This case is designed to reinforce certain technical accounting skills that are a prerequisite to a solid understanding of the generally accepted accounting principles that underlie preparation of general purpose financial statements. You are tasked with the preparation of a set of 2020 financial statements for Kuechly Technology Corp., a company that purchases merchandise inventory for resale. You will be required to prepare journal entries, post those entries the general ledger, and prepare year-end adjustments, an adjusted trial balance, income statement, balance sheet, and statement of cash flows. Kuechly Technology Corp. uses the following chart of accounts (note that you may not use all these accounts): 115 Account Number Account Title 100 Cash 110 Accounts Receivable Allowance for Doubtful Accounts (AFDA) 120 Interest Receivable 130 Inventory 135 Supplies 140 Prepaid Rent 145 Prepaid Insurance 150 Available for Sale Investments (non-current) 160 Land 170 Buildings 175 Accumulated Depreciation - Buildings Equipment 185 Accumulated Depreciation - Equipment 190 Patents 180 210 220 225 230 Accounts Payable Salaries Payable Utilities Payable Interest Payable Unearned Rent Income Taxes Payable Dividends Payable Notes Payable (non-current) 235 240 245 250 300 310 320 Common Stock Additional Paid-In Capital Retained Earnings 300 310 320 325 330 350 Common Stock Additional Paid-In Capital Retained Earnings Dividends Accumulated Other Comprehensive Income Treasury Stock 400 402 410 420 430 Sales Revenue Sales Returns & Allowances Interest Revenue Rent Revenue Dividend Revenue 500 505 507 510 515 Cost of Goods Sold Purchases Purchase Returns & Allowances Salaries Expense Bad Debt Expense Rent Expense Supplies Expense Depreciation Expense - Buildings Depreciation Expense - Equipment Patent Amortization Expense 520 525 530 535 540 In addition to the income statement, balance sheet, and statement of cash flows, compile the following: General Ledger serves as a T-Account for each account. Post all journal entries to the general ledger to assist in forming the trial balance. Adjusted Trial Balance lists ALL accounts after adjusting journal entries but before closing journal entries All students must prepare their own solution to this project; however, you may discuss your work with other students. Notes for Journal Entries: 1) Kuechly uses periodic inventory system and LIFO 2) All credit sales discounts are recorded using the net method - customers receive a 3 percent discount if they pay within 30 days. 3) Purchase discounts are recorded using the net method 4) All depreciation is straight line. Additional Information for Journal Entries Kuechly records accruals for utilities expense as an adjusting journal entry at the end of each year. They pay utilities once a year on January 31st for the prior year. NOTE: There is no payment for utilities on January 31st of 2020 because January 1 of 2020 is the first day of operations. January 1 Sold 10,000 shares of common stock for $95 per share. Borrowed $2,000,000 at 8 percent with interest payable semi-annually (on July 1 and January 1). Purchased 1,000 units of inventory at $150 a piece on credit from Biggie Smalls Inc. Terms are 2/10; n/60 Paid $480,000 for 2 years of rent in advance Purchased office supplies costing $10,000 with cash Jan 20 Paid Biggie full amount owed Feb 10 Sold inventory with a list price of $22,000 to M Jagger on credit. Made cash sales of $30,000. Feb 20 Accepted a sales return from M Jagger for half of the inventory purchased (i.e., list price of $11,000); And M Jagger paid for the remainder in cash. Feb 20 Accepted a sales return from M Jagger for half of the inventory purchased (i.e., list price of $11,000); And M Jagger paid for the remainder in cash. March 15 Bought 1,000 units of inventory at $170 from Wolfpack Corporation with cash March 30 Returned 100 units of inventory to Wolfpack Corporation for cash April 30 Made cash sales of $30,000 June 30 Purchased land and a building. A $200,000 cash down payment was required and a $800,000 note was accepted by the seller for the balance (12 percent interest payable each year on June 30). The fair value of the land at the date of purchase was deemed to be 300,000 and the fair value of the building was 900,000. The building has an estimated residual value of $0 and a useful life of 30 years. September 1 Kuechly began subleasing extra space to DJ Moore. DJ Moore paid for $60,000 for six months' rent in advance. October 1 Purchased equipment for in exchange for a $30,000 non-interest bearing note due in one year. The equipment has an estimated residual value of $2,000 and a useful life of 8 years. Note: Assume an effective interest rate of 8 percent. October 1 Purchased one year of insurance in advance for $12,000 October 14 Sold inventory to H Gilmore for $100,000 on credit October 30 H Gilmore paid half of the amount owed Dec 1 Repurchased 1,000 shares of stock for $120/share Dec 15 Declared a dividend of $2/share. The dividend will be distributed to shareholders on January 19, 2019. Dec 15 H Gilmore went bankrupt so Kuechly wrote off the balance owed by H Gilmore as uncollectible (hint: Directly write-off this Account since no allowance has been made yet). Dec 20 Purchased office supplies for $13,000 in cash. Dec 25 Sold Inventory to J Lennon for $30,000 on Credit Dec 31 Sold Inventory for $200,000 in Cash Information for Adjusting Entries as of 12/31/20 A physical count of inventory finds the 12/31/20 balance to be 500 units of inventory (the company uses LIFO- Periodic Inventory System) A count of office supplies revealed $12,000 in office supplies as of 12/31 Receive the 2020 utility bill for $25,000, payable on January 31st 2021. All depreciation is straight line. Kuechly uses the balance sheet method for estimating bad debts and estimates that 5 percent of outstanding A/R at year-end will be uncollectible. The income tax rate for 2018 is 21%. *Remember to record any necessary accruals related to the transactions (e.g., interest expense, unearned rent) This case is designed to reinforce certain technical accounting skills that are a prerequisite to a solid understanding of the generally accepted accounting principles that underlie preparation of general purpose financial statements. You are tasked with the preparation of a set of 2020 financial statements for Kuechly Technology Corp., a company that purchases merchandise inventory for resale. You will be required to prepare journal entries, post those entries the general ledger, and prepare year-end adjustments, an adjusted trial balance, income statement, balance sheet, and statement of cash flows. Kuechly Technology Corp. uses the following chart of accounts (note that you may not use all these accounts): 115 Account Number Account Title 100 Cash 110 Accounts Receivable Allowance for Doubtful Accounts (AFDA) 120 Interest Receivable 130 Inventory 135 Supplies 140 Prepaid Rent 145 Prepaid Insurance 150 Available for Sale Investments (non-current) 160 Land 170 Buildings 175 Accumulated Depreciation - Buildings Equipment 185 Accumulated Depreciation - Equipment 190 Patents 180 210 220 225 230 Accounts Payable Salaries Payable Utilities Payable Interest Payable Unearned Rent Income Taxes Payable Dividends Payable Notes Payable (non-current) 235 240 245 250 300 310 320 Common Stock Additional Paid-In Capital Retained Earnings 300 310 320 325 330 350 Common Stock Additional Paid-In Capital Retained Earnings Dividends Accumulated Other Comprehensive Income Treasury Stock 400 402 410 420 430 Sales Revenue Sales Returns & Allowances Interest Revenue Rent Revenue Dividend Revenue 500 505 507 510 515 Cost of Goods Sold Purchases Purchase Returns & Allowances Salaries Expense Bad Debt Expense Rent Expense Supplies Expense Depreciation Expense - Buildings Depreciation Expense - Equipment Patent Amortization Expense 520 525 530 535 540 In addition to the income statement, balance sheet, and statement of cash flows, compile the following: General Ledger serves as a T-Account for each account. Post all journal entries to the general ledger to assist in forming the trial balance. Adjusted Trial Balance lists ALL accounts after adjusting journal entries but before closing journal entries All students must prepare their own solution to this project; however, you may discuss your work with other students. Notes for Journal Entries: 1) Kuechly uses periodic inventory system and LIFO 2) All credit sales discounts are recorded using the net method - customers receive a 3 percent discount if they pay within 30 days. 3) Purchase discounts are recorded using the net method 4) All depreciation is straight line. Additional Information for Journal Entries Kuechly records accruals for utilities expense as an adjusting journal entry at the end of each year. They pay utilities once a year on January 31st for the prior year. NOTE: There is no payment for utilities on January 31st of 2020 because January 1 of 2020 is the first day of operations. January 1 Sold 10,000 shares of common stock for $95 per share. Borrowed $2,000,000 at 8 percent with interest payable semi-annually (on July 1 and January 1). Purchased 1,000 units of inventory at $150 a piece on credit from Biggie Smalls Inc. Terms are 2/10; n/60 Paid $480,000 for 2 years of rent in advance Purchased office supplies costing $10,000 with cash Jan 20 Paid Biggie full amount owed Feb 10 Sold inventory with a list price of $22,000 to M Jagger on credit. Made cash sales of $30,000. Feb 20 Accepted a sales return from M Jagger for half of the inventory purchased (i.e., list price of $11,000); And M Jagger paid for the remainder in cash. Feb 20 Accepted a sales return from M Jagger for half of the inventory purchased (i.e., list price of $11,000); And M Jagger paid for the remainder in cash. March 15 Bought 1,000 units of inventory at $170 from Wolfpack Corporation with cash March 30 Returned 100 units of inventory to Wolfpack Corporation for cash April 30 Made cash sales of $30,000 June 30 Purchased land and a building. A $200,000 cash down payment was required and a $800,000 note was accepted by the seller for the balance (12 percent interest payable each year on June 30). The fair value of the land at the date of purchase was deemed to be 300,000 and the fair value of the building was 900,000. The building has an estimated residual value of $0 and a useful life of 30 years. September 1 Kuechly began subleasing extra space to DJ Moore. DJ Moore paid for $60,000 for six months' rent in advance. October 1 Purchased equipment for in exchange for a $30,000 non-interest bearing note due in one year. The equipment has an estimated residual value of $2,000 and a useful life of 8 years. Note: Assume an effective interest rate of 8 percent. October 1 Purchased one year of insurance in advance for $12,000 October 14 Sold inventory to H Gilmore for $100,000 on credit October 30 H Gilmore paid half of the amount owed Dec 1 Repurchased 1,000 shares of stock for $120/share Dec 15 Declared a dividend of $2/share. The dividend will be distributed to shareholders on January 19, 2019. Dec 15 H Gilmore went bankrupt so Kuechly wrote off the balance owed by H Gilmore as uncollectible (hint: Directly write-off this Account since no allowance has been made yet). Dec 20 Purchased office supplies for $13,000 in cash. Dec 25 Sold Inventory to J Lennon for $30,000 on Credit Dec 31 Sold Inventory for $200,000 in Cash Information for Adjusting Entries as of 12/31/20 A physical count of inventory finds the 12/31/20 balance to be 500 units of inventory (the company uses LIFO- Periodic Inventory System) A count of office supplies revealed $12,000 in office supplies as of 12/31 Receive the 2020 utility bill for $25,000, payable on January 31st 2021. All depreciation is straight line. Kuechly uses the balance sheet method for estimating bad debts and estimates that 5 percent of outstanding A/R at year-end will be uncollectible. The income tax rate for 2018 is 21%. *Remember to record any necessary accruals related to the transactions (e.g., interest expense, unearned rent)