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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,
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 $18 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 1/10, n/30. Discounts are taken and granted | |||||||
only when the terms are met. The cost of all inventory sold in December was 65% 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 | 46,300 | |||||
Swanson Brothers Contruction | 133 | 22,590 | |||||
A & B Hardware | 143 | - | |||||
Trudy's Plumbing | 155 | 15,500 | |||||
Coconino Contractors Inc | 160 | 28,700 | |||||
Rankin Plumbing Corp | 166 | 74,350 | |||||
Beverly's Building Products | 175 | 13,600 | |||||
Bilder Construction Co | 180 | 48,900 | |||||
Iwanaga Plumbing and Heating | 190 | 5,800 | |||||
Total | 318,660 | ||||||
Accounts Payable | Acct No | Amount | |||||
Phoenix Plastics | 14 | 19,280 | |||||
Business Basics Inc | 16 | - | |||||
Edward's Plumbing Suppliers | 18 | 20,050 | |||||
DeKalb Transport | 20 | - | |||||
Oxenford Copperworks | 35 | 28,700 | |||||
Smith Pipe Co | 39 | 37,700 | |||||
Ron & Rod's Plumbing Products | 44 | 14,850 | |||||
Khatan Steel Corp | 57 | 12,000 | |||||
Total | 132,580 | ||||||
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 $22,364 from Swanson Brothers Contruction in full | ||||||
payment of invoice No. 1120 dated Novermber 26 in the amount of $22,590. | |||||||
1 | Sold sewer and drainage pipe to Beverly's Building Products on account, invoice No. 1201 | ||||||
for $28850. | |||||||
2 | Purchased copper tubing and fittings from Edward's Plumbing Supplies Inc. on account, | ||||||
purchase order No. 315 for $32660, terms n/60. | |||||||
2 | Issued check No. 1580 for $28,700 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 | ||||||
$47,700.00 | |||||||
4 | Received a check in the amount of $45,374 from the Potts Co in full payment of invoice | ||||||
No. 1128 dated November 27 for $46,300. | |||||||
4 | Sold plumbing supplies and plastic pipe to Coconino Contractors Inc. on account, invoice | ||||||
No. 1203 for $12,300. | |||||||
4 | Issued check No. 1581 for $720 to Standard Oil Co, in payment of gas, oil, and truck repair | ||||||
from Tierney's Standard Service. | |||||||
5 | Issued check No. 1582 for $11,880 to Khatan Steel Corp. in full settlement of purchase order | ||||||
No. 312 for $12,000. | |||||||
5 | Issued check No. 1583 for $12,054 to Phoenix Plastics in full payment of Phoenix's invoice | ||||||
dated November 28 in the amount of $12,300, 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 $26,300. | ||||||
8 | Received a check in the amount of $28,700 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 $56,800 terms 1/10, n/30. | |||||||
8 | Received a check in the amount of $29,600 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 | 410 | ||||||
Federal income taxes withheld | 900 | ||||||
State income taxes withheld | 190 | ||||||
Net pay | 3,360 | ||||||
Employer's payroll taxes: | |||||||
FICA tax | 410 | ||||||
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 $650 to Scooter Gordon for lettering and sign painting on some | ||||||
delivery trucks. | |||||||
9 | Issued check No. 1586 for $6,980 to Phoenix Plastics, in payment of Phoenix's invoice dated | ||||||
November 12 in the amount of $6,980, our purchase order No. 299. | |||||||
10 | Issued check No. 1587 for $37,323 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 $15,500 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 | ||||||
$26,850.00 | |||||||
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 $33,320 from Boecker Builders in full payment of invoice | ||||||
No. 1071. | |||||||
11 | Cash sales to date totaled $10,232. | ||||||
12 | Received a check in the amount of $25,774 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 $5680 is issued relative to invoice No. 1206. The copper tubing | |||||||
had a cost of $3692. | |||||||
15 | The defective copper tubing is returned to Edward's Plumbing supplies, Inc. along with | ||||||
a debit memo in the amount of $3692 in reduction of purchase order No. 315. | |||||||
15 | Issud check No. 1588 for $599 in payment of November telephone bill to Northern | ||||||
Illinois Communications. | |||||||
16 | Issued check No. 1589 in the amount of $12,360 in payment of federal withholding taxes, | ||||||
$10,573, 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 $56,232 to Phoenix Plastics, Inc, in payment of purchase order | ||||||
No. 316. | |||||||
17 | The president informs you that Bilder Construction Co agrees to convert the $48900 | ||||||
overdue account receivable (invoice No. 1120) to a 8% note due six months from today. | |||||||
17 | Purchased plumbing materials from Smith Pipe Company on account, purcase order No. | ||||||
317 for $,51,120 terms 1/15, n/60. | |||||||
17 | Sold drain tile, plastic pipe, and copper tubing to A & B Hardware on account, invoice No. | ||||||
1208 for $7,340. | |||||||
18 | Sold fixtures and materials to Coconino Contractors, Inc. on account, invoice No. 1209 for | ||||||
$44,530. | |||||||
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 $26,582 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 | ||||||
$1,460. (Note: Debit asset account). | |||||||
19 | Purchased a new Faith computer for $5600 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 4 years with a salvage value of $2200. | |||||||
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 $2580 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 2,500 shares of its own stock from stockholder | ||||||
Dionne Schivone at $76 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 $1.25 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 $13,600 | ||||||
overdue accounts receivable (invoice No. 1119) balance to a 10% note due six months from | |||||||
today. | |||||||
29 | A half-acre parcel of land adjacent to the building is acquired in exchange for 750 shares | ||||||
of unissued common stock. The land has a fair value of $58,400 and will be used | |||||||
immediately as an outside storage lot and parking lot. | |||||||
29 | An invoice in the amount of $1,860 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 | ||||||
$44,280 | |||||||
30 | Issued check No. 1597 in the amount of $3,500 to the Northern Star for adverstisement run in | ||||||
the home building supplement of December 13. | |||||||
30 | Issued check No. 1598 in the amount of $830 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 $55,240, terms 1/10, n/30. | |||||||
30 | Check No. 1599 for $9,400 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 $24,150. | |||||||
31 | Received a check for $24,730 from Boecker Builders in payment of invoice No. 1207. | ||||||
31 | Issued check No. 1600 for $50,609 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 (supplies) | $38 | ||||||
United Parcel (freight-out) | 23 | ||||||
C.O.D postage (freight costs) | 51 | ||||||
Christmas office decorations (Misc exp) | 30 | ||||||
Check No. 1601 is issued and cashed to reimburse the fund. | |||||||
31 | Sold an electric truck-lift to Leila Stierman Co. for $2600 cash. The original cost was | ||||||
$7900 with salvage value of $900, a life of 10 years, and accumulated depreciation | |||||||
recorded through 12/31/13 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 $56370. | |||||||
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 $42150. | ||||||
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. |
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