Question

Prepare Financial Statements for Dec 31, 2018 from transactions listed at bottom of the page, complete with any & all Notes to the Financial Statements. Turn in Journal Entries, Trial Balance, Adjusted Journal Entries, Adjusted Trial Balance, and Post-Closing Trial Balance separately.

Madoff’s Marijuana Dispensary had the following beginning balances December 1, 2018.

Cash $ 3,000,000

Rent Expense 22,000

Inventory 150,000

Prepaid Rent 2,000

Equipment 3,000,000

Accumulated Depreciation 50,000

Accounts Payable 25,000

Salaries & Wages Payable 10,000

Advertising Expense 2,500

Notes Payable 300,000

Supplies 500

Retained Earnings 2,402,500

Preferred Stock, 3% cumulative, $1 par value $25,000

Common Stock, $0.01 par value; $100,000

Authorized 32 million shares; Issued 18 million shares

Additional Paid In Capital 500,000

Treasury Stock (8 million shares at cost) 40,000

Sales Revenue 3,000,000

Cost of Goods Sold 500,000

Loan from Owner 500,000

Insurance Expense 11,000

Salaries & Wages Expense 130,000

Utilities Expense 5,000

Supplies Expense 3,000

Prepaid Insurance 13,000

Payroll Tax Expense 10,000

Repairs & Maintenance Expense 3,500

Legal Expense 15,000

Accounting Expense 5,000

All Adjustments are made at the end of the year. The following information is relevant:

Truck is expected to last 10 years, and have a residual value of $5,000. Depreciated using the straight-line method.

Owner is to be paid back over 5 years beginning next year.

Had supplies on hand of $200

The following transactions occurred during the month:

Used $1,000 of prepaid insurance for the month of December

Used $2,000 of prepaid rent for the month of December

Dec 2 - Sold $100,000 worth of product for cash (cost us 50,000)

Dec 2- Paid employees all money owed

Dec 31 - Paid employees bonus of $15,000

Owe employees for 3 days of work (Dec 29-31) at $1,000/day

Dec 5 - Fixed windows, cost $5,000. Paid in cash

Dec 31 - Paid Accountant $3,000 for work related to December. Paid in cash.

Dec 1- Bought a new truck for $20,000 paid cash. At the end of the first year the truck had been driven 7,000 miles.

Dec 8 - Sold 1,000 shares of common stock for $10 per share, cash

Dec 10 - Repurchased 3,500 shares of stock at $15 per share

Dec 15 - Reissued 3,000 shares of Treasury stock at $30 per share (bought Dec 10^th)

Jan 2 - Sold $500,000 worth of product (cost us $250,000)

Answer 1

Please find attached Journal Entries (Both adjustment and Closing) and Trial balance (Pre-adjusted, adjustment, Post- adjusted and Post-closing): "Ref*** column provided in the TB with respect to the Journal Entries.

Ref *** Debit Credit Journal Entry Description Owner is to be paid back over 5 years beginning next year. No Entry required in current year; balance remains same as of 31st Dec 2018 300 Had supplies on hand of $200 Dr. Supplies Expense Cr. Supplies (To record closing balance of supplies ($500 - $ 200) 300 B The following transactions occurred during the month: Used $1,000 of prepaid insurance for the month of December Dr. Insurance Expense Cr. Prepaid Insurance (To record insurance expense for the month of December) 1,000 1,000 2,000 Used $2,000 of prepaid rent for the month of December Dr. Rent Expense Cr. Prepaid Rent (To record rent for the month of December) 2,000 100,000 Dec 2 - Sold $100,000 worth of product for cash (cost us 50,000) Dr. Cash Cr. Sales Revenue (To record cash sales) 100,000 50,000 Dr. Cost of Goods Sold Cr. Merchandise Inventory (To Record COGS pertains to Sale) 50,000 10,000 Dec 2- Paid employees all money owed Dr. Salaries & Wages Payable Cr. Cash (To record payment of outstanding salaries and wages) 10,000 15,000 Dec 31 - Paid employees bonus of $15,000 Dr. Bonus Expense Cr. Cash (To record payment of employee bonus) 15,000 3,000 Owe employees for 3 days of work (Dec 29-31) at $1,000/day Dr. Salaries and wages expense Cr. Salaries and wages payable (To record wages payable to employee (3 days * 1000/day) 3,000 5,000 Dec 5 - Fixed windows, cost $5,000. Paid in cash Dr. Repairs Expense Cr. Cash (To record payment of window repair expense) 5,000 3,000 Dec 31 - Paid Accountant $3,000 for work related to December. Paid in cash. Dr. Salaries and Wages Expense Cr. Cash (To record salary payment to accountant) 3,000 Dec 1- Bought a new truck for $20,000 paid cash. At the end of the first year the truck had been driven 7,000 miles. Dr. Truck Cr. Cash (To record purchase of Truck) 20,000 20,000 125 Truck is expected to last 10 years, and have a residual value of $5,000. Depreciated using the straight-line method. Dr. Depreciation Expense-Truck Cr. Accumulated Depreciation-Truck (To record depreciation expense of Truck:( (cost of 20000 minus residual value of 5000)/10 years)/12months per year) 125 M 10,000 Dec 8 - Sold 1,000 shares of common stock for $10 per share, cash Dr. Cash Cr. Common stock at par (1000 shares @ 0.01 per share) Cr. Additional paid in capital (To record sale of 1000 shares @ $10 per share) 10 9,990 52,500 Dec 10 - Repurchased 3,500 shares of stock at $15 per share Dr. Treasury Stock Cr. Cash (To record repurchase of shares @ $ 15 per share) 52,500 90,000 Dec 15 - Reissued 3,000 shares of Treasury stock at $30 per share (bought Dec 10 ) Dr. Cash Cr. Treasury Stock (3000 shares @ $ 15 per share) Cr. Additional paid in capital (To record resell of treasury stock) 45,000 45,000 Jan 2- Sold $500,000 worth of product (cost us $250,000) No entry required as of 31 Dec 2018, as this pertains to January 750 Preferred Stock Dividend payable Dr. Dividend Expense Cr. Dividend Payable (To record fixed rate dividedn on Preferred stock - 3% on 25000 shares) No Information available regarding Dividend to Common shares; hence no entry 750 3,100,000 Closing Entry 1 Dr. Sales Revenue Cr. Profit and Loss account Cr. Cost of Goods Sold Cr. Accounting Expense Cr. Advertising Expense Cr. Depreciation Expense-Truck Cr. Insurance Expense Cr. Legal Expense Cr. Rent Expense Cr. Repairs & Maintenance Cr. Payroll Tax Expense Cr. Salaries & Wages Expense Cr. Bonus Expense Cr. Supplies Expense Cr. Utilities Expense (To close income and expense account and transfer balance to profit and Loss account) 2,313,575 550,000 5,000 2,500 125 12,000 15,000 24,000 8,500 10,000 136,000 15,000 3,300 5,000 2,313,575 Closing Entry 2 Dr. Profit and Loss Account Cr. Retained Earnings (To close P&L Account and transfer balance to Retained Earnings) 2,313,575 750 Closing Entry 3 Dr. Retained Earnings Cr. Dividend Expense (To close Dividend expense account and balance transferred to Retained Earnings) 750

Unadjusted Trial Balance Debit Credit Post-closing Trial Balance (Balance Sheet) Debit Credit Adjustment Entries Debit Credit Ref*** Adjusted Trial Balance Debit Credit INCOME STATEMENT Debit Credit Closing Entries Credit Ref *** Account title Debit | 200,000 3,000,000 150,000 500 13,000 2,000 3,000,000 D,F,G,1,J,K 105,500,M,N,O 50,000 E 300A 1,000 B 2,000C 3,094,500 100,000 200 12,000 3,094,500 100,000 200 12,000 3,000,000 3,000,000 50,000 50,000 50,000 20,000 20,000 20,000 125 125 10,000 3,000 F,H 25,000 10,000 300,000 500,000 25,000 3,000 300,000 500,000 750 25,000 100,010 554,990 125 25,000 3,000 300,000 500,000 750 25,000 100,010 554,990 750P 25.000 100,000 500,000 Cash Merchandise Inventory Supplies Prepaid Insurance Prepaid Rent Equipment Accumulated Depreciation - Equipment Truck Accumulated Depreciation - Truck Accounts Payable Salaries & Wages Payable Note Payable Loan from owner Dividend Payable Preferred Stock 3% cumulative $1 par value Common Stock @ 0.01 par value Additional Paidincapital Treasury Stock Retained Earnings Sales Revenue Cost of Goods Sold Accounting Expense Advertising Expense Depreciation Expense-Truck Dividend Expense Insurance Expense Legal Expense Rent Expense Repairs & Maintenance Payroll Tax Expense Salaries & Wages Expense Bonus Expense Supplies Expense Utilities Expense Profit and Loss Account 10 M 54,990 MO 45,000 NO 40,000 52,500 47,500 47,500 4,715,325 2,402,500 3,000,000 2,402, 500 3,100,000 750 3,100,000 100,000D 3,100,000 50,000 500,000 5,000 2,500 550,000 5,000 2,500 125 125 750 1,000 11,000 15,000 12,000 15,000 550,000 5,000 2,500 125 750 12,000 15,000 24,000 8,500 10,000 136,000 15,000 3,300 5,000 2,313,575 Closing Entry 2 & 3 Closing Entry 1 550,000 Closing Entry 1 5,000 Closing Entry 1 2,500 Closing Entry 1 125 Closing Entry 1 750 Closing Entry 3 12,000 Closing Entry 1 15,000 Closing Entry 1 24,000 Closing Entry 1 8,500 Closing Entry 1 10,000 Closing Entry 1 136,000 Closing Entry 1 15,000 Closing Entry 1 3,300 Closing Entry 1 5,000 Closing Entry 1 2,313,575 Closing Entry 1 & 2 22,000 24,000 2,000 5,000 3,500 10,000 130,000 6,000 15,000 300 8,500 10,000 136,000 15,000 3,300 5,000 | 2,313,575 3,000 5,000 2,313,575 Totals 6,912,500 6,912,500 362,675 362,675 7,061,375 7,061,375 3,100,000 3,100,000 5,414,325 5,414,325 6,274,200 6,274,200