Part A: Been Carded, Ltd., is a purveyor of woolen goods and is known for its high quality merchandise. The business started up in January 2012 and has been quite successful.

Complete the Journal Entries for all 2016 transaction and adjustment information listed below. You do not have to date your journal entries.

Transaction and Adjustment Data:

1 Paid the $8,377 in salaries owed at year end 2015.

2 Collected the $22,805 of accounts receivable due to them at year end 2015.

3 Paid the $381,796 owed on account at year end 2015.

4 Purchased additional Furniture & Equipment on January 2, 2016 costing $76,000 due to increased shipping activities for their growing online presence.

5 Paid $3,490 to renew their annual insurance policy on March 1, 2016.

6 Purchased a new computerized sales system on April 1, 2016 for $72,000. The system has a useful economic life of 3 years and will be depreciated monthly using the straight line method. The system has no salvage value.

7 Made a payment on the long-term note of $92,000.

8 Made a payment on the mortgage note of $16,800.

9 Paid the interest of $17,257 that was payable at year end 2015.

10 Paid the taxes owed of $109,670 at year end 2015.

11 Issued 1,500 shares of Common Stock on May 1, 2016 for $10 per share.

12 Sales of woolen goods for 2016 were $2,542,690. At December 31, 2016, $43,040 of this amount was still listed as receivable.

13 The total cost of the goods sold during 2016 was $1,652,747.

14 Purchased inventory during the year that cost $1,690,000. The company owed $411,050 on these purchases at year end 2016.

15 Total Salaries Expense for the year were $97,050 and total interest expense was $14,211. Salaries of $6,420 and interest expense of $14,211 are still payable at year end 2016.

16 Supplies inventory of $2,677 was purchased with cash during 2016. Total supplies inventory of $508 was still on hand at year end 2016.

17 Depreciation expense needs to be recorded on the buildings, furniture and equipment, and the new computer system at year end 2016. All items are depreciated on a monthly basis using straight line depreciation with no salvage value. The building has a useful life of 40 years and the furniture and equipment is depreciated over 7 years. As noted above, the new sales system has a useful life of 3 years. Round all depreciation amounts to the nearest dollar.

18 The Prepaid Insurance and the Supplies Inventory need to be adjusted at year end 2016 so that the proper amount for insurance expense and supplies expense is recorded. See items 5 and 15 for details. (If you adjusted the supplies in #16, do not do it again)

19 Estimated income tax payments of $120,000 were made during the year 2016.

20 The company paid out cash dividends totaling $3,500 to its shareholders.

21 The company determined that a customer account was not collectible, and wrote off $135 on December 31.

22 The company believes that 2% of ending Accounts Receivable is a reasonable estimate of its Allowance for Doubtful Accounts balance.

23 Tax expense is 30% of Income before Income Tax.

Background Information: The Balance Sheet for December 31, 2015 is presented here to provide you with the beginning balances needed for your T-Accounts.

Been Carded, Ltd.

Balance Sheet

December 31, 2015

Assets

Current Assets

Cash $384,996

Accounts Receivable 22,805

Allowance for Doubtful Accounts (456)

Merchandise Inventory 1,090,844

Supplies Inventory 466

Prepaid Insurance 515

Total Current Assets 1,499,170

Property, Plant, and Equipment Land 180,000

Buildings 470,000

Accumulated Depreciation--Buildings (47,000)

Furniture and Equipment 18,300

Accumulated Depreciation--Furniture and Equipment (10,457)

Net Property, Plant, and Equipment 610,843

Total Assets 2,110,013

Liabilities and Stockholders' Equity

Current Liabilities

Accounts Payable $381,796

Salaries Payable 8,377

Interest Payable 17,257

Taxes Payable 109,670

Total Current Liabilities 517,100

Long-term Liabilities

Mortgage Note Payable 381,333

Note Payable 235,000

Total Long-term Liabilities 616,333

Total Liabilities 1,133,433

Stockholders' Equity

Common Stock, 5,500 shares issued and outstanding, $10 par 55,000

Retained Earnings 921,580

Total Stockholders' Equity 976,580

Total Liabilities and Stockholders' Equity 2,110,013

Expert Answer Anonymous Anonymous answered this Was this answer helpful? 0 0 2 answers

Journal Entries in the Books of Been Carded Ltd.
For the year ended December 31, 2016
		In Dollars	In Dollars
S. No.	Particular	Amount Dr.	Amount Cr.
1)	Salary Payable A/c Dr.	8377
	To Bank A/c		8377
	(Being Last year salary owed paid off)
2)	Bank A/c Dr.	22805
	To Accounts receivable		22805
	(Being collection of last year accounts receivable)
3)	Accounts Payable A/c Dr.	381796
	To Bank A/c		381796
	(Being payment of last year accounts payable)
4)	Furniture & Equipments A/c Dr.	76000
	To Bank A/c		76000
5)	Insurance A/c Dr.	2908
	Prepaid Insurance A/c Dr.	582
	To Bank A/c		3490
	(Being Insurance Prem. Paid and 2 Months premium transferred to prepaid a/c)
	Working-
	Premium paid from Mar 2016 to Feb 2017 (annual)
	Therefore Two months prepaid = 3490/12*2=582
6)	Computer System A/c Dr.	72000
	To Bank A/c		72000
	(Being Purchase of Computer System)
	Depreciation A/c Dr.	18000
	To Accumulated Depreciation A/c-Computer System		18000
	(Being Depreciation charged for current year)
	Working-
	Cost- 72000, Life -3 years or 36 months
	Depreciation/Month=72000/36=2000
	For 9 Months=2000*9=18000
7)	Long Term Note A/c Dr.	92000
	To Bank A/c		92000
	(Being repayment of long term note)
8)	Mortgage Loan A/c Dr.	16800
	To Bank A/c		16800
	(Being repayment of long term note)
9)	Interest Payable A/c Dr.	17257
	To Bank A/c		17257
	(Being payment of last year interest payable)
10)	Taxes Payable A/c Dr.	109670
	To Bank A/c		109670
	(Being payment of last year taxes payable)
11)	Bank A/c Dr.	15000
	To Common Stock A/c		15000
	(Being issue of common stock 1500 @10 per share)
12)	Bank A/c Dr.	2499650
	Accounts receivable A/c	43040
	To Sales A/c		2542690
	(Being sales for current year in cash to tune of 2499650 and 43040 is still receivable)
	Working-
	Cash sales(sales already realised)=2542690-43040
13)	Profit & Loss A/c Dr.	1652747
	To Cost of Goods Sold		1652747
	( Being Cost of Goods sold charged to P/L A/c)
14)	Purchases A/c Dr.	1690000
	To Bank A/c		1278950
	To accounts payable		411050
	(Being purchases of inventory in cash & credit)
	Working-
	Purchases in Cash=1690000-411050
15)	Salaries A/c Dr.	97050
	Interest A/c Dr.	14211
	To Bank A/c		90630
	To Salary Payable A/c		6420
	To Interest Payable A/c		14211
	(Being Salary and interest expense for the year paid and payable)
	Working= Net salary and interest paid=97050+14211-6420-14211
16)	Supplies Inventory A/c Dr.	2677
	Profit & Loss A/c Dr.	2169
	To Cash A/c		2677
	To Supplies inventory		2169
	(Being Purchase of supplies inventory and subsequent consumption)
	Working- Consumption= 2677-508=2169
17)	Depreciation A/c Dr.	25221
	To Accumulated Depreciation A/c- Building		11750
	To Accumulated Depreciation A/c- Furniture and Equipments		13471
	(Being Depreciation charged on Building & Furniture and Equipments)
	Working-
	Depreciation on Building=470000/40
	Depreciation on Furniture and Equipments=(18300+76000)/7
18)	Already done in respective points
19)	Advance Tax Paid A/c Dr.	120000
	To Bank A/c		120000
	(Being estimated income tax paid during the year)
20)	Dividend A/c Dr.	3500
	To Bank A/c		3500
	(Being payment of dividend to shareholders)
21)	Allowance for Doubtful Accounts Dr.	135
	To Accounts receivable		135
	(Being receivables to the tune of 135 written off)
22)	Profit & Loss A/c Dr.	537
	To Allowance for Doubtful Accounts		537
	(Being Provision made for doubtful accounts)
	Working-
	Opening Balance of accounts receivable- 22805
	Movements during year -
	Minus-Receipts of last year balance- 22805
	Add- Credit sales-43040
	Less:Bad debts-135
	Closing Balance-42905
	Provision @ 2%= 42905*2%=858
	Provisions already(Closing balance of Allowance for Doubtful accounts)=456-135=321
	Provision required=858-321=537
23)	Taxes Expenses A/c Dr.	219107
	To Taxes Payable A/c		219107
	(Being provision made for current year income tax)
	Working -
	Profit & Loss for the year
	Sales- 2542690
	Add: Closing Stock of Supplies inventory- 508
	Less: Expenses
	Provision for allowance for doubtful a/c- 537
	Depreciation a/c- 25221+18000
	Consumption of Supplies Inventory-2169
	salary-97050
	interest-14211
	Cost of good sold- 1652747
	Insurance- 2908
	Net profit before tax=730355
	Tax @30%on above= 219107
	(Assumptions- 1) Cost of goods sold does not include supplies inventory amount 2) Dividend is not considered for tax calculation)

1. Post the Journal Entries you made in Part A for Been Carded, Ltd., to the appropriate T-Accounts. Your T-Account entries must be properly linked to your Journal Entry amounts. The first journal entry has been posted to the appropriate T-Accounts for you

T accounts are :

Cash

Accounts Receivable

Allowance for Doubtful Accts

Merchandise Inventory

Supplies Inventory

Prepaid Insurance

Land

Building

Furniture & Equipment

Computerized Sales System

Accum Depr-Building

Accum Depr-Furn&Equip

Accum Depr-Sales System

Accounts Payable

Salaries Payable

Interest Payable

Taxes Payable

Mortgage Note Payable

Note Payable

Common Stock

Retained Earnings

Dividends Declared

Sales Revenue

Cost of Goods Sold

Salaries & Wages Expense

Supplies Expense

Insurance Expense

Bad Debt Expense

Depreciation Expense

Interest Expense

Tax Expense