issued 60,000 shares of common stock to a valued employee (vice-president of marketing) who was being wooed by a rival company. The employee is prohibited from selling the shares for 5 years and did sign a non-compete agreement. Recall that the stock has a par value of $5 per share. However, the original partners estimate that the shares have a market value of $20 per share.

15. During the year, the Company paid $1,000,000 for utilities (water, gas, electricity) in cash. This entire amount was expensed and not capitalized into inventory as overhead.

16. On 31 November, a customer pre-paid for a shipment of widgets which will not be shipped until January of the New Year. Cash was received in the amount of $42,000.

17. At the end of the current year, the Company learns that a customer has declared bankruptcy and there is no likelihood of collecting any cash. It is determined that the entire Account Receivable for this customer must be written off. The balance owed is $75,000. See accounting policy #7. Gopher Manufacturing Company Accounting 5101 Carlson School U of Minnesota -- Page 18 of 21

18. On 5 December, the Company declared a dividend-in-cash to all common shareholders of record on 5 December (which includes the new shareholder). The amount was $2.50 per share and the cash is to be disbursed on 15 January of the next year. There was no dividend in the prior year.

19. Purchases for supplies were in the amount of $42,000 paid in cash.

Adjusting Journal Entries

1. Notice that two Accrued-Payroll-Payable accounts are in the ledger and have a non-zero balance from the prior year. This represents the sum of the pay performed as of 30 December of the prior year but not yet paid. At the end of the current year, workers again have worked a few days for which they have not yet been paid. This amounts to $6,000 for General Payroll and $4,000 for Factory Payroll.

2. On 31 December, Supplies Inventory was physically counted and found to be $23,000.

3. Record an appropriate amount of insurance expense for the year. Until 30 March of the current year, the automobiles were insured under a prior policy for $1,000 per month. See CYJE #9 for the new policy.

4. Record an appropriate amount of rent expense on the metal cutter mentioned in CYJE 12.

5. Record an appropriate amount of interest expense on the note payable used to finance the purchase of equipment in CYJE 11. The Note Payable plus accrued interest is due 30 July of the next year. The note was signed and began accruing interest on 1 August of the current year. No cash payments were required during the current year but the note does accrue simple interest at 0.5% per month. This interest is added to the balance of the note so that when cash settlement is made, it will include all interest charges.

6. The company has received utility bills totaling $37,000 which is has not yet paid as of 30 December. Note that there is a beginning balance in Utilities Payable Account.

7. Record an appropriate amount of depreciation expense for each of the companys three (3) fixed asset accounts. See accounting policy #1.

8. Record an appropriate amount of amortization expense for the companys intangible assets.

9. Record an appropriate amount of bad debt expense. See accounting policy #7.

10. Record an appropriate amount of income tax expense. The Tax Accountant estimates that the Company owes $300,000 in income taxes for the current year. Income tax expense was determined to be 30% of net income before taxes. This is a different amount. What is the difference between tax expense and taxes paid?