Question
The balance sheet for Bua Enterprises as of December 31, 2020 is shown below: Bua Enterprises, Inc. Balance Sheet As of December 31, 2020 Assets:
The balance sheet for Bua Enterprises as of December 31, 2020 is shown below:
Bua Enterprises, Inc. Balance Sheet As of December 31, 2020 | ||||
Assets: | Liabilities: | |||
Cash | $10,000 | Accounts payable | $1,000 | |
Accounts receivable, net of $1,000 allowance | 3,000 | Salaries payable | 2,000 | |
Inventory | 7,000 | Total current liabilities | 3,000 | |
Total current assets | 20,000 | Notes payable, 5%, due 2025 | 10,000 | |
Equipment, net of $10,000 accumulated depreciation | 20,000 | Total liabilities | 13,000 | |
Total assets | $40,000 | Equity: | ||
Common stock | 10,000 | |||
Retained earnings | 17,000 | |||
Total liabilities and equity | $40,000 |
In January 2021, Bua had the following events/transactions take place:
January 1: Sold inventory costing $1,000 for $3,000 to customers on account.
January 2: Purchased $5,000 of inventory on account.
January 5: Paid $1,000 to suppliers of inventory for past purchases.
January 7: Paid salaries owed to employees as of December 31.
January 10: Signed an agreement with S. Young to serve as CFO beginning February 15, 2021.
January 15: Paid salaries to employees for the first two weeks of January, $2,000.
January 17: Sold inventory costing $2,000 for $5,000 to customers on account.
January 28: Paid the electricity, internet, trash, water, and sewer bills for the month of January, $500.
January 29: Collected $3,000 from customers for past sales transactions.
January 30: Paid $6,000 to the owner of Buas facilities for rent for January through June 2021.
Other information:
- As of January 31, employees who collectively earn $2,000 every 2 weeks have not been paid since January 15.
- The Note Payable was borrowed on December 31, 2020. Interest on the note is not required to be paid until 2025 but accumulates during the term of the loan.
- Bua estimates that $1,500 of the accounts receivable will likely not be collectible.
- Buas board of directors decided to declare a dividend of $1,000 on January 31, to be paid February 15.
- On February 10 (after month end but before the financial statements were prepared), Bua entered into a significant joint venture with Owens Corporation to manufacture accounting professor action figures for sale in the Boston metropolitan area.
- Depreciation of $500 needs to be recorded on the equipment.
Required:
- Post transactions to the general ledger (T-accounts). [Note: dont forget that some accounts have beginning balances (as of December 31, 2020).]
- Briefly list and describe any disclosures that Bua would need to make in the narrative that accompanies the financial statements, assuming that Bua is NOT a publicly-traded company
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