Question

Requirement 2: Compute 2019 net income using the December 31, 2019, ending balances. Ignore income taxes. DO NOT PREPARE A FORMAL INCOME STATEMENT. In December, 2019, Boomer Co. began business and had the following transactions: 1. Issued common stock in exchange for $60,000 cash. 2. On December 1, borrowed $100,000 from 1" Bank by issuing a 5-year, 12% note. The first annual interest payment is due on December 1, 2020 3. Paid $96,000 to purchase a building 4. Paid $1,500 for supplies 5. Purchased Inventory for $40,000 on account from OU Co. 6. Sold merchandise on account for $42,000. The cost of the merchandise sold was $18,000. 7. Paid $33,000 on account to Ou Co. & Received $2,000 from customers in advance for products to be delivered in 2020. 9. Paid $15,000 to employees for December salaries. 10. Received $25.000 from customers on account. 11. Paid $1,000 for dividends. 12. Recorded an adjusting entry for $800 depreciation on the building 13. Recorded an adjusting entry for supplies; the amount on hand at year-end was $1,200. Show computations. 14. Recorded other necessary adjusting entries, if any, for 2019. Show computations. Requirement 3: Compute the December 31, 2019, balance in Retained Earnings. Beginning Retained Earnings is $0.CLOSI ENTRIES ARE NOT REQUIRED. Requirement 1: Record the 2019 transactions in the T-accounts below AND determine the December 31, 2019, ending balances. Use the number of each transaction to identify the entries in the T-accounts as shown for transaction 1. You may abbreviate the names of account titles. You may not use every T-account. BE SURE THAT EACH ENTRY HAS A DEBIT AND A CREDIT. Cash 1. 60.000 Requirement 4: Prepare the December 31, 2019, CLASSIFIED balance sheet by including: 1) 12-31-19 ending balances in asset/contra-asset and liability accounts (use balances after adjusting entries). 2) 12-31-19 ending balances in shareholders' equity accounts. If the balance sheet does not balance, work other problems and come back to this if you have time, DO NOT USE A "PLUG" AMOUNT TO GET IT TO BALANCE! ASSETS LIABILITIES Current liabilities Current assets Common Stock 1. 60,000 Long-term liabilities Total liabilities Long-term assets SHAREHOLDERS' EQUITY Total shareholders' equity Total assets Total liabilities and shareholders' equity

Answer 1

Prepare journal entries as follows:

Trn.	Account Title	Debit	Credit
1	Cash	$60,000
	Common stock		$60,000
2	Cash	$100,000
	Note payable		$100,000
3	Building	$96,000
	Cash		$96,000
4	Supplies	$1,500
	Cash		$1,500
5	Inventory	$40,000
	Accounts payable		$40,000
6	Accounts receivable	$42,000
	Sale		$42,000
6(a)	COGS	$18,000
	Inventory		$18,000
7	Accounts payable	$33,000
	Cash		$33,000
8	Cash	$2,000
	Advance from customer		$2,000
9	Salaries expense	$15,000
	Cash		$15,000
10	Cash	$25,000
	Accounts receivable		$25,000
11	Dividend	$1,000
	Cash		$1,000
12	Depreciation expense	$800
	Accumulated depreciation-Building		$800
13	Supplies expense ($1500-$1200)	$300
	Supplies		$300
14	Interest expense	$1,000
	Interest payable ($100,000 × 12% ×1/12)		$1,000

__________________________________________________________________________

Prepare t-accounts as follows:

Cash
1	$60,000	3	$96,000
2	$100,000	4	$1,500
8	$2,000	7	$33,000
10	$25,000	9	$15,000
		11	$1,000
End. Bal.	$40,500
Common stock
		1	$60,000
		End. Bal.	$60,000
Building
3	$96,000
End. Bal.	$96,000
Note payable
		2	$100,000
		End. Bal.	$100,000
Supplies
4	$1,500	13	$300
End. Bal.	$1,200
Inventory
5	$40,000	6(a)	$18,000
End. Bal.	$22,000
Accounts receivable
6	$42,000	10	$25,000
End. Bal.	$17,000
Accumulated depreciation -Building
		12	$800
		End. Bal.	$800
Interest payable
		14	$1,000
		End. Bal.	$1,000

COGS
6(a)	$18,000
End. Bal.	$18,000
Sale
		6	$42,000
		End. Bal.	$42,000
Accounts payable
7	$33,000	5	$40,000
		End. Bal.	$7,000
Advance from customer
		8	$2,000
		End. Bal.	$2,000
Salaries expense
9	$15,000
End. Bal.	$15,000
Dividend
11	$1,000
End. Bal.	$1,000
Depreciation expense
12	$800
End. Bal.	$800
Supplies expense
13	$300
End. Bal.	$300
Interest expense
14	$1,000
End. Bal.	$1,000

_____________________________________________________________________

Prepare Trial balance as follows:

Trial Balance
	Debit	Credit
Cash	$40,500
Accounts receivable	$17,000
Supplies	$1,200
Inventory	$22,000
Building	$96,000
Accounts payable		$7,000
Note payable		$100,000
Interest payable		$1,000
Advance from customer		$2,000
Common stock		$60,000
Sale		$42,000
COGS	$18,000
Accumulated depreciation-Building		$800
Interest expense	$1,000
Salaries expense	$15,000
Depreciation expense	$800
Supplies expense	$300
Dividend	$1,000
Total	$212,800	$212,800

_________________________________________________________________________

Prepare income statement and retained earnings as follows:

Income Statement $42.000 ($18,000) $24,000 Sale Less: COGS Gross profit Less: Operating expense: Salaries expense Depreciation expense Supplies expense Interest expense $15,000 $800 $300 $1,000 $17,100 Net Income $6,900 Statement of Retained Earnings Beginning balance Add: Net Income Less: Dividends Ending balance $6.900 ($1,000) $5,900

____________________________________________________________________

Prepare Balance Sheet as follows:

Balance Sheet
ASSETS
Current assets:
Cash	$40,500
Accounts receivable	$17,000
Supplies	$1,200
Inventory	$22,000
Total Current assets		$80,700
Long-term assets:
Building	$96,000
Less: Accumulated Depr.-Building	($800)	$95,200
Total Assets		$175,900
LIABILITIES
Current liabilities:
Accounts payable	$7,000
Interest payable	$1,000
Advance from customer	$2,000
Total Current liabilities		$10,000
Note payable		$100,000
Stockholders' equity
Common stock	$60,000
Retained Earnings	$5,900	$65,900
Total Liabilities & SE		$175,900