Page 2 SUMMARY INFORMATION BACKGROUND: Fiona's Florist was incorporated on January 1,2010 with 40,000 shares of $1 par value common stock authorized. All 40,000 shares have been issued. The company's accounting period ends on December 31 of each year. ACCOUNTING POLICIES: The company uses the following generally accepted accounting principles in presenting financial information 2. 3. a. INVENTORY VALUATION - First-in, first-out method on a perpetual basis Physical counts are conducted at the end of the year to determine the quantity and value of merchandise inventory on hand. b. DEPRECIATION Straight-line 4. As of the close of business on November 30, 2018, the company had the following trial balance Acct # 1110 Cash 1120 Accounts Receivable 1130 Merchandise Inventory Account Title Debit Credit 460,800 $282,240 $ 767,520 $ 979,200 1230 Equipment $352,512 253,440 1231 Accumulated Depreciation- Equipment 2110 Accounts Payable 2210 Income Tax Payable 3010 Common Stock ($1 Par) 3020 Paid-In Capital in Excess of Par 3030 Income Summary 3040 Retained Earnings $ 40,000 $ 173,744 509,400 4010 Sales Revenue $ 7,729,200 5020 Cost of Goods Sold 6010 Salaries&Wages Expense 6060 Telephone & Utility Expense 6070 Rent Expense 6120 Depreciation Expense- Equipment 6410 Income Tax Expense 3,511440 $ 2,696,400 $ 178,560 $ 182,136 Total 9,058,296 $ 9,058,296 Page 3 INFORMATION FOR CURRENT PERIOD TRANSACTIONS When applicable, round amounts to the nearest dollar. Th e following transactions occurred during December 2018 JE. #. DESCRIPTION AMOUNT S 403,920 S 982,800 Merchandise Inventory purchased from vendors on account, terms net 45. 2. Sales to credit customers on account, terms net 45. The cost of the merchandise inventory sold was $599,040 Cash collections from credit customers Payments of Accounts Payable Payments in cash for Telephone and Utility Expense Payroll checks written and distributed for salaries and wages 3 852,480 360,000 23,904 S 381,600 5. 6 7. Payment in cash for Rent Espense 36,000 Information for Adjusting Journal Entries After creating the journal entries to record the current year transactions, posting those entries to the ledger accounts, balancing each account, and preparing the unadjusted trial balance, an inspection of the balances indicates that the following adjusting entries are required: AJE # As the result of a physical count, year-end Merchandise Inventory was determined to be $564,000. Adjust the Merchandise Inventory account to reflect the amount of inventory overage or shortage. 1. Record the depreciation expense on Equipment for the year. All depreciable assets were purchased on the date of incorporation and have an estimated useful life of 20 years, with a residual (salvage) value equal of 10% of original costs. 2. 3. Income Tax Expense for the year is estimated to be $160,800