please fill in the question marks on the table on the last page.

Financial Accounting and Reporting - Homework Assignment 2 One Submission per Team Portobello Co.- Reconstructing the income statement and balance sheet. Portobello Co., a retailer, is in its 10th year of operation. On December 28, 2008, three days before the close of its fiscal year, a Category 5 hurricane devastated the company's administrative office and destroyed almost all of its accounting records. The company saved the balance sheet on December 31, 2007 (see Exhibit 1 on the next page), the checkbook, the bank statements, and some soggy remains of the specific accounts receivable and accounts payable balances. Based on a review of the surviving documents and a series of interviews with company employees, you obtain the following information. i. The company's insurance agency advises that a four-year insurance policy has six months to run as of December 31, 2008. The policy cost $12,000 when the company paid the four-year premium during 2005. ii. During 2008, the company's board of directors declared $6,000 of dividends, of which the firm paid $3,000 in cash to shareholders during 2008 and will pay the remainder during 2009. Early in 2008, the company also paid dividends of S1,800 cash that the board of directors had declared during 2007. iii. On April 1, 2008, the company received from Appleton Co. $10,900 cash, which included principal of $10,000 and interest, in full settlement of Appleton's nine-month note dated July 1, 2007. According to the terms of the note, Appleton was required to and paid all interest at maturity on April 1, 2008. iv. a. The amount owed by the company to merchandise (inventory) suppliers on December 31, 2008, was $16,000. During 2008, the company paid $115,000 to merchandise suppliers. The cost of merchandise inventory on December 31, 2008, based on a physical count, was $40,0 correctly calculated at $88,000. This amount was debited to the Cost of Goods Sold account and credited to the Merchandize inventory account b.On December 8, 2008, the company exchanged shares of its common stock for merchandise inventory costing S11,000. v. a. The company purchased delivery trucks on March 1, 2008, for $60,000. The delivery trucks have an expected useful life of 10 years and an estimated salvage value of $6,000. The company uses the straight-line depreciation method. b. To finance the acquisition of the truck, it gave the seller a $60,000 four-year note that bears interest at 10% per year. The company must pay interest on the note each six months, beginning September 1, 2008. On September 1, the company made the required interest payment of $3,000 (60,000x10% x 6/12)) for the 6 month period (3/1-9/1) and recorded it accordingly. maturity on April 1, 2008. a. The amount owed by the company to merchandise inventory) suppliers on December 31, 2008, was S16,000. During 2008, the company paid $115,000 to merchandise suppliers. The cost of merchandise inventory on December 31, 2008, based on a physical count, was $40,000. The cost of goods sold was correctly calculated at $88,000. This amount was debited to the Cost of Goods Sold account and credited to the Merchandize inventory account. b. On December 8, 2008, the company exchanged shares of its common stock for merchandise inventory costing $11,000. v. 2. The company purchased delivery trucks on March 1, 2008, for $60,000. The delivery trucks have an expected useful life of 10 years and an estimated salvage value of $6,000. The company uses the straight-line depreciation method b. To finance the acquisition of the truck, it gave the seller a $60,000 four-year note that bears interest at 10% per year. The company must pay interest on the note each six months, beginning September 1, 2008. On September 1, the company made the required interest payment of $3,000 (60,000x10% x 6/12)) for the month period (3/1-9/1) and recorded it accordingly. vi. The company's computer system has a six-year total expected life and zero expected salvage value. vii. 2. The company makes all sales on account and recognizes revenue at the time of shipment to customers. During 2008, the company received $210,000 cash from sales to customers. A close examination revealed that $1,400 of the $210,000 cash from its customers cash received from customers during 2008 applies to merchandise that the company will not ship until 2009. The company's accountant reconstructed the Accounts Receivable subsidiary ledger, the detailed record of the amount owed to the company by cach customer. It showed that customers owed the company $51.000 on December 31, 2008 b. The beginning balance in the "Advances from Customers" account reflects $600 received in advance from customers during 2007 for merchandise shipped in 2008. vill. a. The company paid $85,000 in cash to employees during 2008. Of this amount, $6,500 relates to services that employees performed during 2007 and reflected in the "Salaries Payable" account at the beginning of the period, 54,000 relates to advance payment to employees for services to be performed during 2009. Advance payments to employees were debited to "Advances to Employees account Employees performed the remainder of the services during 2008 b. On December 31, 2008, the company owes employees $1.300 for services performed during the last several days of 2008. The amount has not been recorded. ix. a. The company paid $27.000 in cash for property and income taxes during 2008, or this amount, b. The beginning balance in the "Advances from Customers" account reflects S600 received in advance from customers during 2007 for merchandise shipped in 2008. 2. The company paid $85,000 in cash to employees during 2008. Of this amount, $6,500 relates to services that employees performed during 2007 and reflected in the "Salaries Payable" account at the beginning of the period. $4,000 relates to advance payment to employees for services to be performed during 2009. Advance payments to employees were debited to "Advances to Employees" account. Employees performed the remainder of the services during 2008. b. On December 31, 2008, the company owes employees $1,300 for services performed during the last several days of 2008. The amount has not been recorded. ix. a. The company paid $27,000 in cash for property and income taxes during 2008. Or this amount, $10,000 relates to income taxes applicable to 2007, and $3,000 relates to future property taxes applicable to 2009. b. The company owes and has yet to record $4,000 in income taxes on December 31, 2008. . On December 9, 2008, Portobello Coentered into a contract with a management consulting firm for consulting services at a cost of $48.000 per year. The consulting firm had performed 10% of the estimated total consulting services under the contract by December 31, 2008. However, the accountant at Portobello Co, forgot to record an adjusting entry on December 31, 2008 for the consulting expenses incurred during the period. Exhibiti Portobello Co. Balance Sheet December 31, 2007 . Accounts Receivable ............. Notes Receivable .......... Interest Receivable ...................... Merchandise Inventories.. .. Prepaid Insurance . ........ Total Current Assets .............. Computer System: $ 18,600 33.000 10.000 600 22.000 4.500 S 8700 Exhibit 1 Portobello Co. Balance Sheet December 31, 2007 $ 18,600 33,000 10,000 600 22,000 4,500 $88,700 Cash Accounts Receivable Notes Receivable ....... Interest Receivable ... Merchandise Inventories. Prepaid Insurance Total Current Assets ..... Computer System: At Cost Less Accumulated Depreciation Net Computer System.. Total Assets ....... LIABILITIES AND SHAREHOLDERS' EQUITY Accounts Payable for Merchandise Dividend Payable ..... Salaries Payable .......... Taxes Payable.... Advances from Customers....... Total Liabilities Common Stock ...... Retained Eamings... Total Shareholders' Equity... Total Liabilities and Shareholders' Equity.......... $ 78,000 (26,000) $ 52,000 $140.700 $ 36,000 1,800 6,500 10,000 600 $ 54,900 $ 40,000 45.800 $ 85,800 $140,700 Credit 39,000 PORTOBELLO CO. Trial Balance For the Year Ended December 31, 2008 (May include $0 balances) Debit Cash 4,700 Accounts Receivable 51,000 Merchandise Inventories Notes Receivable Interest Receivable Prepaid Insurance Advances to Employees (Prepaid Wages) 4,000 Prepaid Property Taxes Computer System-at Cost 78,000 Accumulated Depreciation - Computer System Delivery Trucks - at Cost 60,000 Accumulated Depreciation - Delivery Trucks Accounts Payable Interest Payable Dividend Payable Salaries Payable Taxes Payable Consulting Fee Payable Advances from Customers - Unearned Revenue Note Payable Common Stock Retained Earnings Sales Revenues Interest Revenues Cost of Goods Sold 88,000 Depreciation Expense (Delivery Truck) 4,500 Depreciation Expense (Computer Equipment) 13,000 Salaries Exp Taxes Exp. Insurance Exp. Consulting Exp. 4,800 Interest Exp. 4,500 16,000 3,000 4,800 60,000 39,800 Totals $