Narrative and Instructions
Rockford Corporation is a wholesale plumbing supply distributor. The corporation was organized
in 1981, under the laws of the State of Illinois, with an authorized capitalization of 10,000 shares
of no-par common stock with a stated value of $30 per share. The common stock is sold over the
the counter in the local area. You have been hired as of Thursday, December 25, 2014, to replace the
controller, who has resigned. As controller, you are responsible for the corporation's accounting
recrods, preparation of the financial statements, safeguarding the corporate assets, and providing
management with financial information to set prices and to monitor and control operations.
Rockford 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 only on a work sheet, not in the general
ledger. Therefore, the adjusting entries to be recorded on December 31 are annual adjustments that
you must journalize and the post to the general ledger accounts before preparing the financial
statements.
Rockford 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:
Journals
1. A sales journal (S) - to record sales of merchandise on account.
2. A purchase journal (P)- to record purchases of merchandise on account.
3. A cash receipts journal (CR) - to record all cash receipts.
4. A cash disbursements journal (CD) - to record all cash payments.
5. A general journal (J) - to record all transacitons that cannot be recorded in the other journals.
Ledgers
1. A general ledger
2. An accounts receivable subsidiary ledger.
3. An accounts payable subsidiary ledger.
In recording sales transactions, each sale should be posted on the day of the sale directly to the
customer's account in the subsidiary ledger, using the invoice number as the posting reference
number in the subsidiary account. Also, cash receipts from customers should be posted to the
subsidiary ledger on the day they are received. The purchase order number should be used as
the posting reference number in the subsidiary ledger for purchases on account from suppliers.
Purchases from suppliers and payments to them should be posted daily. All other individual posting
may be made weekly or at the month-end. Account numbers should be used as posting reference
numbers in the journals. Officers and office personnel are salaried employees and are paid monthly
on the last day of each month. The delivery truck drivers and warehouse employees are hourly wage
employees and are paid biweekly. Each biweekly pay period ends Friday. On the following Monday
you assistants provide you with a payroll summary from which you prepare general journal entries
to record the biweekly payroll and the employer's taxes on the payroll. The biweekly employees'
paychecks are distributed on the following day (Tuesday).
The January 1, 2014, balances appear in the general ledger accounts as well as the Noverber 30, 2014,
balances, for those accounts whose balances have changed. All transacitons affecting the non-
current accounts from January 1, 2014, through Noverber 30, 2014, with explanations, appear in
these accounts to facilitate the preparation of the statement of cash flows.
Subsidiary ledger account balances as of Noverber 30, 2014, are as follows:
Accounts Receivable	Acct No	Amount
Boecker Builders	117	62,920
The Potts Company	122	50,300
Swanson Brothers Contruction	133	24,050
A & B Hardware	143	-
Trudy's Plumbing	155	15,100
Coconino Contractors Inc	160	27,800
Rankin Plumbing Corp	166	74,350
Beverly's Building Products	175	14,000
Bilder Construction Co	180	45,200
Iwanaga Plumbing and Heating	190	3,700
Total	317,420
Accounts Payable	Acct No	Amount
Phoenix Plastics	14	17,450
Business Basics Inc	16	-
Edward's Plumbing Suppliers	18	20,050
DeKalb Transport	20	-
Oxenford Copperworks	35	26,400
Smith Pipe Co	39	38,100
Ron & Rod's Plumbing Products	44	14,850
Khatan Steel Corp	57	10,000
Total	126,850
The transactions through December 23 have already been recorded by the former controller. You
are to begin your work by entering the transaction of December 25 for the payment of cash to
repurchase stock.
Dec-14
S	M	T	W	T	F	S
1	2	3	4	5	6
7	8	9	10	11	12	13
14	15	16	17	18	19	20
21	22	23	24	25	26	27
28	29	30	31
December Transactions
December
1	Received a check in the amount of $23,569 from Swanson Brothers Contruction in full
payment of invoice No. 1120 dated Novermber 26 in the amount of $24,050.
1	Sold sewer and drainage pipe to Beverly's Building Products on account, invoice No. 1201
for $13,150.
2	Purchased copper tubing and fittings from Edward's Plumbing Supplies Inc. on account,
purchase order No. 315 for $24,320, terms n/60.
2	Issued check No. 1580 for $26,400 to Oxenford Copperworks in settlement of the
balance owned on purchase order No. 280.
3	A court notice indicates that Iwanaga Plumbing and Heating is bankrupt and payment
of its account improbable; the president orders the account to be written off as a
bad debt (invoice No. 780).
3	Sold bathroom fixtures to Bilder Construction Co on account, invoice No. 1202 for
$44,900.00
4	Received a check in the amount of $49,294 from the Potts Co in full payment of invoice
No. 1128 dated November 27 for $50,300.
4	Sold plumbing supplies and plastic pipe to Coconino Contractors Inc. on account, invoice
No. 1203 for $10,300.
4	Issued check No. 1581 for $810 to Standard Oil Co, in payment of gas, oil, and truck repair
from Tierney's Standard Service.
5	Issued check No. 1582 for $9,900 to Khatan Steel Corp. in full settlement of purchase order
No. 312 for $10,000.
5	Issued check No. 1583 for $10,486 to Phoenix Plastics in full payment of Phoenix's invoice
dated November 28 in the amount of $10,700, for purchase order No. 313, terms 2/10, n/30.
5	Received a check in the amount of $72,863 from Rankin Plumbing Corp. in full payment
of invoice No. 1129 dated November 28 for $74,350.
8	Sold cast pipe to Trudy's Plumbing on account, invoice No. 1204 for $29,300.
8	Received a check in the amount of $27,800 from Coconion Contractors, Inc. in full payment
of invoice No. 1091 dated October 20.
8	Purchased bathroom fixtures from Phoenix Plastics, on account, purchcase order No. 316
for $52,700 terms 1/10, n/30.
8	Received a check in the amount of $29,000 from Boecker Builders in partial payment of
balance outstanding covering invoice Nos. 1050 and 1071.
9	The payroll summary for the biweekly pay period ended Friday, December 5 contained the
follwing information:
Delivery and warehouse wages	4,860
FICA taxes withheld	350
Federal income taxes withheld	900
State income taxes withheld	190
Net pay	3,420
Employer's payroll taxes:
FICA tax	350
Federal unemployment tax	-
State unemployment tax	-
Issued check No. 1584 for the amount of the net pay and deposited it in the payroll bank
account. Individual payroll checks were then preppared for distributions to the biweekly
emplyees on Tuesday, December 9, 2014.
9	Issued check No. 1585 for $600 to Scooter Gordon for lettering and sign painting on some
delivery trucks.
9	Issued check No. 1586 for $6,750 to Phoenix Plastics, in payment of Phoenix's invoice dated
November 12 in the amount of $6,750, our purchase order No. 299.
10	Issued check No. 1587 for $37,719 to Smith Pipe Co in full payment of their invoice dated
November 28, terms 1/15, n/30, our purchase order No. 314.
10	Received a check in the amount of $15,100 from Trudy's Plumbing in full settlement of
invoice No. 1106 dated November 7.
10	Sold pipe, fixtures, and accessories to Trudy's Plumbing on account, invoice No. 1205 for
$28,850.00
11	Sold pumbing supplies and copper tubing to The Potts Company on account, invoice No.
1206 for $31,450.
11	Received a check in the amount of $33,920 from Boecker Builders in full payment of invoice
No. 1071.
11	Cash sales to date totaled $12,292.
12	Received a check in the amount of $28,714 from Trudy's Plumbing in payment of inoivce
No. 1204.
12	Sold plumbing fixtures and supplies to Boecker Builders, on account, invoice No. 1207
for $24,730.
15	The Potts Co returned defective copper tubing that is purchased on December 11. A credit
memo in the amount of $4,680 is issued relative to invoice No. 1206. The copper tubing
had a cost of $3,550.
15	The defective copper tubing is returned to Edward's Plumbing supplies, Inc. along with
a debit memo in the amount of $3,550 in reduction of purchase order No. 315.
15	Issud check No. 1588 for $399 in payment of November telephone bill to Northern
Illinois Communications.
16	Issued check No. 1589 in the amount of $11,360 in payment of federal withholding taxes,
$9,573, and FICA taxes, $1787, payable on November salaries and wages; The check is
remitted to the Winnebago County Bank as the depository.
16	Issued check No. 1590 for $52,173 to Phoenix Plastics, Inc, in payment of purchase order
No. 316.
17	The president informs you that Bilder Construction Co agrees to convert the $45,200
overdue account receivable (invoice No. 1120) to a 14% note due six months from today.
17	Purchased plumbing materials from Smith Pipe Company on account, purcase order No.
317 for $50,800 terms 1/15, n/60.
17	Sold drain tile, plastic pipe, and copper tubing to A & B Hardware on account, invoice No.
1208 for $7,920.
18	Sold fixtures and materials to Coconino Contractors, Inc. on account, invoice No. 1209 for
$42,780.00
18	An invoice in the amount of $1,021 was received from S. White Trucking Company for
freight on purchase order No. 317 and paid by issuing check No. 1591.
18	Received a check in the amount of $28,273 from Trudy's Plumbing in payment of invoice
No. 1205.
19	Purchased office supplies from the Pen & Pad, issuing check No. 1592 in the amount of
$1,360. (Note: Debit asset account).
19	Purchased a new Faith computer for $6,100 from Business Basics, Inc, purchase order
No, 318, paying $600 down through check No. 1593 with the balance due in thirty days
(n/30). The computer has an estmated life of five years with a salvage value of $1,300.
22	Purchased bathroom and kitchen fixtures from Phoenix Plastics, on account, purchase
order No. 319 for $48,330, terms 1/10, n/30.
22	Received a bill from DeKalb Transport for $2,300 for freight costs incurred during the last 30
days, terms n/30.
23	The payroll summary for the biweekly pay period ended Friday, December 19 contained the
follwing information:
Delivery and warehouse wages	5,770
FICA taxes withheld	415
Federal income taxes withheld	1,067
State income taxes withheld	225
Net pay	4,063
Employer's payroll taxes:
FICA tax	415
Federal unemployment tax	-
State unemployment tax	-
Issued check No. 1594 for the amount of the net pay and deposited it in the payroll bank
account. Individual payroll checks were then prepared for distributions to the biweekly
emplyees on Tuesday, December 23.
NOTE: Transactions up to this point have been recorded. At this point you became
controller and are responsible for recordign all further transactions.
25	The board of directors voted to purchase 1,200 shares of its own stock from stockholder
Dionne Schivone at $86 per share and issued check No. 1595 in payment. Stock repurchases
are recorded at cost. Rockford is purchasing these shares because Ms. Schivone had been
a valuable employee.
26	The baord of directors declared a $1.60 per share cash dividend payable on January 14 to
shareholders of record by the end of the day of December 26.
26	The president informs you that Beverly's Building Products agrees to convert the $14,000
overdue accounts receivable (invoice No. 1119) balance to a 12% note due six months from
today.
29	A half-acre parcel of land adjacent to the building is acquired in exchange for 600 shares
of unissued common stock. The land has a fair value of $58,000 and will be used
immediately as an outside storage lot and parking lot.
29	An invoice in the amount of $2,950 is received from Wayne McManus, lawyer, for legal
services involved in the acquisition of the adjacent parcel of land; check No. 1596 is issued.
29	Sold pipe and plumbing materials to Boecker Builders on account, invoice No. 1210 for
$47,040.00
30	Issued check No. 1597 in the amount of $1,500 to the Northern Star for adverstisement run in
the home building supplement of December 13.
30	Issued check No. 1598 in the amount of $750 to Standard Oil Co. in payment of gas, oil,
and truck repairs from Standard Oil Co. (use Freight-out).
30	Purchased copper and cast iron pipe from Oxenford Copperworks on account, purchase
order No. 320 for $63,940, terms 1/10, n/30.
30	Check No. 1599 for $14,000 is issued to the bond sinking fund trustee, Chicago Trust Co.,
for deposit in the sinking fund. (Use Other Assets).
30	Sold plumbing supplies to Swanson Brothers Construction on account, invoice No. 1211
for $24,350.
31	Received a check for $24,730 from Boecker Builders in payment of invoice No. 1207.
31	Issued check No. 1600 for $50,292 to Smith Pipe Company in payment of purchase order
No. 317.
31	The custodian of the petty cash fund submits the following receipts for reimbursement
and reports a cash-on-hand count of $8.
Postage stampls used	$38
United Parcel (freight-out)	23
C.O.D postage (freight costs)	51
Christmas office decorations	30
Check No. 1601 is issued and cashed to reimburse the fund.
31	Sold an electric truck-lift to Leila Stierman Co. for $2,600 cash. The original cost was
$7,900 with salvage value of $900, a life of 10 years, and accumulated depreciation
recorded through 11/31/13 is $4,550. The straight-line method is used. (Note: the
company follows the practice of recording a half year's depreciation in the year of
acquisition and a half year in the year of disposal.) First, bring the depreciation expense
up to date in the general journal. Then journalize the entire entry for the sale in the cash
receipts journal.
31	Sold bathroom fixtures and plumbing supplies to Trudy's Plumbing on account, invoice
No. 1212 for $58,770.
31	Because for some time the petty cash fund has been smaller than required for monthly
expenditures, the fund is increased by $95 by cashing check No. 1602 and placing the
money in the petty cash fund.
31	The payroll summary for the monthly paid employees in submitted so that December
checks can be distributed before the year-end; the details are as follows:
Office and administrative salaries	$43,900
Federal income taxes withheld	7,696
State income taxes withheld	1,517
FICA taxes withheld	3,120
Net pay	$31,567
Issued check No, 1603 for the amount of the net pay and deposited it in the payroll bank
account. Individual payroll checks were prepared for distribution to all monthly employees
by the end of the day.
Employer's payroll taxes:
FICA tax (all office and administrative)	$3,120
Federal unemployment tax	0
State unemployment tax	0
31	Cash sale since December 12 total $29,280.
Instructions
1	Make the entries in the appropriate journal for December 25 through December 31.
(adjusting entries are recorded in general journal)
2	Post any amounts to be posted as individual amounts from journals to the general ledger
and update the receivable and payable subsidiary ledger accounts.
(only a few entries are posted for Dec, e.g., account receivable. Please post all other entries)
3	Foot and cross-foot the columnar journals and complete the month-end postings of all
books of orginal entry.
4	Prepare a trial balance by entering the accout balance from the general ledger in the
work sheet (list all accounts, including those with zero balances).
5	From the following information prepare adjusting entries in the general journal and
enter them in the work sheet.
a	The annual provison for doubtful accounts receivable is recorded by
providing a charge to Bad Debt Expense in an amount equal to 2.2% of net
credit sale. All cash sales were executed in December.
b	An inventory count of the office supplies revealed $850 of supplies on hand
at year end.
c	The prepaid insurance on January 1, 2014 was $3,220, which covers the period
January 1 through August 31, 2014. The insurance premium of $7,800 recorded
in August covers the period of September 1, 2014 through August 31, 2015.
Rockford estimates that 60% of the premiums are attributable to general
activities (Use Insurance Expense) and 25% to selling activities. (Use
Miscellaneous Expense).
d	The payroll summary for the employees who are paid biweekly shows the
following information at December 31, 2014:
Delivery and Warehouse Wages	$6,100
FICA Taxes Payable	430
Federal Withholding Taxes	1,036
State Withholding Taxes	218
Net pay	4,416	(will pay in 2015)
e	The employer's share of the FICA tax ($430) must be accrued; no state or
federal unemployment tax is incurred during the fourth quarter because all
wages and salries earned during the last quarter exceed the manimum
subject to unemployment tax.
f	Interest has accrued at 7% on the long-term notes payable since July 1,2014.
These interests are due on January 1, 2015 (The first six-month interests have
been recorded and paid in July).
Interest on bonds is accrued and paid semi-annually, at a 4% annual coupon rate.
The next interest payment is due on January 1, 2015. The bonds are dated
January 1, 2008, and mature January 1, 2018. Market interest rate was 6%
at issurance . Use effective interest amortization method.
g	The interest accrued to 12/31/14 on notes receivable is composed of the
following:
Platteville Plumbers, 10%, 6 months, due March 31, 2015	$1,325
Bilder Construction, 11%, 6 months, due June 14, 2015	232
Beverly's Building, 9%, 6 months, due June 26, 2015	17
$1,574
The interst accrued at 12/31/14 on the note payable (current) of $15,000 is
$1,200. Interest is payable on January 2, 2015. (The note is due in 2015)
h	A warehouse lease payment of $9,600 was made on Septermber 1, 2014,
for rental through February 28, 2015. (The Prepaid Rent account is for
advance lease payments on the warehouse.)
i	$730 is owned to Northern Electric Co. and $279 is owned to City of Rockford
for utility services proved during December 2014.
j	Plant and equipmentto be depreciated are composed of the following:
Assets	Date Acquired	cost	estimated usage or life	salvage value	depreciation method
Building	7/1/2010	$306,000	25 years	$20,000	sum-of-years' digits
Truck #1	4/1/2010	28,000	60,000 miles	3,100	miles driven
Truck #2	9/1/2011	33,000	60,000 miles	4,200	miles driven
Lift Truck #1*	8/17/2007	7,900	10 years	900	straight-line
Lift Truck #2	3/29/2011	4,500	10 years	500	straight-line
Lift Truck #3	9/16/2012	5,000	10 years	500	straight-line
Office Equipment	Prior to 1/1/14	32,800	7 years	2,000	straight-line
Computer	12/19/2014	6,100	4 years	1,300	Double-decling
*	sold 12/31/14
Truck No. 1has been driven 45,000 miles prior to 1/1/14 and truck No. 2 has
been driven 30,500 miles prior to 1/1/14. During 2014 truck No. 1 was driven
13,000 miles and truck No. 2 was driven 17,000 miles. Remember that Rockford
Company takes a half-year's depreciation in the year of acquisition and a half-
year in the year of sale.
6	Complete the worksheet. Compute State of Illinois corporate income taxes at 4.5% of pretax
income. The state income tax is deductible on the federal tax return, and the federal tax is
not deductible on the Illinois return. Assume federal corporate income tax on income
subject to federal tax is as follows:
first $50,000	15%
next 25,000	25%
remainder	34%
Income between $100,000 and $335,000 is assessed a 5% federal surtax, not to exceed
$11,750.00
7	Prepare the journal entry for income taxes. Post all adjusting entries.
8	Prepare 2014's income statement (assume the weighted-average number of shares outstanding
for the year 2014 is 5,600 shares). Assume that bad debt expense and depreciation expense
are administrative expenses.
9	Prepare 2014's statement of retained earnings.
10	Prepare 2014's balance sheet.

Narrative and Instructions Rockford Corporation is a wholesale plumbing supply distributor. The corporation was organized in 1981, under the laws of the State of Illinois, with an authorized capitalization of 10,000 shares of no-par common stock with a stated value of $30 per share. The common stock is sold over the the counter in the local area. You have been hired as of Thursday, December 25, 2014, to replace the controller, who has resigned. As controller, you are responsible for the corporation's accounting recrods, preparation of the financial statements, safeguarding the corporate assets, and providing management with financial information to set prices and to monitor and control operations. Rockford 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 only on a work sheet, not in the general ledger. Therefore, the adjusting entries to be recorded on December 31 are annual adjustments that you must journalize and the post to the general ledger accounts before preparing the financial statements. Rockford 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: Journals 1. A sales journal (S) - to record sales of merchandise on account. 2. A purchase journal (P)- to record purchases of merchandise on account. 3. A cash receipts journal (CR) - to record all cash receipts. 4. A cash disbursements journal (CD) - to record all cash payments. 5. A general journal (J) - to record all transacitons that cannot be recorded in the other journals. Ledgers 1. A general ledger 2. An accounts receivable subsidiary ledger. 3. An accounts payable subsidiary ledger. In recording sales transactions, each sale should be posted on the day of the sale directly to the customer's account in the subsidiary ledger, using the invoice number as the posting reference number in the subsidiary account. Also, cash receipts from customers should be posted to the subsidiary ledger on the day they are received. The purchase order number should be used as the posting reference number in the subsidiary ledger for purchases on account from suppliers. Purchases from suppliers and payments to them should be posted daily. All other individual posting may be made weekly or at the month-end. Account numbers should be used as posting reference numbers in the journals. Officers and office personnel are salaried employees and are paid monthly on the last day of each month. The delivery truck drivers and warehouse employees are hourly wage employees and are paid biweekly. Each biweekly pay period ends Friday. On the following Monday you assistants provide you with a payroll summary from which you prepare general journal entries to record the biweekly payroll and the employer's taxes on the payroll. The biweekly employees' paychecks are distributed on the following day (Tuesday). The January 1, 2014, balances appear in the general ledger accounts as well as the Noverber 30, 2014, balances, for those accounts whose balances have changed. All transacitons affecting the noncurrent accounts from January 1, 2014, through Noverber 30, 2014, with explanations, appear in these accounts to facilitate the preparation of the statement of cash flows. Subsidiary ledger account balances as of Noverber 30, 2014, are as follows: Accounts Receivable Boecker Builders The Potts Company Swanson Brothers Contruction A & B Hardware Trudy's Plumbing Coconino Contractors Inc Rankin Plumbing Corp Beverly's Building Products Bilder Construction Co Iwanaga Plumbing and Heating Total Acct No Amount 117 62,920 122 50,300 133 24,050 143 155 15,100 160 27,800 166 74,350 175 14,000 180 45,200 190 3,700 317,420 Accounts Payable Phoenix Plastics Business Basics Inc Edward's Plumbing Suppliers DeKalb Transport Oxenford Copperworks Smith Pipe Co Ron & Rod's Plumbing Products Khatan Steel Corp Total Acct No Amount 14 17,450 16 18 20,050 20 35 26,400 39 38,100 44 14,850 57 10,000 126,850 The transactions through December 23 have already been recorded by the former controller. You are to begin your work by entering the transaction of December 25 for the payment of cash to repurchase stock. S 7 14 21 28 M 1 8 15 22 29 T 2 9 16 23 30 Dec-14 W 3 10 17 24 31 T 4 11 18 25 F 5 12 19 26 S 6 13 20 27 December Transactions December 1 Received a check in the amount of $23,569 from Swanson Brothers Contruction in full payment of invoice No. 1120 dated Novermber 26 in the amount of $24,050. 1 Sold sewer and drainage pipe to Beverly's Building Products on account, invoice No. 1201 for $13,150. 2 Purchased copper tubing and fittings from Edward's Plumbing Supplies Inc. on account, purchase order No. 315 for $24,320, terms n/60. 2 Issued check No. 1580 for $26,400 to Oxenford Copperworks in settlement of the balance owned on purchase order No. 280. 3 A court notice indicates that Iwanaga Plumbing and Heating is bankrupt and payment of its account improbable; the president orders the account to be written off as a bad debt (invoice No. 780). 3 Sold bathroom fixtures to Bilder Construction Co on account, invoice No. 1202 for $44,900.00 4 Received a check in the amount of $49,294 from the Potts Co in full payment of invoice No. 1128 dated November 27 for $50,300. 4 Sold plumbing supplies and plastic pipe to Coconino Contractors Inc. on account, invoice No. 1203 for $10,300. 4 Issued check No. 1581 for $810 to Standard Oil Co, in payment of gas, oil, and truck repair from Tierney's Standard Service. 5 Issued check No. 1582 for $9,900 to Khatan Steel Corp. in full settlement of purchase order No. 312 for $10,000. 5 Issued check No. 1583 for $10,486 to Phoenix Plastics in full payment of Phoenix's invoice dated November 28 in the amount of $10,700, for purchase order No. 313, terms 2/10, n/30. 5 Received a check in the amount of $72,863 from Rankin Plumbing Corp. in full payment of invoice No. 1129 dated November 28 for $74,350. 8 Sold cast pipe to Trudy's Plumbing on account, invoice No. 1204 for $29,300. 8 Received a check in the amount of $27,800 from Coconion Contractors, Inc. in full payment of invoice No. 1091 dated October 20. 8 Purchased bathroom fixtures from Phoenix Plastics, on account, purchcase order No. 316 for $52,700 terms 1/10, n/30. 8 Received a check in the amount of $29,000 from Boecker Builders in partial payment of balance outstanding covering invoice Nos. 1050 and 1071. 9 The payroll summary for the biweekly pay period ended Friday, December 5 contained the follwing information: Delivery and warehouse wages 4,860 FICA taxes withheld 350 Federal income taxes withheld 900 State income taxes withheld 190 Net pay 3,420 Employer's payroll taxes: FICA tax 350 Federal unemployment tax State unemployment tax Issued check No. 1584 for the amount of the net pay and deposited it in the payroll bank account. Individual payroll checks were then preppared for distributions to the biweekly emplyees on Tuesday, December 9, 2014. 9 Issued check No. 1585 for $600 to Scooter Gordon for lettering and sign painting on some delivery trucks. 9 Issued check No. 1586 for $6,750 to Phoenix Plastics, in payment of Phoenix's invoice dated November 12 in the amount of $6,750, our purchase order No. 299. 10 Issued check No. 1587 for $37,719 to Smith Pipe Co in full payment of their invoice dated November 28, terms 1/15, n/30, our purchase order No. 314. 10 Received a check in the amount of $15,100 from Trudy's Plumbing in full settlement of invoice No. 1106 dated November 7. 10 Sold pipe, fixtures, and accessories to Trudy's Plumbing on account, invoice No. 1205 for $28,850.00 11 Sold pumbing supplies and copper tubing to The Potts Company on account, invoice No. 1206 for $31,450. 11 Received a check in the amount of $33,920 from Boecker Builders in full payment of invoice No. 1071. 11 Cash sales to date totaled $12,292. 12 Received a check in the amount of $28,714 from Trudy's Plumbing in payment of inoivce No. 1204. 12 Sold plumbing fixtures and supplies to Boecker Builders, on account, invoice No. 1207 for $24,730. 15 The Potts Co returned defective copper tubing that is purchased on December 11. A credit memo in the amount of $4,680 is issued relative to invoice No. 1206. The copper tubing had a cost of $3,550. 15 The defective copper tubing is returned to Edward's Plumbing supplies, Inc. along with a debit memo in the amount of $3,550 in reduction of purchase order No. 315. 15 Issud check No. 1588 for $399 in payment of November telephone bill to Northern Illinois Communications. 16 Issued check No. 1589 in the amount of $11,360 in payment of federal withholding taxes, $9,573, and FICA taxes, $1787, payable on November salaries and wages; The check is remitted to the Winnebago County Bank as the depository. 16 Issued check No. 1590 for $52,173 to Phoenix Plastics, Inc, in payment of purchase order No. 316. 17 The president informs you that Bilder Construction Co agrees to convert the $45,200 overdue account receivable (invoice No. 1120) to a 14% note due six months from today. 17 Purchased plumbing materials from Smith Pipe Company on account, purcase order No. 317 for $50,800 terms 1/15, n/60. 17 Sold drain tile, plastic pipe, and copper tubing to A & B Hardware on account, invoice No. 1208 for $7,920. 18 Sold fixtures and materials to Coconino Contractors, Inc. on account, invoice No. 1209 for $42,780.00 18 An invoice in the amount of $1,021 was received from S. White Trucking Company for freight on purchase order No. 317 and paid by issuing check No. 1591. 18 Received a check in the amount of $28,273 from Trudy's Plumbing in payment of invoice No. 1205. 19 Purchased office supplies from the Pen & Pad, issuing check No. 1592 in the amount of $1,360. (Note: Debit asset account). 19 Purchased a new Faith computer for $6,100 from Business Basics, Inc, purchase order No, 318, paying $600 down through check No. 1593 with the balance due in thirty days (n/30). The computer has an estmated life of five years with a salvage value of $1,300. 22 Purchased bathroom and kitchen fixtures from Phoenix Plastics, on account, purchase order No. 319 for $48,330, terms 1/10, n/30. 22 Received a bill from DeKalb Transport for $2,300 for freight costs incurred during the last 30 days, terms n/30. 23 The payroll summary for the biweekly pay period ended Friday, December 19 contained the follwing information: Delivery and warehouse wages 5,770 FICA taxes withheld 415 Federal income taxes withheld 1,067 State income taxes withheld 225 Net pay 4,063 Employer's payroll taxes: FICA tax 415 Federal unemployment tax State unemployment tax Issued check No. 1594 for the amount of the net pay and deposited it in the payroll bank account. Individual payroll checks were then prepared for distributions to the biweekly emplyees on Tuesday, December 23. NOTE: Transactions up to this point have been recorded. At this point you became controller and are responsible for recordign all further transactions. 25 The board of directors voted to purchase 1,200 shares of its own stock from stockholder Dionne Schivone at $86 per share and issued check No. 1595 in payment. Stock repurchases are recorded at cost. Rockford is purchasing these shares because Ms. Schivone had been a valuable employee. 26 The baord of directors declared a $1.60 per share cash dividend payable on January 14 to shareholders of record by the end of the day of December 26. 26 The president informs you that Beverly's Building Products agrees to convert the $14,000 overdue accounts receivable (invoice No. 1119) balance to a 12% note due six months from today. 29 A half-acre parcel of land adjacent to the building is acquired in exchange for 600 shares of unissued common stock. The land has a fair value of $58,000 and will be used immediately as an outside storage lot and parking lot. 29 An invoice in the amount of $2,950 is received from Wayne McManus, lawyer, for legal services involved in the acquisition of the adjacent parcel of land; check No. 1596 is issued. 29 Sold pipe and plumbing materials to Boecker Builders on account, invoice No. 1210 for $47,040.00 30 Issued check No. 1597 in the amount of $1,500 to the Northern Star for adverstisement run in the home building supplement of December 13. 30 Issued check No. 1598 in the amount of $750 to Standard Oil Co. in payment of gas, oil, and truck repairs from Standard Oil Co. (use Freight-out). 30 Purchased copper and cast iron pipe from Oxenford Copperworks on account, purchase order No. 320 for $63,940, terms 1/10, n/30. 30 Check No. 1599 for $14,000 is issued to the bond sinking fund trustee, Chicago Trust Co., for deposit in the sinking fund. (Use Other Assets). 30 Sold plumbing supplies to Swanson Brothers Construction on account, invoice No. 1211 for $24,350. 31 Received a check for $24,730 from Boecker Builders in payment of invoice No. 1207. 31 Issued check No. 1600 for $50,292 to Smith Pipe Company in payment of purchase order No. 317. 31 The custodian of the petty cash fund submits the following receipts for reimbursement and reports a cash-on-hand count of $8. Postage stampls used $38 United Parcel (freight-out) 23 C.O.D postage (freight costs) 51 Christmas office decorations 30 Check No. 1601 is issued and cashed to reimburse the fund. 31 Sold an electric truck-lift to Leila Stierman Co. for $2,600 cash. The original cost was $7,900 with salvage value of $900, a life of 10 years, and accumulated depreciation recorded through 11/31/13 is $4,550. The straight-line method is used. (Note: the company follows the practice of recording a half year's depreciation in the year of acquisition and a half year in the year of disposal.) First, bring the depreciation expense up to date in the general journal. Then journalize the entire entry for the sale in the cash receipts journal. 31 Sold bathroom fixtures and plumbing supplies to Trudy's Plumbing on account, invoice No. 1212 for $58,770. 31 Because for some time the petty cash fund has been smaller than required for monthly expenditures, the fund is increased by $95 by cashing check No. 1602 and placing the money in the petty cash fund. 31 The payroll summary for the monthly paid employees in submitted so that December checks can be distributed before the year-end; the details are as follows: Office and administrative salaries $43,900 Federal income taxes withheld 7,696 State income taxes withheld 1,517 FICA taxes withheld 3,120 Net pay $31,567 Issued check No, 1603 for the amount of the net pay and deposited it in the payroll bank account. Individual payroll checks were prepared for distribution to all monthly employees by the end of the day. Employer's payroll taxes: FICA tax (all office and administrative) $3,120 Federal unemployment tax 0 State unemployment tax 0 31 Cash sale since December 12 total $29,280. Instructions 1 Make the entries in the appropriate journal for December 25 through December 31. (adjusting entries are recorded in general journal) 2 Post any amounts to be posted as individual amounts from journals to the general ledger and update the receivable and payable subsidiary ledger accounts. (only a few entries are posted for Dec, e.g., account receivable. Please post all other entries) 3 Foot and cross-foot the columnar journals and complete the month-end postings of all books of orginal entry. 4 Prepare a trial balance by entering the accout balance from the general ledger in the work sheet (list all accounts, including those with zero balances). 5 From the following information prepare adjusting entries in the general journal and enter them in the work sheet. a The annual provison for doubtful accounts receivable is recorded by providing a charge to Bad Debt Expense in an amount equal to 2.2% of net credit sale. All cash sales were executed in December. b An inventory count of the office supplies revealed $850 of supplies on hand at year end. c The prepaid insurance on January 1, 2014 was $3,220, which covers the period January 1 through August 31, 2014. The insurance premium of $7,800 recorded in August covers the period of September 1, 2014 through August 31, 2015. Rockford estimates that 60% of the premiums are attributable to general activities (Use Insurance Expense) and 25% to selling activities. (Use Miscellaneous Expense). d The payroll summary for the employees who are paid biweekly shows the following information at December 31, 2014: Delivery and Warehouse Wages $6,100 FICA Taxes Payable 430 Federal Withholding Taxes 1,036 State Withholding Taxes 218 Net pay 4,416 (will pay in 2015) e The employer's share of the FICA tax ($430) must be accrued; no state or federal unemployment tax is incurred during the fourth quarter because all wages and salries earned during the last quarter exceed the manimum subject to unemployment tax. f Interest has accrued at 7% on the long-term notes payable since July 1,2014. These interests are due on January 1, 2015 (The first six-month interests have been recorded and paid in July). Interest on bonds is accrued and paid semi-annually, at a 4% annual coupon rate. The next interest payment is due on January 1, 2015. The bonds are dated January 1, 2008, and mature January 1, 2018. Market interest rate was 6% at issurance . Use effective interest amortization method. g The interest accrued to 12/31/14 on notes receivable is composed of the following: Platteville Plumbers, 10%, 6 months, due March 31, 2015 $1,325 Bilder Construction, 11%, 6 months, due June 14, 2015 232 Beverly's Building, 9%, 6 months, due June 26, 2015 h i j 17 $1,574 The interst accrued at 12/31/14 on the note payable (current) of $15,000 is $1,200. Interest is payable on January 2, 2015. (The note is due in 2015) A warehouse lease payment of $9,600 was made on Septermber 1, 2014, for rental through February 28, 2015. (The Prepaid Rent account is for advance lease payments on the warehouse.) $730 is owned to Northern Electric Co. and $279 is owned to City of Rockford for utility services proved during December 2014. Plant and equipmentto be depreciated are composed of the following: depreciati Date estimated salvage on Assets Acquired cost usage or life value method Building 7/1/2010 $306,000 25 years $20,000 sum-of-years' digits Truck #1 4/1/2010 28,000 60,000 miles 3,100 miles driven Truck #2 9/1/2011 33,000 60,000 miles 4,200 miles driven Lift Truck #1* 8/17/2007 7,900 10 years 900 straight-line Lift Truck #2 3/29/2011 4,500 10 years 500 straight-line Lift Truck #3 9/16/2012 5,000 10 years 500 straight-line Office Equipme Prior to 1/1/14 32,800 7 years 2,000 straight-line Computer 12/19/2014 6,100 4 years 1,300 Double-decling * sold 12/31/14 Truck No. 1has been driven 45,000 miles prior to 1/1/14 and truck No. 2 has been driven 30,500 miles prior to 1/1/14. During 2014 truck No. 1 was driven 13,000 miles and truck No. 2 was driven 17,000 miles. Remember that Rockford Company takes a half-year's depreciation in the year of acquisition and a halfyear in the year of sale. 6 Complete the worksheet. Compute State of Illinois corporate income taxes at 4.5% of pretax income. The state income tax is deductible on the federal tax return, and the federal tax is not deductible on the Illinois return. Assume federal corporate income tax on income subject to federal tax is as follows: first $50,000 15% next 25,000 25% remainder 34% Income between $100,000 and $335,000 is assessed a 5% federal surtax, not to exceed $11,750.00 7 Prepare the journal entry for income taxes. Post all adjusting entries. 8 Prepare 2014's income statement (assume the weighted-average number of shares outstanding for the year 2014 is 5,600 shares). Assume that bad debt expense and depreciation expense are administrative expenses. 9 Prepare 2014's statement of retained earnings. 10 Prepare 2014's balance sheet. Date Account Titles ENTRIES FROM PRIOR CONTROLLER: 3-Dec Allowance for Doutful Account Accounts Receivable - Iwanaga Plumbing and Heating 9-Dec Payroll Tax Expense FICA Taxes Payable 15-Dec Sales Returns and Allowance Accounts Receivable - The Potts Co Ref 113 112/190 730 214 Debit Credit 3,700 3,700 350 350 412 112/122 4,680 120 505 3,550 15-Dec Accounts Payable - Edward's Plumbing Supplies Inc Inventory 201/18 120 3,550 17-Dec Notes Receivable Accounts Receivable - Bilder Construction 115 112/180 45,200 22-Dec Inventory Accounts Payable - DeKalb Transport 120 201/20 2,300 730 214 415 Inventory Cost of Goods Sold 23-Dec Payroll Tax Expenses FICA Taxes Payable 4,680 3,550 3,550 45,200 2,300 415 Date Order No Account Credited 2-Dec 315 Edward's Plumbing Supplies, Inc. n/60 8 316 Phoenix Plastics 1/10, n/30 17 317 Smith Pipe Company 1/15, n/60 19 318 (see cash disbursements journal) 22 319 Phoenix Plastics 1/10, n/30 Account No Amount 18 24,320 14 52,700 39 50,800 14 48,330 Date Invoice No Account Debited 1-Dec 1201 Beverly's Building Products 3 1202 Bilder Construction Co 4 1203 Coconino Contractors, Inc 8 1204 Trudy's Plumbing 10 1205 Trudy's Plumbing 11 1206 The Potts Company 12 1207 Boecker Builders 17 1208 A & B Hardware 18 1209 Coconino Contractors, Inc Acct No. Acct. Rec. Dr Sales Rev. Cr COGS Dr inventory Cr 175 13,150 10,520 180 44,900 35,920 160 10,300 8,240 155 29,300 23,440 155 28,850 23,080 122 31,450 25,160 117 24,730 19,784 143 7,920 6,336 160 42,780 34,224 Date Description Cash Dr Sales Discounts Dr Ref AR Cr Sales Rev Cr Acct No 1-Dec Swanson Brothers Construction 4 The Potts Company 5 Rankin Plumbing Corp 8 Coconino Contractors Inc 8 Boecker Builders 10 Trudy's Plumbing 11 Boecker Builders 11 Cash Sales 23,569 49,294 72,863 27,800 29,000 15,100 33,920 12,292 481 1,006 1,487 133 122 166 160 117 155 117 Sundry Acct. Dr Cr 24,050 50,300 74,350 27,800 29,000 15,100 33,920 12,292 505 120 12 Trudy's Plumbing 18 Trudy's Plumbing 28,714 28,273 586 577 155 155 29,300 28,850 9,834 9,834 Date Check No Payee Cash Cr Ref AP Dr Inventory Cr Acct No 2-Dec 4 5 5 9 1580 Oxenford Copperworks 1581 Standard Oil Company 1582 Khatan Steel Corp. 1583 Phoenix Plastics 1584 Payroll Bank Account 26,400 810 9,900 10,486 3,420 9 9 10 15 16 1585 Scooter Gordon 1586 Phoenix Plastics 1587 Smith Pipe Company 1588 N. ILL. Communications 1589 Winnebago County Bank 600 6,750 37,719 399 11,360 16 18 19 19 1590 Phoenix Plastics 1591 S. White Trucking 1592 Pen & Pad 1593 Business Basics Inc 52,173 1,021 1,360 600 23 1594 Payroll Bank Account 4,063 35 26,400 57 14 10,000 10,700 Sundry Acct. Dr Cr 644 726 214 216 218 610 14 6,750 38,100 52,700 4,860 732 216 214 14 39 810 399 9,573 1,787 120 126 151 201/16 726 214 216 218 1,021 1,360 6,100 100 214 350 900 190 600 381 527 5,500 5,770 415 1,067 225 Account: Cash Date 101 Explanation 30-Nov Balance Account: Petty Cash Date Explanation 30-Nov Balance Ref Debit Credit Balance 244,430 Ref Debit Credit Balance 105 150 Account: Accounts Receivable Date Explanation 30-Nov Balance Ref Debit Credit Account: Allowance for Doubtful Accounts Date Explanation 30-Nov Balance Ref Debit Credit Account: Notes Receivable Date Explanation 30-Nov Balance 112 Ref Ref Account: Inventory Date Explanation 30-Nov Balance Ref Debit Credit Debit Credit Balance 0 Debit Credit 120 Balance 531,960 126 Ref Debit Credit Ref Debit Credit Account: Prepaid Rent Date Explanation 30-Nov Balance Ref Debit Credit Account:Land Date Balance 45,000 118 Account: Prepaid Insurance Date Explanation 30-Nov Balance Account:Other Assets Date Explanation 30-Nov Balance 113 Balance 4,560 115 Account: Interest Receivable Date Explanation 30-Nov Balance Account: Supplies Date Explanation 30-Nov Balance Balance 317,400 Balance 2,320 130 Balance 11,020 131 Balance 25,410 135 Ref Debit Credit Balance 139,769 Ref Debit Credit Balance 140 Explanation 1-Jan Balance Account:Building Date 43,000 145 Explanation 1-Jan Balance Ref Debit Credit Account:Accum. Depr - Building Date Explanation 1-Jan Balance Ref Debit Credit Account:Equipment Date Explanation 1-Jan Balance Ref Debit Credit Account:Accum. Depr - Equipment Date Explanation 1-Jan Balance Account:Trucks Date Balance 306,000 146 Balance 73,040 151 Balance 32,800 152 Ref Debit Credit Balance 13,200 163 Explanation 1-Jan Balance Account:Accum. Depr - Trucks Date Explanation 1-Jan Balance Account:Notes Payable Date Explanation 30-Nov Balance Account:Accounts Payable Date Explanation 30-Nov Balance Account:FICA Taxes Payable Date Explanation 30-Nov Balance Account:Income Taxes Payable Date Explanation 30-Nov Balance Account:Federal Withholding Taxes Payable Date Explanation 30-Nov Balance Ref Debit Credit Balance 78,400 164 Ref Debit Credit Balance 39,540 200 Ref Debit Credit Balance 15,000 201 Ref Debit Credit Balance 126,850 214 Ref Debit Credit Balance 1,787 215 Ref Debit Credit Balance 0 216 Ref Debit Credit Balance 9,573 Account:State Withholding Taxes Payable Date Explanation 30-Nov Balance Ref Debit Credit Balance 2,486 Account:FUTA Taxes Payable Date Explanation 30-Nov Balance Ref Debit Credit Balance Account:SUTA Taxes Payable Date Explanation 30-Nov Balance Ref Debit Credit 225 Balance 2,600 Account:Wages and Salaries Payable Date Explanation 30-Nov Ref Debit Credit Balance Account:Interest Payable Date Explanation 30-Nov Balance 218 224 400 226 0 230 Ref Debit Credit Balance 0 Account:Dividends Payable Date Explanation 30-Nov Balance Ref Account:Notes Payable (Long term) Date Explanation 30-Nov Balance Ref Debit Credit 268 Balance 113,000 Account: Bonds Payable Date Explanation 1-Jan Balance Ref Debit Credit 270 Balance 275,000 Account: Discount on Bonds Payable Date Explanation 30-Nov Balance Ref Debit Credit 273 Balance 17,131 Account: Common Stock - $30 Stated Value Date Explanation 1-Jan Balance (6300 shares) Account: Paid-in Captial in Excess of Stated Value Date Explanation 1-Jan Balance Account: Retained Earnings Date Explanation 1-Jan Balance Account: Treasury Stock Date Explanation 1-Jan Balance (700 shares) 250 Debit Credit Balance 0 311 Ref Debit Credit Balance 189,000 317 Ref Debit Credit Balance 256,400 320 Ref Debit Credit Balance 362,748 330 Ref Debit Credit Balance 42,610 Account: Dividends Date 332 Explanation Ref Debit Credit Balance 0 Account: Income Summary Date Explanation 350 Ref Debit Credit Balance Account: Sales Revenue Date Explanation 30-Nov Ref Debit Credit 401 Balance 5,234,940 Account: Sales Return and Allowance Date Explanation 30-Nov Ref Debit Credit 412 Balance 9,380 Account: Sales Discount Date Explanation 30-Nov Account: Cost of Goods Sold Date Explanation 30-Nov 414 Ref Debit Credit Balance 73,044 505 Ref Debit Credit Balance 3,648,722 Account: Advertising Expense Date Explanation 30-Nov Ref Debit Credit Balance 6,578 Account: Bad Debt Expense Date Explanation 1-Jan Ref Debit Credit Balance Account: Supplies Expense Date Explanation 30-Nov Account: Freight-out Date Explanation 30-Nov Account: Misc Expense Date Explanation 610 612 0 631 Ref Debit Credit Balance 1,540 644 Ref Debit Credit Balance 17,732 649 Ref Debit Credit Balance Account: Depreciation Expense Date Explanation Account: Insurance Expense Date Explanation Account: Salaries and Wages Expense Date Explanation 30-Nov Account: Rent Expense Date Explanation 711 Ref Debit Credit Balance 722 Ref Debit Credit Balance Ref Debit Credit 726 Balance 933,122 729 Ref Debit Credit Balance 0 Account: Payroll Tax Expense Date Explanation 30-Nov 730 Ref Debit Credit Account: Utilities Expense Date Explanation 30-Nov Ref Debit Credit Account: Interest Revenue Date Explanation 30-Nov Ref Debit Credit Account: Gain on Disposal of Plant Assets Date Explanation Balance 82,916 732 Balance 16,270 820 Balance 3,150 826 Ref Debit Credit Balance Account: Interest Expense Date Explanation 30-Nov 905 Ref Debit Credit Balance 24,570 Account:Loss on Disposal of Plant Assets Date Explanation 30-Nov Ref Debit Credit Balance 921 0 Account:Income Tax Expense Date Explanation 30-Nov 999 Ref Debit Credit Balance 72,000 cash receipts journal: cash disbursements journal: Income statement: Balace Sheet: Cash Dr Total Cash Cr Total Net Sales Total Assets $377,435 $371,557 $5,548,811 $1,481,759