Question

Using the information on the 12/31/18 adjusted trial balance (page 2) complete the following two parts. Note: An accompanying EXCEL file is provided see "Trial Balance for Homework 2" Note: The owner cannot afford an accountant so she hires an accountant (you) to come in once a month during the year to make the necessary accounting. Part 1 - For the 2018 Year-End A. Prepare closing entries B. Prepare post-closing trial balance C. Prepare the balance sheet as of 12/31/18 Part 2 - For 2019 Prepare journal entries for the following events...and then prepare the trial balance as of 1/31/19 AND prepare the income Statement, Statement of Retained Earnings, and Balance Sheet for the month of January (1/31/19). For the month of January, 2019 the following events/information need to be accounted for... Event 1 - Jan. 31 -> Cash sales for the month of January were $85,000 Event 2 - Jan. 31 -> Administrative expenses for the month of January were $14,400 (total amount was paid in cash) Event 3 - Jan. 31 -> Cost of Goods Sold (COGS) for the month of January were $18,000 ($12,000 was paid in cash AND the remaining $6,000 was on account). Event 4 - Jan. 31 -> Income Tax Expense (total amount accrued) for the month of January is $6,000 Event 5 - Jan. 31 -> Depreciation expense (for the month) - equipment is $900 Event 6 - Jan. 31 -> Depreciation expense (for the month) - building is $1,200 Event 7-Jan. 31 -> Accounts receivable of $3,300 was collected. Event 8 - Jan. 31 -> Salaries and Wages payable is $0 at the end of the month. Event 9 - Jan. 31 -> Month-end physical count of inventory and supplies shows that the month end balances are as follows: Inventory -> $3,000 Supplies -> $1,200

Answer 1

Part I - For the 2018 year end

A. Closing entries:

Sales Revenue a/c ........Dr 463,850
To Profit and Loss a/c     463,850
(Being sales revenue transferred to P&L a/c)

Profit and Loss a/c .......Dr 145,000
To COGS a/c 145,000
(Being COGS transferred to P&L a/c)

Profit and Loss a/c .......Dr 15,000
To Selling Expenses 15,000
(Being selling expenses transferred to P&L a/c)

Profit and Loss a/c .......Dr 125,000
To Administrative expenses 125,000
(Being Administrative expenses transferred to P&L a/c)

Profit and Loss a/c .......Dr 75,000
To Income Tax Expense 75,000
(Being Income Tax Expense transferred to P&L a/c)

Profit and Loss a/c .......Dr 103,850
To Profit on sale of goods 103,850
(Being Profit on sale of goods accounted for and carried to Balance sheet)

B. Post Closing TB

Company Name
Adjusted TB
31-Dec-18
Particulars	Debit	Credit
Cash	85000
Accounts receivables	4300
Allowance for doubtful accounts		200
Closing Inventory	8600
Supplies	3800
Equipment	95000
Acc Depr - Equipment		10000
Building	125000
Acc Depr - Building		15000
Land	95000
Accounts Payables		14000
Salaries and Wages Payables		1200
Mortgage Payable		175000
Commpn Stock		1000
APIC		90000
Retained Earnings		6450
Profit on sale of goods		103850
Total	416700	416700

C. Balance Sheet as on 12/31/2018

	Company Name
	Closing Balance Sheet
	31-Dec-18
	Particulars	Amount
1	Equity and Liabilities
a	Sahre Capital
i	Common Stock	1000
ii	APIC	90000
b	Reserves and surplus
i	Retained Earnings	6450
ii	Profit on sale of goods for 2018	103850
c	Non Current Liabilities
d	Current Liabilities
i	Accounts Payables	14000
ii	Salaries and Wages Payables	1200
iii	Mortgage Payable	175000
	Total	391500
2	Assets
a	Non Current Assets
i	Tangible Assets (net of Depr)
	Land	95000
	Building	110000
	Equipment	85000
b	Current Assets
i	Supplies	3800
ii	Closing Inventory	8600
iii	Accounts receivables (net)	4100
iv	Cash	85000
	Total	391500

Part 2 - For 2019

a. Journal Entries:

(i) Cash a/c .................Dr 85,000
To Sales Revenue a/c 85,000
(Being Cash sales recorded)

(ii) Administrative Expenses a/c ........Dr 14,400
To Cash a/c 14,400
(Being Administrative Expenses paid full in cash)

(iii) COGS a/c .....................Dr 18,000
To Accounts Payable a/c 6,000
To Cash a/c 12,000
(Being COGS recorded with part payment being made in cash and part in credit)

(iv) Income Tax Expense a/c ..........Dr 6,000
To Income Tax payable a/c 6,000
(Being Income tax expense for Jan accrued)

(v) Depr on Equipment a/c ..........Dr 900
To Accumulated Depr - Equipment 900
(Being depr expenses on Equipment being charged)

(vi) Depr on Building a/c ..........Dr 1,200
To Accumulated Depr - Equipment 1,200
(Being depr expenses on Building being charged)

(vii) Cash a/c .......................Dr 3,300
To Accounts receivable 3,300
(Being accounts receivable collected in cash)

(viii) Salaries and wages payable a/c ...Dr 1,200
To Cash a/c 1,200
(Being Salaries and wages payable settled in cash)

(ix) COGS a/c .......................Dr     8200
To Inventory a/c 5600
To supplies a/c 2600
(Being Inventory and supplies used up in production, transferred to COGS)

b. Trial Balance

Company Name
Adjusted TB
31-Dec-19
Particulars	Debit	Credit
Cash	145700
Accounts receivables	1000
Allowance for doubtful accounts		200
Closing Inventory	3000
Supplies	1200
Equipment	95000
Acc Depr - Equipment		10900
Building	125000
Acc Depr - Building		16200
Land	95000
Accounts Payables		20000
Salaries and Wages Payables		0
Mortgage Payable		175000
Income Tax payable		6000
Common Stock		1000
APIC		90000
Retained Earnings		6450
Profit on sale of goods		103850
Sales Revenue		85000
COGS	26200
Administrative Expenses	14400
Income Tax Expense	6000
Depr on Equipment	900
Depr on Building	1200
Total	514600	514600

c. Income Statement

	Company Name
	Income Statement
	31-Dec-19
	Particulars	Amount
1	Sales and Other Incomes
a	Sales Revenue	85000
2	Expenses
a	COGS	26200
b	Administrative Expenses	14400
c	Depr on Equipment	900
d	Depr on Building	1200
	Income Before Taxes	42300
a	Income Tax Expense	6000
	Income After Taxes
	Carried to Balance Sheet	36300

d. Statement of Retained Earnings

Company Name
Statement of Retained Earnings
31-Dec-19
Opening Retained Earnings	6450
Profit on sale of goods for 2018	103850
Profit on sale of goods for 2019	36300
Closing Retained Earnings	146600

e. Balance Sheet for 2019

	Company Name
	Closing Balance Sheet
	31-Dec-19
	Particulars	Amount
1	Equity and Liabilities
a	Sahre Capital
i	Common Stock	1000
ii	APIC	90000
b	Reserves and surplus
i	Retained Earnings	146600
c	Non Current Liabilities
d	Current Liabilities
i	Accounts Payables	20000
ii	Income Tax payable	6000
iii	Mortgage Payable	175000
	Total	438600
2	Assets
a	Non Current Assets
i	Tangible Assets (net of Depr)
	Land	95000
	Building	108800
	Equipment	84100
b	Current Assets
i	Supplies	1200
ii	Closing Inventory	3000
iii	Accounts receivables (net)	800
iv	Cash	145700
	Total	438600