Mini-Practice Set 3

Corporation Accounting Cycle

The Texas Company

This project will give you an opportunity to apply your knowledge of accounting principles and procedures to a corporation. You will handle the accounting work of The Texas Company for 2016.

INTRODUCTION

The chart of accounts and account balances of The Texas Company on January 1, 2016, are shown on the next page. Texas does not use reversing entries.

INSTRUCTIONS

Round all computations to the nearest whole dollar.

1. Open the general ledger accounts and enter the balances for January 1, 2016. Obtain the necessary figures from the trial balance.

2. Analyze the transactions on the pages that follow, and record them in the general journal. Use 1 as the number of the first journal page.

3. Post the journal entries to the general ledger accounts.

4. Prepare a worksheet for the year ended December 31, 2016.

5. Prepare a summary income statement for the year ended December 31, 2016.

6. Prepare a statement of retained earnings for the year ended December 31, 2016.

7. Prepare a balance sheet as of December 31, 2016.

8. Journalize and post the adjusting entries as of December 31, 2016.

9. Journalize and post the closing entries as of December 31, 2016.

Analyze:Assume that the firm declared and issued a 3:1 stock split of common stock in 2016. What is the effect on total par value?

Journalize the following summary transactions using December 31, 2016, as the record date:

Data for Year-End Adjustments

1. The balance of Allowance for Doubtful Accounts should be adjusted to equal 3 percent of the balance of Accounts Receivable. (Debit Operating Expenses.)

2. Depreciation on the buildings should be recorded. (Debit Operating Expenses.) The firm uses the straight-line method and an estimated life of 20 years to compute this adjustment.

3. Depreciation on furniture and equipment should be recorded. The firm uses the straight-line method and an estimated life of 10 years to compute this adjustment. (Debit Operating Expenses.)

4. Accrued interest on the outstanding bonds payable of The Texas Company should be recorded and the premium amortized.

5. The amortization of organization costs for the year should be recorded. The Texas Company was formed on January 1, 2014. Organization costs of $10,000 were incurred at the time and are being amortized over a 60-month period.

6. The ending merchandise inventory is $130,000.

Other Data

Estimated federal income taxes are to be recorded using the tax rates given on page 728.