Question

Excalibur Corporation sells video games for personal computers. The unadjusted trial balance as of December 31, 2021, appears below. December 31 is the company's reporting year-end. The company uses the perpetual inventory system. Credits Debits 51.760 21,00 48,eee 59,eee count Titl Cash Accounts receivable Supplies Prepaid rent Inventory office equipment Accumulated depreciation Accounts payable Salaries payable Notes payable Common stock Retained earnings Dividends Sales revenue Cost of goods sold Interest expense Salaries expense Rent expense Supplies expense Utility expense Totals 7,670 22.280 2,400 27.60e 60.ee 13.109 4,500 195,000 102, see 25,150 10,400 1,360 4,300 327978 Information necessary to prepare the year-end adjusting entries appears below. 1. The office equipment was purchased in 2019 and is being depreciated using the straight-line method over an eight-year useful life with no salvage value. 2. Accrued salaries at year-end should be $3,600. 3. The company borrowed $27600 on September 1, 2021. The principal is due to be repaid in 10 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 10% 4 The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $340 5. Prepaid rent at year-end should be $700. 1. Complete the worksheet below 2-s. Use the information in the worksheet to prepare an income statement for 2021. 2-b. Use the information in the worksheet to prepare a statement of shareholders' equity for 2021 2.c. Use the information in the worksheet to prepare a balance sheet as of December 31, 2021 the necessary closing entries assuming that adjusting entries have been correctly posted to the account

Answer 1

Requirement 1:

	Unadjusted		Adjustments		Adjusted		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	51,760				51,760				51,760
Accounts receivable	21,000				21,000				21,000
Supplies	0		340		340				340
Prepaid rent	0		700		700				700
Inventory	48,000				48,000				48,000
Office equipment	59,000				59,000				59,000
Accumulated depreciation		7,670		7,375		15,045				15,045
Accounts payable		22,200				22,200				22,200
Salaries payable		2,400		3,600		6,000				6,000
Interest payable		0		920		920				920
Notes payable		27,600				27,600				27,600
Common stock		60,000				60,000				60,000
Retained Earnings		13,100				13,100				13,100
Dividends	4,500				4,500				4,500
Sales revenue		195,000				195,000		195,000
Cost of goods sold	102,500				102,500		102,500
Interest expense	0		920		920		920
Salaries expense	25,150		3,600		28,750		28,750
Rent expense	10,400			700	9,700		9,700
Supplies expense	1,360			340	1,020		1,020
Utility expense	4,300				4,300		4,300
Depreciation expense			7,375		7,375		7,375
Totals	327,970	327,970			339,865	339,865	154,565	195,000	185,300	144,865
Net income							40,435			40,435
							195,000	195,000	185,300	185,300

*Interest expense to be calculated for 4 months (Aug 31 to Dec.31). Interest expense = $27,600 x 10% x (4/12) = 920

*Depreciation expense = $59,000/8 yeas = $7,375

Requirement 2a:

Income Statement
For the year ended December 31,2021
Revenues:
Sales revenue		195,000
Expenses:
Cost of goods sold	102,500
Interest expense	920
Salaries expense	28,750
Rent expense	9,700
Supplies expense	1,020
Utility expense	4,300
Depreciation expense	7,375
Total Expenses		154,565
Net income		40,435

Requirement 2b:

Statement of stockholders' equity
For the year ended December 31,2021
	Common stock	Retained earnings	Total
Beginning balance	60,000	13,100	73,100
Net income		40,435	40,435
Dividends		-4,500	-4,500
Ending balance	60,000	49,035	109,035

Requirement 2c:

Balance Sheet
For the year ended December 31,2021
Assets		Liabilities and stockholders' equity
Cash	51,760	Accounts payable	22,200
Accounts receivable	21,000	Salaries payable	6,000
Supplies	340	Interest payable	920
Prepaid rent	700	Notes payable	27,600
Inventory	48,000	Total liabilities	56,720
Office equipment	59,000	Stockholders' equity:
Accumulated depreciation	-15,045	Common stock	60,000
		Retained Earnings	49,035
		Total stockholders' equity	109,035
Total Assets	165,755	Total liabilities and stockholders' equity	165,755

Requirement 3:

Date	Account title and explanation	Debit	Credit
12/31/2021	Sales revenue	195,000
	Income Summary		195,000
	[To close revenue accounts]
12/31/2021	Income Summary	154,565
	Cost of goods sold		102,500
	Interest expense		920
	Salaries expense		28,750
	Rent expense		9,700
	Supplies expense		1,020
	Utility expense		4,300
	Depreciation expense		7,375
	[To close expenses accounts]
12/31/2021	Income summary	40,435
	Retained earnings		40,435
	[To close income summary account]
12/31/2021	Retained earnings	4,500
	Dividends		4,500
	[To close dividends account]