Question
Scenario for adjusting entries: Year end is December 31, 2017. Peyton Baking Company uses the following accounting practices: Inventory: Periodic, FIFO for both baking and
Scenario for adjusting entries: Year end is December 31, 2017. Peyton Baking Company uses the following accounting practices:
Inventory: Periodic, FIFO for both baking and merchandise
Baking supplies: $27,850 ending inventory
Equipment: Straight line method used for equipment
Mixing machine: $5,000 initial cost, $500 salvage value, 3rd year of use of 7 total ($642.86 per year)
Ovens: $8,000 initial cost, $1,000 salvage value, 3rd year of use of 7 total ($1,000 per year)
Other depreciable equipment: $4,000 initial cost, $0 salvage value, 1st year of use of 4 total ($1,000 per year)
Bakery Leasehold Improvements: $10,000, 2nd year of use ($2,000 per year)
Trademark for company name: Initial cost, $2,300, 3rd year of use
Office supplies: Periodic, FIFO. Ending balance is $250.
Pay period is every 2 weeks. Last pay period ended December 27
60 employees with a daily pay of $5,700. All receive pay through December 31.
Financing:
6% interest note payable was made on January 31, 2017, and is due February 1, 2019.
5-year loan was made on June 1, 2017. Terms are 7.5% annual rate, interest only until due date.
Insurance: Annual policy covers 12 months, purchased in February, covering March 2017 February 2018. No monthly adjustments have been made.
Other information: An employee slipped and fell in the baking area and has filed a lawsuit. The company lawyer indicates that it is probable that the company will be found liable. No additional information is available.
| Peyton Approved | ||||||
| Trial Balance | ||||||
| 2017 | ||||||
| Unadjusted trial balance | Adjusting entries | Adjusted trial balance | ||||
| Account | Debit | Credit | Debit | Credit | Debit | Credit |
| Cash | 64,713.72 | 64,713.72 | ||||
| Baking Supplies | 165,250.00 | 137,400.00 | 27,850.00 | |||
| Merchandise Inventory (FIFO) | 25,750.00 | 25,750.00 | ||||
| Prepaid Rent | 7,500.00 | 7,500.00 | ||||
| Prepaid Insurance | 2,400.00 | 2,000.00 | 400.00 | |||
| Baking Equipment | 17,000.00 | 17,000.00 | ||||
| Accumulated Depreciation | 3,285.72 | 2,642.86 | 5,928.58 | |||
| Leasehold Improvements | 10,000.00 | 10,000.00 | ||||
| Accumulated Amortization | 2,000.00 | 2,000.00 | 4,000.00 | |||
| Trademark | 2,300.00 | 2,300.00 | ||||
| Office Supplies | 1,600.00 | 1,350.00 | 250.00 | |||
| Accounts Receivable | 30,401.00 | 30,401.00 | ||||
| Notes Payable | 10,000.00 | 10,000.00 | ||||
| Interest Payable | 1,468.75 | 1,468.75 | ||||
| Accounts Payable | 27,325.00 | 27,325.00 | ||||
| Wages Payable | 22,800.00 | 22,800.00 | ||||
| Loans Payable | 21,000.00 | 21,000.00 | ||||
| Common Stock | 30,000.00 | 30,000.00 | ||||
| Dividends | 20,000.00 | 20,000.00 | ||||
| Bakery Sales | 335,675.00 | 335,675.00 | ||||
| Merchandise Sales | 35,200.00 | 35,200.00 | ||||
| Baking Cost of Goods Sold | 137,400.00 | 137,400.00 | ||||
| Rent Expense | 90,000.00 | 90,000.00 | ||||
| Interest Expense | 1,468.75 | 1,468.75 | ||||
| Insurance Expense | 2,000.00 | 2,000.00 | ||||
| Depreciation Expense | 2,642.86 | 2,642.86 | ||||
| Amortization Expense | 2,000.00 | 2,000.00 | ||||
| Misc. Expense | 2,780.00 | 2,780.00 | ||||
| Office Supplies Expense | 1,350.00 | 1,350.00 | ||||
| Business License Expense | 375.00 | 375.00 | ||||
| Advertising Expense | 5,200.00 | 5,200.00 | ||||
| Wages Expense | 22,800.00 | 22,800.00 | ||||
| Telephone Expense | 3,456.00 | 3,456.00 | ||||
| Merchandise COGS (FIFO) | 15,760.00 | 15,760.00 | ||||
| Total | 464,485.72 | 464,485.72 | 169,661.61 | 169,661.61 | 493,397.33 | 493,397.33 |
Please complete the income statement
| Peyton Approved | ||||
| Income Statement | ||||
| For Year Ending 12/31/2017 | ||||
| Bakery Sales | ||||
| Merchandise Sales | ||||
| Total Revenues | - | |||
| Merchandise Cost of Goods Sold (FIFO) | ||||
| Baking Cost of Goods Sold | ||||
| Gross Profit | - | |||
| Operating Expenses: | ||||
| Rent Expense | ||||
| Interest Expense | ||||
| Insurance Expense | ||||
| Depreciation Expense | ||||
| Amortization Expense | ||||
| Misc. Expense | ||||
| Office Supplies Expense | ||||
| Business License Expense | ||||
| Advertising Expense | ||||
| Wages Expense | ||||
| Telephone Expense | ||||
| Total Operating Expenses: | - | |||
| Net Income | - | |||
Please complete the closing entries:
| Peyton Approved | |||
| Closing Entries | |||
| For Year Ending 12/31/2017 | |||
| Date | Accounts | Debit | Credit |
| 31-Dec | Bakery Sales | ||
| Merchandise Sales | |||
| Income Summary | - | ||
| 31-Dec | Income Summary | - | |
| Baking Cost of Goods Sold | |||
| Rent Expense | |||
| Interest Expense | |||
| Insurance Expense | |||
| Depreciation Expense | |||
| Amortization Expense | |||
| Misc. Expense | |||
| Office Supplies Expense | |||
| Business License Expense | |||
| Advertising Expense | |||
| Wages Expense | |||
| Telephone Expense | |||
| Merchandise Cost of Goods Sold (FIFO) | |||
| 31-Dec | Income Summary | - | |
| Retained Earnings | - | ||
| 31-Dec | Retained Earnings | ||
| Dividends | |||
| - | - | ||
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Management Accounting A Business Planning Approach
Authors: Noah P. Barsky, Jr. Anthony H. Catanach
2nd Edition
1516506286, 978-1516506286
