Question
The ML Corporations post-closing trial balance at December 31, 20x5 was as follows: Dr. Cr. Cash--------------------------------------------------------------------------------$36,000 Accounts receivable------------------------------------------------------------176,000 Allowance for doubtful accounts -----------------------------------------------------------------------$23,000 Inventory-------------------------------------------------------------------------- 320,000
The ML Corporations post-closing trial balance at December 31, 20x5 was as follows:
Dr. Cr.
Cash--------------------------------------------------------------------------------$36,000 Accounts receivable------------------------------------------------------------176,000 Allowance for doubtful accounts -----------------------------------------------------------------------$23,000
Inventory-------------------------------------------------------------------------- 320,000 Prepaid insurance------------------------------------------------------------------1,400 Land----------------------------------------------------------------------------------40,000 Building----------------------------------------------------------------------------300,000 Accumulated depreciation building-------------------------------------------------------------------120,000
Equipment ------------------------------------------------------------------------145,000 Accumulated depreciation equipment--------------------------------------------------------------- 38,000
Patents ------------------------------------------------------------------------------34,000 Accounts payable ------------------------------------------------------------------------------------------127,000 Salaries payable----------------------------------------------------------------------------------------------- 5,600 Income taxes payable ---------------------------------------------------------------------------------------12,000 Warranty liability ----------------------------------------------------------------------------------------------13,000 Bonds payable----------------------------------------------------------------------------------------------- 400,000 Common stock -----------------------------------------------------------------------------------------------150,000 Retained Earnings -------------------------------------------------------------------------------------------124,600
TOTAL Dr.=$1,052,400
TOTAL Cr.=$1,052,400
Additional information
The company uses a FIFO perpetual inventory system.
The prepaid insurance is for a one year policy taken out in 20x5 that expires on March 1, 20x6.
The building is being depreciated on a straight-line basis over 40 years.
The equipment is being depreciated using the diminishing method at a rate of 20%.
The patent remaining useful life at December 31, 20x5 is 8 years.
There are 10,000 shares of common stock outstanding.
The following transactions took place during the year:
1. Total sales on account were $1,600,000.
2. Cash collections on accounts receivable totaled $1,520,000.
3. Accounts written off totaled $34,000.
4. Recoveries of previously written off accounts receivable totaled $5,000.
5. Inventory purchased on account totaled $960,000.
6. Inventory costing $16,000 was returned to suppliers.
7. On March15, an additional 3,000 common shares were issued for $75,000.
Cash disbursements were as follows:
8. Payments on accounts payable $945,000
9. Payments for salaries $320,000
10. Interest payments on bonds payable $26,000
11. Purchase of equipment on January $2 30,000
12. Payments to the Canada Revenue Agency for income taxes $12,000
13. Repurchase of 1,000 common shares on Aug 23 $22,000
14. Insurance policy taken out on March 1 one year policy. $24,000
15. Operating expenses paid $130,000
The following adjustments need to be made at year-end:
16. The ending balance of the allowance for doubtful accounts is estimated to be $17,930.
17. An adjustment is made for insurance expense.
18. Depreciation expense on the building, equipment and patents.
19. Salaries payable at December 31, 20x6 amount to $6,700.
20. Dividends of $80,000 were declared and paid on December 15, 20x6.
Required
Prepare journal entries for the above transactions.
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