Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Unadjusted pre-closing 12/31/2020 account balances for the Mahoney Company are listed below: Net Sales $12,540,000 Net Purchases 9,000,000 Selling Expenses 424,000 Cash 487,000 Machines

The Unadjusted pre-closing 12/31/2020 account balances for the Mahoney Company are listed below:

Net Sales

$12,540,000

Net Purchases

9,000,000

Selling Expenses

424,000

Cash

487,000

Machines

6,019,000

Accumulated Depreciation, Machines

2,154,000

Accounts Payable

1,445,000

Retained Earnings

4,182,000

Allowance for Doubtful Accounts

60,000

Building

4,800,000

Accumulated Depreciation, Building

468,000

Common Stock

4,760,000

Accounts Receivable

2,877,000

Depreciation Expense, Machines

1,077,000

Inventory @ 1/1/2020

925,000

During your audit, you discover the following four items that have yet to be recorded:

1) No depreciation on the building has been recorded for 2020. Depreciation on the building is based on Double-Declining Balance. It was purchased on 1/1/18 and has an estimated useful life of 40 years. The estimated salvage value is $1,000.

2) Mahoney exhanged a machine for a similar machine on 12/31/2020. The origianl machine cost $3,429 and has a book value of $2,134. The new machine had a fair value of $1,823; Mahoney also received $511 in cash. The exchange lacked commercial substance.

3) Mahoney uses the Income Statement approach to record Bad Debts. Bad Debts in 2020 are estimate to be 4% of Sales.

4) Ending Inventory is to be estimated using the Gross Profit Method. The historic Gross Profit percentage is 20%.

Required

A) Record journal entries for items #1-3 above; show supporting computations. In addition, compute ending inventory per #4 above; show supporting computations. Assume adjusting/closing entries to adjust inventory, closing Purchases, and Record Cost of Goods Sold were properly made.

B) Draft the 2020 Condensed Income Statement and the 12/31/2020 Balance Sheet. Assume no Taxes. Do not include Earnings Per Share.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction To Managerial Accounting

Authors: Peter Brewer, Ray Garrison, Eric Noreen

4th Edition

0073379352, 9780073379357

More Books

Students also viewed these Accounting questions