Paste K14 Narrative and Instructions 1 3 Rockford Corporation is a wholesale plumbing supply distributor. The corporation was organized 4 in 1981, under the laws of the State of Illinois, with an authorized capitalization of 100,000 shares 5 ofno-par common stock with a stated value of $16 per share. The common stock is sold over the 6 the counter in the local area. You have been hired as of Thursday, December 25, 2018, to replace the 7 controller, who has resigned. As controller, you are responsible for the corporation's accounting 8 recrods, preparation of the financial statements, safeguarding the corporate assets, and providi 9 management with financial information to set prices and to monitor and control operations 10 11 Rockford Corporation closes its books annually on December 31 but prepares financial statements 12 quarterly. Adjusting entries are posted to the general ledger only at year-end; at the end of the 13 first, second, and third quarter the adjustments are entered only on a work sheet, not in the general 14 |ledger. Therefore, the adjusting entries to be recorded on December 31 are annual adjustments that 15 you must journalize and the post to the general ledger accounts before preparing the financial 16 statements 17 18 Rockford Corporation maintains a perpetual inventory system and takes a physical count each year 19 to adjust the inventory carrying amount. Purchases are recorded at the gross amount (discounts 20 taken are recognized at the date of payment) of the supplier's invoice, and the terms vary with 21 each supplier. Sales on account are subject to terms of 2/10, n/30. Discounts are taken and granted 22 only when the terms are met. The cost of all inventory sold in December was 60% ofthe sales price. 23 The corporation uses the following journals and ledgers 24 25 Journals 26 1. A sales journal (S)-to record sales of merchandise on account. 27 2.Apurchase journal (P+ to record purchases of merchandise on account 28 3. A cash receipts journal (CR)-to record all cash receipts. 29 4. A cash disbursements journal (CD)-to record all cash payments. 30 5 31 32 Ledgers SA general journal u-to record all transac i tons that cannot be recorded in the other journals. Instruction General Journal Purchase Journal Sales Journal Ready 29 Paste K14 31 32 Ledgers 33 1. Ageneral ledger 34 2. An accounts receivable subsidiary ledger. 35 3. An accounts payable subsidiary ledger. 36 37 In recording sales transactions, each sale should be posted on the day of the sale directly to the 38 customer's account in the subsidiary ledger, using the invoice number as the posting reference 39 number in the subsidiary account. Also, cash receipts from customers should be posted to the 40 subsidiary ledger on the day they are received. The purchase order number should be used as 41 the posting reference number in the subsidiary ledger for purchases on account from suppliers 42 Purchases from suppliers and payments to them should be posted daily.All other individual posting 43 may be made weekly or at the month-end. Account numbers should be used as posting reference 44 numbers in the journals. Officers and office personnel are salaried employees and are paid monthly 45 on the last day of each month. The delivery truck drivers and warehouse employees are hourly wage 46 employees and are paid biweekly. Each biweekly pay period ends Friday. On the following Monday 47 you assistants provide you with a payroll summary from which you prepare general journal entries 48 to record the biweekly payroll and the employer's taxes on the payroll. The biweekly employees 49 paychecks are distributed on the following day (Tuesday). 50 51 The January 1, 2018, balances appear in the general ledger accounts as well as the Noverber 30, 2018 52 balances, for those accounts whose balances have changed. All transacitons affecting the non- 53 current accounts from January 1, 2018, through Noverber 30, 2018, with explanations, appear in 54 these accounts to facilitate the preparation of the statement of cash flows 56 Subsidiary ledger account balances as of Noverber 30, 2018, are as follows: 57 58 Accounts Recelvable 59 Boecker Builders 60 The Potts Company 61 Swanson Brothers Contruction 62 A & B Hardware Acct No Amount 72,420 42,300 28,750 122 133 Instruction General Journal Purchase Journal Sales Journal Ready 29 age Layout Calibri (Body) Paste K14 57 58 Accounts Receivable 59 Boecker Builders 60 The Potts Company 61 Swanson Brothers Contruction 62 A& B Hardware 63 Trudy's Plumbing 64 Coconino Contractors Inc 65 Rankin Plumbing Corp 66 Beverly's Building Products 67 Bilder Construction Co 68 Iwanaga Plumbing and Heating 69 Total 70 71 Accounts Pavable 72 Phoenix Plastics Acct NoAmount 117 72,420 122 42,300 133 28,750 143 155 13,500 160 31,700 166 76,350 175 12,800 180 190 68,900 4,800 351,520 Amount Acct No 14 16 18 20,050 20 35 31,700 39 35,000 44 14,850 57 18,000 18,280 73 Business Basics Inc 74 Edward's Plumbing Suppliers 5 DeKalb Transport 76 Oxenford Copperworks 77 Smith Pipe Co 78 Ron & Rod's Plumbing Products 79 Khatan Steel Corp 80 Total 81 137,880 82 The transactions through December 23 have already been recorded by the former controller. You 83 are to begin your work by entering the transaction of December 25 for the payment of cash to 84 repurchase stock Dec-18 86 87 Sales Journal Cas General Journal Instruction Purchase Journal Ready 29 X Calibri (Body) Paste K14 85 86 87 Dec-18 89 15 14 21 28 13 20 27 12 19 26 10 17 24 31 18 25 91 16 92 23 93 30 29 95 96 December Transactions 97 December 1 Received a check in the amount of $28,175 from Swanson Brothers Contruction in full 1 Sold sewer and drainage pipe to Beverly's Building Products on account, invoice No. 1201 2 Purchased copper tubing and fittings from Edward's Plumbing Supplies Inc. on account, 2 Issued check No. 1580 for $31700 to Oxenford Copperworks in settlement of the 3 A court notice indicates that Iwanaga Plumbing and Heating is bankrupt and payment payment ofinvoice No. 1120 dated Novermber 26 in the amount of $28,750 for $25050. purchase order No. 315 for $35880, terms n/60. balance owned on purchase order No. 280. of its account improbable; the president orders the account to be written off as a 101 103 104 107 08 bad debt (invoice No. 780). 3 Sold bathroom fixtures to Bilder Construction Co on account, invoice No. 1202 for $42720. 110 4 Recelived a check in the amount of $41454 from the Potts Co in full payment of invoice No. 1128 dated November 27 for $42300. 4 Sold plumbing supplies and plastic pipe to Coconino Contractors Inc. on account, invoice 13 14 15 No. 1203 for $11200. 4 Issued check No. 1581 for $1120 to Standard Oll Co, in payment of gas, oil, and truck repair Cash Recei Instruction General JournalPurchase Journal Sales Journal Ready 29 No. 1203 for $11200 4 Issued check No. 1581 for $1120 to Standard Oil Co, in payment of gas, oil, and truck repair 5 Issued check No. 1582 for $17820 to Khatan Steel Corp. n full settlement of purchase order 5 Issued check No. 1583 for $12,054 to Phoenix Plastics in full payment of Phoenix's invoice 5 Received a check in the amount of $74823 from Rankin Plumbing Corp. in full payment from Tierney's Standard Service No. 312 for $18000. dated November 28 in the amount of $12,300, for purchase order No. 313, terms 2/10, n/30 of invoice No. 1129 dated November 28 for $76350. 8Sold cast pipe to Trudy's Plumbing on account, invoice No. 1204 for $23100. 8 Received a check in the amount of $31700 from Coconion Contractors, Inc. in full payment ofinvoice No. 1091 dated October 20. 8 Purchased bathroom fixtures from Phoenix Plastics, on account, purchcase order No. 316 for $51900 terms 3/10, n/30. balance outstanding covering invoice Nos. 1050 and 1071 dellvery trucks. 8 Received a check in the amount of $39100 from Boecker Builders in partial payment of 9 Issued check No. 1585 for $790 to Scooter Gordon for lettering and sign painting on some 9 Issued check No. 1586 for $5980 to Phoenix Plastics, in payment of Phoenix's invoice dated 10 10 Received a check in the amount of $13500 from Trudy's Plumbing in full settlement of 9 30 32 November 12 in the amount of $5980, our purchase order No. 299. Issued check No. 1587 for $34300 to Smith Pipe Co in full payment of their invoice datecd November 28, terms 2/15, n/30, our purchase order No. 314 35 136 137 138 invoice No. 1106 dated November 7 10 Sold pipe, fixtures, and accessories to Trudy's Plumbing on account, invoice No. 1205 for 33850. 140 141 142 143 11 The payroll summary for the biweekly pay period ended Friday, December 5 contained the follwing information Delivery and warehouse wages FICA taxes withheld Federal income taxes withheld State income taxes withheld 5,890 450 1,472 471 145 Cash Rece Instruction General Journal Purchase Journal Sales Journal Ready 29 Calibri (Body) Paste BUv e payroll summary tor the biweekiy pay period ended Friday, Decembers contained t follwing information Delivery and warehouse wages FICA taxes withheld Federal income taxes withheld State income taxes withheld II Th I40 141 142 43 144 145 146 147 148 5,890 1,472 471 3,497 Net pay Employer's payroll taxes: FICA tax 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 11, 2018. 150 151 152 153 11 Sold pumbing supplies and copper tubing to The Potts Company on account, involce No. 1206 for $51450 156 11 Recelved a check in the amount of $33,320 from Boecker Builders in full payment of invoice 157 158 159 160 161 No. 1071. 11 Cash sales to date totaled $15258 12 Received a check in the amount of $22638 from Trudy's Plumbing in payment of inoivce 12 Sold plumbing fixtures and supplies to Boecker Builders, on account, invoice No. 1207 15 The Potts Co returned defective copper tubing that is purchased on December 11. A credit No. 1204. for $24,730 memo in the amount of $5145 is issued relative to invoice No. 1206. The copper tubing had a cost of $3087 164 165 166 167 168 169 70 15 The defective copper tubing is returned to Edward's Plumbing supplies, Inc. along with a debit memo in the amount of $3087 in reduction of purchase order No. 315 15 Issud check No. 1588 for $599 in payment of November telephone bill to Northern Illinols 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 General JournalPurchase Journal Sales Journal Cash 4Instruction Ready 29 K14 170 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. 172 73 16 Issued check No. 1590 for $50,343 to Phoenix Plastics, Inc, in payment of purchase order 174 75 17 The president informs you that Bilder Construction Co agrees to convert the $68900 176 No. 316. overdue account receivable (invoice No. 1 120) to a 6% note due six months from today. 17 Purchased plumbing materials from Smith Pipe Company on account, purcase order No. 317 for $,55,120 terms 2/15, n/60 1208 for $8,340 $47,930 freight on purchase order No. 317 and paid by issuing check No. 1591 No. 1205 178 17917 Sold drain tile, plastic pipe, and copper tubing to A&B Hardware on account, invoice No 180 181 182 183 184 185 186 187 188 189 190 18 Sold fixtures and materials to Coconino Contractors, Inc. on account, invoice No. 1209 for 18 An invoice in the amount of $1,021 was received from S. White Trucking Company for 18 Received a check in the amount of $33,173 from Trudy's Plumbing in payment of invoice 19 Purchased office supplies from the Pen & Pad, issuing check No. 1592 in the amount of 19 Purchased a new Faith computer for $7600 from Business Basics, Inc, purchase order $1,460. (Note: Debit asset account). 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 6 years with a salvage value of $1600. 91 192 22 Purchased bathroom and kitchen fixtures from Phoenix Plastics, on account, purchase order No. 319 for $48,330, terms 1/10, n/30. 194 22 Recelved a bill from DeKalb Transport for $3520 for freight costs incurred during the last 30 195 196 197 198 days, terms n/30 NOTE: Transactions up to this point have been recorded. At this point you became controller and are responsible for recordign all further transactions The board of directors voted to purchase 3,800 shares of its own stock from stockholder Dionne Schivone at $48 per share and issued check No. 1595 in payment. Stock repurchases 99 25 201 are rarnrdad st rnst Rorkford is.nurchasina theca chares heralice Ms Schiunne had hoon Instruction General Journal Purchase Journal Sales Journal Ready 29 Paste K14 NOTE: Transactions up to this point have been recorded. At this point you became controller and are responsible for recordign all further transactions The board of directors voted to purchase 3,800 shares of its own stock from stockholder Dionne Schivone at $48 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. The payroll summary for the biweekly pay period ended Friday, December 21 contained the follwing information: Delivery and warehouse wages FICA taxes withheld Federal income taxes withheld State income taxes withheld 197 198 199 25 200 201 202 203 25 204 205 5,970 456 1,493 477 3,545 206 207 208 209 210 211 212 213 214 215 216 Net pay Employer's payroll taxes: FICA tax 456 Federal unemployment tax State unemployment tax ssued check No. account. Individual payroll checks were then prepared for distributions to the biweekly emplyees on Tuesday, December 25 The baord of directors declared a $1.20 per share cash dividend payable on January 14 to shareholders of record by the end of the day of December 26. 1594 for the amount of the net pay and deposited it in the payroll banlk 217 26 218 19 26 The president informs you that Beverly's Building Products agrees to convert the $12,800 overdue accounts receivable (invoice No. 1 1 1 9) balance to a 8% note due six months from today A half-acre parcel of land adjacent to the building is acquired in exchange for 850 shares of unissued common stock. The land has a fair value of $48,000 and will be used immediately as an outside storage lot and parking lot An invoice in the amount of $1,060 is received from Wayne McManus, lawyer, for legal services involved in the acquisition of the adjacent parcel ofland; check No. 1596 is issued. Sold pipe and plumbing materials to Boecker Builders on account, invoice No. 1210 for 220 221 222 *29 223 224 225 "29 226 227 29 General Journal Instruction Sales Journal Cas Purchase Journal Ready 29 XCalibri (Body) PasteBIUA K14 227 29 228 229 230 Sold pipe and plumbing materials to Boecker Builders on account, involce No. 1210 for $49,800 30 Issued check No. 1597 in the amount of $5,940 to the Northern Star for adverstisement run in the home building supplement of December 13 30 Issued check No. 1598 in the amount of $1,350 to Standard Oil Co. in payment of gas, oil, 232 233 and truck repairs from Standard Oil Co. (use Freight-out). 30 Purchased copper and cast iron pipe from Oxenford Copperworks on account, purchase 234 order No. 320 for $55,840, terms 1/10, n/30. 30 Check No. 1599 for $10,400 is issued to the bond sinking fund trustee, Chicago Trust Co. 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 for deposit in the sinking fund. (Use Other Assets). 30 Sold plumbing supplies to Swanson Brothers Construction on account, invoice No. 1211 for $22,150 31 Received a check for $24,730 from Boecker Builders in payment of invoice No. 1207 31 Issued check No. 1600 for $54,018 to Smith Pipe Company in payment of purchase order No. 317 31 The custodian of the petty cash fund submits the following receipts for relmbursement and reports a cash-on-hand count of $8 Postage stampls used (supplies) United Parcel (freight-out) ..D postage (freight costs) Christmas office decorations (Misc exp) Check No. 1601 is issued and cashed to reimburse the fund. $38 23 51 30 31 Sold an electric truck-lift to Leila Stierman Co. for $2620 cash. The original cost was 250 251 252 253 254 $7900 with salvage value of $900, a life of 10 years, and accumulated depreciation recorded through 12/31/17 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 256 31 Sold bathroom fixtures and plumbing supplies to Trudy's Plumbing on account, invoice No. 1212 for $50370. Because for some time the petty cash fund has been smaller than required for monthly 258 31 Instruction General Journal Purchase Journal Sales Journal Cash R Ready 29 1 L' Calibri (Body) K14 1 Because for some time the petty cash fund has been smaller than required for monthly 258 259 expenditures, the fund is increased by $105 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 261 262 263 264 checks can be distributed before the year-end; the details are as follows: Office and administrative salaries Federal income taxes withheld State income taxes withheld FICA taxes withheld $40,900 10,225 3,272 3,129 266 267 268 269 270 271 272 273 274 24,274 Net pay 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 Federal unemployment tax State unemployment tax $3,129 31 Cash sale since December 12 total $59160 276 277 278 Instructions 279 280 281 282 283 284 285 286 287 288 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 recelvable and payable subsidiary ledger accounts. (only a few entries are posted for Dec, e.g.,account receivable. Please post all other entries) books of orginal entry work sheet (list all accounts, including those with zero balances). 3 Foot and cross-foot the columnar journals and complete the month-end postings of all 4 Prepare a trial balance by entering the accout balance from the general ledger in the 5 From the following information prepare adjusting entries in the general journal and 89 enter them in the work sheet. Instruction General Journal Purchase Journal Sales Journal Cas Ready 29 insertDraw Home Pag Layout Formulas Data Review View X Calibri (Body) Paste v - K14 4 Prepare a trial balance by entering the accout balance from the general ledger in the B6 work sheet (ist alll 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 90 91 92 93 94 95 The annual provison for doubtful accounts receivable is recorded by providing a charge to Bad Debt Expense in an amount equal to 2.5% of net credit sale. All cash sales were executed in December An inventory count of the office supplies revealed $700 of supplies on hand at year end The prepaid insurance on January 1, 2018 was $3400 which covers the period January 1 through August 31, 2018. The insurance premium of $6800 recorded in August covers the period of September 1, 2018 through August 31, 2019. Rockford estimates that 50% of the premiums are attributable to general activities (Use Insurance Expense) and 50% to selling activities, (Use Miscellaneous Expense). The payroll summary for the employees who are paid biweekly shows the following information at December 31, 2018: Delivery and Warehouse Wages FICA Taxes Payable Federal Withholding Taxes State Withholding Taxes 297 01 302 303 $6,000 459 1,500 305 306 307 308 309 310 311 312 313 314 315 316 $480.00 Net pay 3,561 (will pay in 2019) The employers share of the FICA tax ($459) 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 maximum subject to unemployment tax Interest has accrued at 6% on the long-term notes payable since July 1,2018 These interests are due on January 1, 2019 (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, 2019. The bonds are dated January 1, 2012, and matureanuan 1. 2022. Market interest rate was 6% Cash Receipts Jo Purchase Journal Sales Journal General Journal 4Instruction Ready 29 subject to unemployment tax. Interest has accrued at 6% on the long-term notes payable since July 1,2018. These interests are due on January 1, 2019 (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, 2019. The bonds are datec January 1, 2012, and mature January 1, 2022, Market interest rate was 6% at issurance. Use effective interest amortization method. The interest accrued to 12/31/18 on notes receivable is composed of the following Platteville Plumbers, 10%, 6 months, due March 31, 2019 Bilder Construction, 6%, 6 months, due June 14, 2019 Beverly's Building, 8%, 6 months, due June 26, 2019 $1,052 161 23 1,236 The interst accrued at 12/31/18 on the note payable (current) of $16000 is $1250. Interest is payable on January 2, 2019. (The note is due in 2019) A warehouse lease payment of $8400 was made on Septermber 1, 2018, for rental through February 28,2019. (The Prepaid Rent account is for advance lease payments on the warehouse.) $815 is owned to Northern Electric Co. and $425 is owned to City of Rockford for utility services proved during December 2018. Plant and equipmentto be depreciated are composed of the following: depreciati estimated salvage on usage or life value method Acquiredcos 7/1/14 $306,000 25 years $20,000 sum-of years' digits 4/1/1428,000 60,000 miles3,100 miles driven 33,000 60,000 miles 4,200 miles driven 900 straight-line Truck #1 Truck #2 Lift Truck #1. Lift Truck #2 Lift Truck 7,900 10 years 4,500 10 years me 5,000 10 years --+ soo straight-line 500 straight dine 3/29/15 9/16/16 Instruction General Journal Purchase Journal Sales Journal Cash Receipts Journal Ready 29 tor utility services proved auring December zur18. Plant and equipmentto be depreciated are composed of the following depreciati Date Acquired estimated salvage on usage or life value method Assets Building Truck #1 Truck #2 Lift Truck #1 Lift Truck 2 Lift Truck 83 Office Equipme Computer cost 7/1/14 $306,000 25 years $20,000 sum-of-years' digits 4/1/1428,000 60,000 miles 3,100 miles driven 4,200 miles driven 900 straight-line 500 straight-line 500 straight-ine 2,000 straight-ine 1.600 Double-decling 33,000 60,000 miles 7.900 10 years 4,500 10 years 5,000 10 years 3/29/15 9/16/16 7/1/16 12/19/18 32,800 7 years 7,600 4 years sold 12/31/18 Truck No. 1has been driven 45,000 milles prior to 1/1/18 and truck No. 2 has been driven 30,500 miles prior to 1/1/18. During 2018 truck No. 1 was driven 12000 miles and truck No. 2 was driven 16000 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.S%ofpretax income. The state income tax is deductible on the federal tax return, and the federal tax is not deductible on the llinois return. Assume federal corporate income tax on income subject to federal tax is as follows: 15% 25% 34% first $50000 next 25000 remainder 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 2018's income statement (assume the weighted-average number of shares outstanding for the year 2018 is 5,600 shares). Assume that bad debt expense and depreciation expense Cash Receipts Journal Sales Journal Purchase Journal General Journal Instruction eady 29 e Insert Draw Page Layout Formulas Data Review View 4 Calibri (Body) 11 A A General te first $50000 next 25000 remainder 15% 25% 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 2018's income statement (assume the weighted-average number of shares outstanding for the year 2018 is 5,600 shares). Assume that bad debt expense and depreciation expense are adminlstrative expenses. 9 Prepare 2018's statement of retained earnings 10 Prepare 2018's balance sheet. Instruction General JournalPurchase Journal Sales Journal Cash Receipts Ready 29 Paste K14 Narrative and Instructions 1 3 Rockford Corporation is a wholesale plumbing supply distributor. The corporation was organized 4 in 1981, under the laws of the State of Illinois, with an authorized capitalization of 100,000 shares 5 ofno-par common stock with a stated value of $16 per share. The common stock is sold over the 6 the counter in the local area. You have been hired as of Thursday, December 25, 2018, to replace the 7 controller, who has resigned. As controller, you are responsible for the corporation's accounting 8 recrods, preparation of the financial statements, safeguarding the corporate assets, and providi 9 management with financial information to set prices and to monitor and control operations 10 11 Rockford Corporation closes its books annually on December 31 but prepares financial statements 12 quarterly. Adjusting entries are posted to the general ledger only at year-end; at the end of the 13 first, second, and third quarter the adjustments are entered only on a work sheet, not in the general 14 |ledger. Therefore, the adjusting entries to be recorded on December 31 are annual adjustments that 15 you must journalize and the post to the general ledger accounts before preparing the financial 16 statements 17 18 Rockford Corporation maintains a perpetual inventory system and takes a physical count each year 19 to adjust the inventory carrying amount. Purchases are recorded at the gross amount (discounts 20 taken are recognized at the date of payment) of the supplier's invoice, and the terms vary with 21 each supplier. Sales on account are subject to terms of 2/10, n/30. Discounts are taken and granted 22 only when the terms are met. The cost of all inventory sold in December was 60% ofthe sales price. 23 The corporation uses the following journals and ledgers 24 25 Journals 26 1. A sales journal (S)-to record sales of merchandise on account. 27 2.Apurchase journal (P+ to record purchases of merchandise on account 28 3. A cash receipts journal (CR)-to record all cash receipts. 29 4. A cash disbursements journal (CD)-to record all cash payments. 30 5 31 32 Ledgers SA general journal u-to record all transac i tons that cannot be recorded in the other journals. Instruction General Journal Purchase Journal Sales Journal Ready 29 Paste K14 31 32 Ledgers 33 1. Ageneral ledger 34 2. An accounts receivable subsidiary ledger. 35 3. An accounts payable subsidiary ledger. 36 37 In recording sales transactions, each sale should be posted on the day of the sale directly to the 38 customer's account in the subsidiary ledger, using the invoice number as the posting reference 39 number in the subsidiary account. Also, cash receipts from customers should be posted to the 40 subsidiary ledger on the day they are received. The purchase order number should be used as 41 the posting reference number in the subsidiary ledger for purchases on account from suppliers 42 Purchases from suppliers and payments to them should be posted daily.All other individual posting 43 may be made weekly or at the month-end. Account numbers should be used as posting reference 44 numbers in the journals. Officers and office personnel are salaried employees and are paid monthly 45 on the last day of each month. The delivery truck drivers and warehouse employees are hourly wage 46 employees and are paid biweekly. Each biweekly pay period ends Friday. On the following Monday 47 you assistants provide you with a payroll summary from which you prepare general journal entries 48 to record the biweekly payroll and the employer's taxes on the payroll. The biweekly employees 49 paychecks are distributed on the following day (Tuesday). 50 51 The January 1, 2018, balances appear in the general ledger accounts as well as the Noverber 30, 2018 52 balances, for those accounts whose balances have changed. All transacitons affecting the non- 53 current accounts from January 1, 2018, through Noverber 30, 2018, with explanations, appear in 54 these accounts to facilitate the preparation of the statement of cash flows 56 Subsidiary ledger account balances as of Noverber 30, 2018, are as follows: 57 58 Accounts Recelvable 59 Boecker Builders 60 The Potts Company 61 Swanson Brothers Contruction 62 A & B Hardware Acct No Amount 72,420 42,300 28,750 122 133 Instruction General Journal Purchase Journal Sales Journal Ready 29 age Layout Calibri (Body) Paste K14 57 58 Accounts Receivable 59 Boecker Builders 60 The Potts Company 61 Swanson Brothers Contruction 62 A& B Hardware 63 Trudy's Plumbing 64 Coconino Contractors Inc 65 Rankin Plumbing Corp 66 Beverly's Building Products 67 Bilder Construction Co 68 Iwanaga Plumbing and Heating 69 Total 70 71 Accounts Pavable 72 Phoenix Plastics Acct NoAmount 117 72,420 122 42,300 133 28,750 143 155 13,500 160 31,700 166 76,350 175 12,800 180 190 68,900 4,800 351,520 Amount Acct No 14 16 18 20,050 20 35 31,700 39 35,000 44 14,850 57 18,000 18,280 73 Business Basics Inc 74 Edward's Plumbing Suppliers 5 DeKalb Transport 76 Oxenford Copperworks 77 Smith Pipe Co 78 Ron & Rod's Plumbing Products 79 Khatan Steel Corp 80 Total 81 137,880 82 The transactions through December 23 have already been recorded by the former controller. You 83 are to begin your work by entering the transaction of December 25 for the payment of cash to 84 repurchase stock Dec-18 86 87 Sales Journal Cas General Journal Instruction Purchase Journal Ready 29 X Calibri (Body) Paste K14 85 86 87 Dec-18 89 15 14 21 28 13 20 27 12 19 26 10 17 24 31 18 25 91 16 92 23 93 30 29 95 96 December Transactions 97 December 1 Received a check in the amount of $28,175 from Swanson Brothers Contruction in full 1 Sold sewer and drainage pipe to Beverly's Building Products on account, invoice No. 1201 2 Purchased copper tubing and fittings from Edward's Plumbing Supplies Inc. on account, 2 Issued check No. 1580 for $31700 to Oxenford Copperworks in settlement of the 3 A court notice indicates that Iwanaga Plumbing and Heating is bankrupt and payment payment ofinvoice No. 1120 dated Novermber 26 in the amount of $28,750 for $25050. purchase order No. 315 for $35880, terms n/60. balance owned on purchase order No. 280. of its account improbable; the president orders the account to be written off as a 101 103 104 107 08 bad debt (invoice No. 780). 3 Sold bathroom fixtures to Bilder Construction Co on account, invoice No. 1202 for $42720. 110 4 Recelived a check in the amount of $41454 from the Potts Co in full payment of invoice No. 1128 dated November 27 for $42300. 4 Sold plumbing supplies and plastic pipe to Coconino Contractors Inc. on account, invoice 13 14 15 No. 1203 for $11200. 4 Issued check No. 1581 for $1120 to Standard Oll Co, in payment of gas, oil, and truck repair Cash Recei Instruction General JournalPurchase Journal Sales Journal Ready 29 No. 1203 for $11200 4 Issued check No. 1581 for $1120 to Standard Oil Co, in payment of gas, oil, and truck repair 5 Issued check No. 1582 for $17820 to Khatan Steel Corp. n full settlement of purchase order 5 Issued check No. 1583 for $12,054 to Phoenix Plastics in full payment of Phoenix's invoice 5 Received a check in the amount of $74823 from Rankin Plumbing Corp. in full payment from Tierney's Standard Service No. 312 for $18000. dated November 28 in the amount of $12,300, for purchase order No. 313, terms 2/10, n/30 of invoice No. 1129 dated November 28 for $76350. 8Sold cast pipe to Trudy's Plumbing on account, invoice No. 1204 for $23100. 8 Received a check in the amount of $31700 from Coconion Contractors, Inc. in full payment ofinvoice No. 1091 dated October 20. 8 Purchased bathroom fixtures from Phoenix Plastics, on account, purchcase order No. 316 for $51900 terms 3/10, n/30. balance outstanding covering invoice Nos. 1050 and 1071 dellvery trucks. 8 Received a check in the amount of $39100 from Boecker Builders in partial payment of 9 Issued check No. 1585 for $790 to Scooter Gordon for lettering and sign painting on some 9 Issued check No. 1586 for $5980 to Phoenix Plastics, in payment of Phoenix's invoice dated 10 10 Received a check in the amount of $13500 from Trudy's Plumbing in full settlement of 9 30 32 November 12 in the amount of $5980, our purchase order No. 299. Issued check No. 1587 for $34300 to Smith Pipe Co in full payment of their invoice datecd November 28, terms 2/15, n/30, our purchase order No. 314 35 136 137 138 invoice No. 1106 dated November 7 10 Sold pipe, fixtures, and accessories to Trudy's Plumbing on account, invoice No. 1205 for 33850. 140 141 142 143 11 The payroll summary for the biweekly pay period ended Friday, December 5 contained the follwing information Delivery and warehouse wages FICA taxes withheld Federal income taxes withheld State income taxes withheld 5,890 450 1,472 471 145 Cash Rece Instruction General Journal Purchase Journal Sales Journal Ready 29 Calibri (Body) Paste BUv e payroll summary tor the biweekiy pay period ended Friday, Decembers contained t follwing information Delivery and warehouse wages FICA taxes withheld Federal income taxes withheld State income taxes withheld II Th I40 141 142 43 144 145 146 147 148 5,890 1,472 471 3,497 Net pay Employer's payroll taxes: FICA tax 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 11, 2018. 150 151 152 153 11 Sold pumbing supplies and copper tubing to The Potts Company on account, involce No. 1206 for $51450 156 11 Recelved a check in the amount of $33,320 from Boecker Builders in full payment of invoice 157 158 159 160 161 No. 1071. 11 Cash sales to date totaled $15258 12 Received a check in the amount of $22638 from Trudy's Plumbing in payment of inoivce 12 Sold plumbing fixtures and supplies to Boecker Builders, on account, invoice No. 1207 15 The Potts Co returned defective copper tubing that is purchased on December 11. A credit No. 1204. for $24,730 memo in the amount of $5145 is issued relative to invoice No. 1206. The copper tubing had a cost of $3087 164 165 166 167 168 169 70 15 The defective copper tubing is returned to Edward's Plumbing supplies, Inc. along with a debit memo in the amount of $3087 in reduction of purchase order No. 315 15 Issud check No. 1588 for $599 in payment of November telephone bill to Northern Illinols 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 General JournalPurchase Journal Sales Journal Cash 4Instruction Ready 29 K14 170 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. 172 73 16 Issued check No. 1590 for $50,343 to Phoenix Plastics, Inc, in payment of purchase order 174 75 17 The president informs you that Bilder Construction Co agrees to convert the $68900 176 No. 316. overdue account receivable (invoice No. 1 120) to a 6% note due six months from today. 17 Purchased plumbing materials from Smith Pipe Company on account, purcase order No. 317 for $,55,120 terms 2/15, n/60 1208 for $8,340 $47,930 freight on purchase order No. 317 and paid by issuing check No. 1591 No. 1205 178 17917 Sold drain tile, plastic pipe, and copper tubing to A&B Hardware on account, invoice No 180 181 182 183 184 185 186 187 188 189 190 18 Sold fixtures and materials to Coconino Contractors, Inc. on account, invoice No. 1209 for 18 An invoice in the amount of $1,021 was received from S. White Trucking Company for 18 Received a check in the amount of $33,173 from Trudy's Plumbing in payment of invoice 19 Purchased office supplies from the Pen & Pad, issuing check No. 1592 in the amount of 19 Purchased a new Faith computer for $7600 from Business Basics, Inc, purchase order $1,460. (Note: Debit asset account). 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 6 years with a salvage value of $1600. 91 192 22 Purchased bathroom and kitchen fixtures from Phoenix Plastics, on account, purchase order No. 319 for $48,330, terms 1/10, n/30. 194 22 Recelved a bill from DeKalb Transport for $3520 for freight costs incurred during the last 30 195 196 197 198 days, terms n/30 NOTE: Transactions up to this point have been recorded. At this point you became controller and are responsible for recordign all further transactions The board of directors voted to purchase 3,800 shares of its own stock from stockholder Dionne Schivone at $48 per share and issued check No. 1595 in payment. Stock repurchases 99 25 201 are rarnrdad st rnst Rorkford is.nurchasina theca chares heralice Ms Schiunne had hoon Instruction General Journal Purchase Journal Sales Journal Ready 29 Paste K14 NOTE: Transactions up to this point have been recorded. At this point you became controller and are responsible for recordign all further transactions The board of directors voted to purchase 3,800 shares of its own stock from stockholder Dionne Schivone at $48 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. The payroll summary for the biweekly pay period ended Friday, December 21 contained the follwing information: Delivery and warehouse wages FICA taxes withheld Federal income taxes withheld State income taxes withheld 197 198 199 25 200 201 202 203 25 204 205 5,970 456 1,493 477 3,545 206 207 208 209 210 211 212 213 214 215 216 Net pay Employer's payroll taxes: FICA tax 456 Federal unemployment tax State unemployment tax ssued check No. account. Individual payroll checks were then prepared for distributions to the biweekly emplyees on Tuesday, December 25 The baord of directors declared a $1.20 per share cash dividend payable on January 14 to shareholders of record by the end of the day of December 26. 1594 for the amount of the net pay and deposited it in the payroll banlk 217 26 218 19 26 The president informs you that Beverly's Building Products agrees to convert the $12,800 overdue accounts receivable (invoice No. 1 1 1 9) balance to a 8% note due six months from today A half-acre parcel of land adjacent to the building is acquired in exchange for 850 shares of unissued common stock. The land has a fair value of $48,000 and will be used immediately as an outside storage lot and parking lot An invoice in the amount of $1,060 is received from Wayne McManus, lawyer, for legal services involved in the acquisition of the adjacent parcel ofland; check No. 1596 is issued. Sold pipe and plumbing materials to Boecker Builders on account, invoice No. 1210 for 220 221 222 *29 223 224 225 "29 226 227 29 General Journal Instruction Sales Journal Cas Purchase Journal Ready 29 XCalibri (Body) PasteBIUA K14 227 29 228 229 230 Sold pipe and plumbing materials to Boecker Builders on account, involce No. 1210 for $49,800 30 Issued check No. 1597 in the amount of $5,940 to the Northern Star for adverstisement run in the home building supplement of December 13 30 Issued check No. 1598 in the amount of $1,350 to Standard Oil Co. in payment of gas, oil, 232 233 and truck repairs from Standard Oil Co. (use Freight-out). 30 Purchased copper and cast iron pipe from Oxenford Copperworks on account, purchase 234 order No. 320 for $55,840, terms 1/10, n/30. 30 Check No. 1599 for $10,400 is issued to the bond sinking fund trustee, Chicago Trust Co. 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 for deposit in the sinking fund. (Use Other Assets). 30 Sold plumbing supplies to Swanson Brothers Construction on account, invoice No. 1211 for $22,150 31 Received a check for $24,730 from Boecker Builders in payment of invoice No. 1207 31 Issued check No. 1600 for $54,018 to Smith Pipe Company in payment of purchase order No. 317 31 The custodian of the petty cash fund submits the following receipts for relmbursement and reports a cash-on-hand count of $8 Postage stampls used (supplies) United Parcel (freight-out) ..D postage (freight costs) Christmas office decorations (Misc exp) Check No. 1601 is issued and cashed to reimburse the fund. $38 23 51 30 31 Sold an electric truck-lift to Leila Stierman Co. for $2620 cash. The original cost was 250 251 252 253 254 $7900 with salvage value of $900, a life of 10 years, and accumulated depreciation recorded through 12/31/17 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 256 31 Sold bathroom fixtures and plumbing supplies to Trudy's Plumbing on account, invoice No. 1212 for $50370. Because for some time the petty cash fund has been smaller than required for monthly 258 31 Instruction General Journal Purchase Journal Sales Journal Cash R Ready 29 1 L' Calibri (Body) K14 1 Because for some time the petty cash fund has been smaller than required for monthly 258 259 expenditures, the fund is increased by $105 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 261 262 263 264 checks can be distributed before the year-end; the details are as follows: Office and administrative salaries Federal income taxes withheld State income taxes withheld FICA taxes withheld $40,900 10,225 3,272 3,129 266 267 268 269 270 271 272 273 274 24,274 Net pay 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 Federal unemployment tax State unemployment tax $3,129 31 Cash sale since December 12 total $59160 276 277 278 Instructions 279 280 281 282 283 284 285 286 287 288 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 recelvable and payable subsidiary ledger accounts. (only a few entries are posted for Dec, e.g.,account receivable. Please post all other entries) books of orginal entry work sheet (list all accounts, including those with zero balances). 3 Foot and cross-foot the columnar journals and complete the month-end postings of all 4 Prepare a trial balance by entering the accout balance from the general ledger in the 5 From the following information prepare adjusting entries in the general journal and 89 enter them in the work sheet. Instruction General Journal Purchase Journal Sales Journal Cas Ready 29 insertDraw Home Pag Layout Formulas Data Review View X Calibri (Body) Paste v - K14 4 Prepare a trial balance by entering the accout balance from the general ledger in the B6 work sheet (ist alll 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 90 91 92 93 94 95 The annual provison for doubtful accounts receivable is recorded by providing a charge to Bad Debt Expense in an amount equal to 2.5% of net credit sale. All cash sales were executed in December An inventory count of the office supplies revealed $700 of supplies on hand at year end The prepaid insurance on January 1, 2018 was $3400 which covers the period January 1 through August 31, 2018. The insurance premium of $6800 recorded in August covers the period of September 1, 2018 through August 31, 2019. Rockford estimates that 50% of the premiums are attributable to general activities (Use Insurance Expense) and 50% to selling activities, (Use Miscellaneous Expense). The payroll summary for the employees who are paid biweekly shows the following information at December 31, 2018: Delivery and Warehouse Wages FICA Taxes Payable Federal Withholding Taxes State Withholding Taxes 297 01 302 303 $6,000 459 1,500 305 306 307 308 309 310 311 312 313 314 315 316 $480.00 Net pay 3,561 (will pay in 2019) The employers share of the FICA tax ($459) 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 maximum subject to unemployment tax Interest has accrued at 6% on the long-term notes payable since July 1,2018 These interests are due on January 1, 2019 (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, 2019. The bonds are dated January 1, 2012, and matureanuan 1. 2022. Market interest rate was 6% Cash Receipts Jo Purchase Journal Sales Journal General Journal 4Instruction Ready 29 subject to unemployment tax. Interest has accrued at 6% on the long-term notes payable since July 1,2018. These interests are due on January 1, 2019 (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, 2019. The bonds are datec January 1, 2012, and mature January 1, 2022, Market interest rate was 6% at issurance. Use effective interest amortization method. The interest accrued to 12/31/18 on notes receivable is composed of the following Platteville Plumbers, 10%, 6 months, due March 31, 2019 Bilder Construction, 6%, 6 months, due June 14, 2019 Beverly's Building, 8%, 6 months, due June 26, 2019 $1,052 161 23 1,236 The interst accrued at 12/31/18 on the note payable (current) of $16000 is $1250. Interest is payable on January 2, 2019. (The note is due in 2019) A warehouse lease payment of $8400 was made on Septermber 1, 2018, for rental through February 28,2019. (The Prepaid Rent account is for advance lease payments on the warehouse.) $815 is owned to Northern Electric Co. and $425 is owned to City of Rockford for utility services proved during December 2018. Plant and equipmentto be depreciated are composed of the following: depreciati estimated salvage on usage or life value method Acquiredcos 7/1/14 $306,000 25 years $20,000 sum-of years' digits 4/1/1428,000 60,000 miles3,100 miles driven 33,000 60,000 miles 4,200 miles driven 900 straight-line Truck #1 Truck #2 Lift Truck #1. Lift Truck #2 Lift Truck 7,900 10 years 4,500 10 years me 5,000 10 years --+ soo straight-line 500 straight dine 3/29/15 9/16/16 Instruction General Journal Purchase Journal Sales Journal Cash Receipts Journal Ready 29 tor utility services proved auring December zur18. Plant and equipmentto be depreciated are composed of the following depreciati Date Acquired estimated salvage on usage or life value method Assets Building Truck #1 Truck #2 Lift Truck #1 Lift Truck 2 Lift Truck 83 Office Equipme Computer cost 7/1/14 $306,000 25 years $20,000 sum-of-years' digits 4/1/1428,000 60,000 miles 3,100 miles driven 4,200 miles driven 900 straight-line 500 straight-line 500 straight-ine 2,000 straight-ine 1.600 Double-decling 33,000 60,000 miles 7.900 10 years 4,500 10 years 5,000 10 years 3/29/15 9/16/16 7/1/16 12/19/18 32,800 7 years 7,600 4 years sold 12/31/18 Truck No. 1has been driven 45,000 milles prior to 1/1/18 and truck No. 2 has been driven 30,500 miles prior to 1/1/18. During 2018 truck No. 1 was driven 12000 miles and truck No. 2 was driven 16000 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.S%ofpretax income. The state income tax is deductible on the federal tax return, and the federal tax is not deductible on the llinois return. Assume federal corporate income tax on income subject to federal tax is as follows: 15% 25% 34% first $50000 next 25000 remainder 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 2018's income statement (assume the weighted-average number of shares outstanding for the year 2018 is 5,600 shares). Assume that bad debt expense and depreciation expense Cash Receipts Journal Sales Journal Purchase Journal General Journal Instruction eady 29 e Insert Draw Page Layout Formulas Data Review View 4 Calibri (Body) 11 A A General te first $50000 next 25000 remainder 15% 25% 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 2018's income statement (assume the weighted-average number of shares outstanding for the year 2018 is 5,600 shares). Assume that bad debt expense and depreciation expense are adminlstrative expenses. 9 Prepare 2018's statement of retained earnings 10 Prepare 2018's balance sheet. Instruction General JournalPurchase Journal Sales Journal Cash Receipts Ready 29