Question

1. $300,000 in sales on account had not been recorded but were shipped FOB Shipping Point on December 31. The cost of this inventory was $140,000. Bruce and Emmett use a perpetual inventory system.
2. Employees are allowed to carry over up to 10 days of earned vacation days per year up to 40 days. Employees earn an average of $150 per day. A total of 500 earned vacation days will be carried over to 2020. It is probable that the employees will take the vacation days.
3. Accrued wages at December 31, 2019 amount to $50,000.
4. You discover that a product sale was made and recorded in December for $50,000; the product had not yet been shipped. The cost of the product was $24,000.
5. The Prepaid Expense account balance includes the $24,000 cost of a two year insurance policy purchased on April 1, 2019. (Prepaid Expense was debited for $24,000 on April 1, 2019)
6. Depreciation & Amortization expense for the year is $150,000
7. Interest expense accrued on its long-term liabilities is $35,000.
8. A dividend of $40,000 was declared on December 16, to be paid on January 15, 2020
9. It is estimated that 5% of accounts receivable will be uncollectable.
10. Income tax expense is 30% of income before income tax.

INSTRUCTIONS:

1. Record the adjusting journal entries
2. Compute the adjusted trial balance amounts
3. Prepare in good form:
   1. Multiple Step Income Statement with an other gains and losses section
   2. Balance Sheet
   3. Retained Earnings Statement
4. Compute the following ratios: Current Ratio, Profit Margin on Sales,        Debt to Assets, Earnings per Share, and Book Value per share
5. Record Closing Entries

	Bruce and Emmett Corporation
	Unadjusted Balances
	12/31/19
		Debit	Credit
101	Cash	$                    425,000
102	Cash Equivalents	$                       38,000
103	Accounts Receivable	$                    825,000
104	Allowance for Doubtful Accounts		$                         25,000
105	Inventory	$                1,375,000
106	Prepaid expenses	$                    122,593
107	Other Current Assets	$                       25,531
121	Equipment	$                    487,000
122	Building	$                    875,000
123	Land	$                    310,000
124	Accumulated Depreciation		$                      457,500
125	Investments	$                    675,868
131	Goodwill	$                    175,000
132	Other Intangible Assets	$                    250,000
201	Accounts Payable		$                  1,144,925
202	Wages Payable		$                         80,000
204	Payroll taxes payable		$                         18,000
205	Interest Payable		$                         12,550
206	Dividends Payable		$                         50,000
207	Unearned Revenue		$                      187,500
210	Income Tax payable
212	Compensated Absence Payable
221	Long Term Liabilities		$                      688,500
301	Common Stock ($10 par)		$                      735,000
302	Paid-in Capital Common Stock		$                      157,500
310	Dividends	$                       50,000
315	Treasury Stock	$                    250,000
320	Retained Earnings		$                      369,700
401	Product Sales Revenue		$                  9,280,673
402	Service Revenue		$                  1,542,678
403	Sales Returns	$                    162,500
404	Sales Discounts	$                    269,500
420	Investment Income		$                         28,290
421	Gain/Loss on Disposal
501	Cost of Goods Sold	$                5,100,000
601	Office Expenses	$                    215,000
602	Bad debts expenses	$                                    -
603	Equipment Repair Expense	$                    150,000
604	Advertising Expense	$                    168,500
605	Depreciation Expense
607	Legal Fees	$                    205,000
608	Office Wages Expense	$                    400,000
609	Accounting Consultants	$                    100,000
610	Property Taxes	$                    107,831
611	Maintenance Expense	$                       42,500
612	Dues and subscriptions Expense	$                       22,960
613	Telephone Expense	$                       20,199
614	Utilities Expenses	$                       78,000
615	Wages Expense	$                    962,000
616	Travel & Entertainment Expense	$                    220,000
617	Research & Development	$                    290,000
618	Insurance Expense	$                       85,000
619	Income Tax Expense
620	Payroll taxes Expense	$                    168,488
625	Compensated Absence Expense
695	Interest Expense	$                       47,500
699	Miscellaneous Expense	$                       78,846

Answer 1

Bruce and Emmett Corporation General Journal Adjusting Entries 31-12-2019 Particulars Debit Credit Trans. $ 3,00,000 Accounts Receivable Product Sales Revenue 3,00,000 $ 1,40,000 COGS Inventory 1,40,000 Compensated Absence Expense 75,000 Compensated Absence Payable 75,000 500 х 150 50,000 Wages Expense Wages Payable 50,000 Cash 4 50,000 Product Sales Revenue 50,000 COGS 24,000 Inventory 24,000 Insurance Expense 24,000 Prepaid Expense 24,000 $ 1,50,000 6. Depreciation Expense Accumulated Depreciation 1,50,000 Interest Expense 35,000 Interest Payable 35,000 Dividends 40,000 Dividends Payable 40,000 Bad Debt Expense 41,250 Allowance for Doubtful Accounts 41,250 825000 x 5% $ 5,30,570 Income Tax Expense 10 Income Tax Payable 5,30,570 %24 %24 %24 %24 %24 %24 %24 %24 %24 %24 %24 %24 2. 3.

General Journal Closing Entries 31-12-2018 Particulars Debit Credit Date $96,30,673 $15,42,678 Product Sales Revenue Dec. 31 Service Revenue 28,290 Investment Income Income Summary $1,12,01,641 $ 99,63,644 Income Summary Dec. 31 Sales Returns 2$ 1,62,500 Sales Discounts 2,69,500 $ 52,64,000 Cost of Goods Sold Office Expenses 2,15,000 Bad debts expenses 2$ 41,250 2$ Equipment Repair Expense 1,50,000 2$ Advertising Expense 1,68,500 Depreciation Expense 2$ 1,50,000 2$ Legal Fees 2,05,000 Office Wages Expense 2$ 4,00,000 1,00,000 Accounting Consultants 1,07,831 Property Taxes Maintenance Expense 42,500 Dues and subscriptions Expense Telephone Expense 22,960 20,199 Utilities Expenses 78,000 $ 10,12,000 Wages Expense Travel & Entertainment Expense 2$ 2,20,000 Research & Development 2,90,000 2$ Insurance Expense Income Tax Expense 1,09,000 5,30,570 Payroll taxes Expense Compensated Absence Expense 2$ 1,68,488 2$ 75,000 2$ Interest Expense Miscellaneous Expense 82,500 78,846 $ 12,37,997 Dec. 31 Income Summary $ 12,37,997 Retained Earnings Dec. 31 Retained Earnings 90,000 Dividends 90,000

Adjusted Trial Balance 31-12-2019 Debit Credit 101 Cash 4,75,000 102 Cash Equivalents 38,000 2$ 103 Accounts Receivable 11,25,000 104 Allowance for Doubtful Accounts 66,250 105 Inventory 12,11,000 106 Prepaid expenses 2$ 98,593 107 Other Current Assets 25,531 121 Equipment 4,87,000 122 Building 8,75,000 2$ 123 Land 3.10.000 124 Accumulated Depreciation 6,07,500 125 Investments 6,75,868 131 Goodwill 1,75,000 132 Other Intangible Assets 2,50,000 201 Accounts Payable 11,44,925 202 Wages Payable 1,30,000 204 Payroll taxes payable 18,000 205 Interest Payable 47,550 2$ 206 Dividends Payable 90,000 207 Unearned Revenue 1,87,500 210 Income Tax payable 5,30,570 212 Compensated Absence Payable 75,000 221 Long Term Liabilities 301 Common Stock ($10 par) 6,88,500 7,35,000 302 Paid-in Capital Common Stock 1,57,500 310 Dividends 90,000 315 Treasury Stock 320 Retained Earnings 2,50,000 3,69,700 401 Product Sales Revenue 96,30,673 2$ 15,42,678 402 Service Revenue 403 Sales Returns 1,62,500 2,69,500 404 Sales Discounts 28,290 420 Investment Income 421 Gain/Loss on Disposal 501 Cost of Goods Sold 52,64,000 601 Office Expenses 2,15,000 602 Bad debts expenses 41,250 603 Equipment Repair Expense 1,50,000 604 Advertising Expense 1,68,500 605 Depreciation Expense 1,50,000 607 Legal Fees 2,05,000 608 Office Wages Expense 4,00,000 609 Accounting Consultants 1,00,000 610 Property Taxes 1,07,831 611 Maintenance Expense 42,500 612 Dues and subscriptions Expense 613 Telephone Expense 22,960 20,199 614 Utilities Expenses 78,000 615 Wages Expense 10,12,000 616 Travel & Entertainment Expense 2,20,000 617 Research & Development 2,90,000 1,09,000 618 Insurance Expense 619 Income Tax Expense 5,30,570 620 Payroll taxes Expense 2$ 1,68,488 625 Compensated Absence Expense 75,000 2$ 695 Interest Expense 82,500 699 Miscellaneous Expense 78,846 $1,60,49,636 $1,60,49,636 Totals

Income Statement 31-12-2019 Revenue: $ 96,30,673 $ 15,42,678 Product Sales Revenue Service Revenue 2$ Investment Income 28,290 2$ Less: Sales Returns and Allowances 1,62,500 $ 2,69,500 Sales Discounts Taken $ 1,07,69,641 Net Sales $ 52,64,000 Cost of Goods Sold $ 55,05,641 Gross Margin Operating Expenses: Office Expenses 2,15,000 Bad debts expenses 2$ 41,250 Equipment Repair Expense 1,50,000 Advertising Expense 1,68,500 2$ Depreciation Expense 1,50,000 2$ Legal Fees 2,05,000 Office Wages Expense 2$ 4,00,000 1,00,000 Accounting Consultants 2$ 1,07,831 Property Taxes Maintenance Expense 2$ 42,500 Dues and subscriptions Expense 2$ 22,960 Telephone Expense 20,199 2$ Utilities Expenses 78,000 $ 10,12,000 Wages Expense Travel & Entertainment Expense 2$ 2,20,000 Research & Development 2,90,000 Insurance Expense 2$ 1,09,000 2$ Payroll taxes Expense 1,68,488 Compensated Absence Expense 75,000 Miscellaneous Expense 78,846 $ 36,54,574 Total Operating Expenses $ 18,51,067 Operating Income (Loss) 82,500 Non-Operating Expense Interest $ 17,68,567 Income (Loss) Before Taxes $ 5,30,570 Federal Income Taxes Net Income (Loss) $ 12,37,997

Retained Earnings Statement 31-12-2019 $ 3,69,700 $12,37,997 Retained Earnings, January 1, 2018 Add: Net Income $ 16,07,697 $ (90,000) Retained Earnings, December 31, : $15,17,697 Less: Dividends Current Ratio = Current Assets / 2,906,874 / 2,223,545 Current Liabilties 1.31 Profit Margin on Sales = Net Income / 1,237,997/ 10,769,641 Net Sales 11.50% Debt to Assets = Total Liabilities / Total Assets 2,912,045 / 5,072,242 0.57 Earnings per Share = Net Income - Preferred Dividend / Weighted Average Number of Shares Outstanding 1,237,997 -0/36,750* 34 Book Value per Share = Total Common Stockholder's Equity / 2,160,197/ 73,500 Number of Common Shares 29 *735000 X .10 = 73,500 number of outstanding shares X 1/2 = 36,750

Balance Sheet 31-12-2019 Current Assets $ 4,75,000 Cash Cash Equivalents 38,000 $11,25,000 Accounts Receivable $ 66,250 Allowance for Doubtful Accounts $ 10,58,750 Accounts Receivable (Net) $ 12,11,000 Inventory Prepaid Expenses 98,593 2$ Other Current Assets 25,531 Total Current Assets 29,06,874 Property, Plant, & Equipment Equipment $ 4,87,000 $ 8,75,000 $ 3,10,000 Building Land $(6,07,500) $ Accumulated Depreciation 10,64,500 $ 6,75,868 $ 1,75,000 Investments Goodwill $ 2,50,000 $ 11,00,868 $ 21,65,368 Other Intangible Assets Property, Plant, & Equipment (Net) $ 50,72,242 Total Assets Current Liabilities $ 11,44,925 $ 1,30,000 Accounts Payable Wages Payable Payroll taxes payable Interest Payable 18,000 47,550 Dividends Payable 2$ 90,000 $ 1,87,500 $ 5,30,570 $ 75,000 Unearned Revenue Income Tax payable Compensated Absence Payable Total Current Liabilities 22.23,545 Long Term Liabilities Total Long Term Liabilities 2$ 6,88,500 Total Liabilities 2$ 29,12,045 Owner's Equity Common Stock ($10 par) 7,35,000 Paid-in Capital Common Stock 1,57,500 $ 2,50,000 Treasury Stock Retained Earnings $ 15,17,697 $ 21,60,197 $ 50,72,242 Total Owner's Equity Total Liabilities + Owner's Equity