Question

Comprehensive Accounting Cycle Review 6 On December 1, 2017, Shamrock, Inc. had the account balances shown below. Debits Credits Cash $5,230 Accumulated Depreciation—Equipment $1,490 Accounts Receivable 3,590 Accounts Payable 3,260 Inventory (2,900 x $0.60) 1,740 Common Stock 9,500 Equipment 20,300 Retained Earnings 16,610 $30,860 $30,860 The following transactions occurred during December. Dec. 3 Purchased 3,900 units of inventory on account at a cost of $0.68 per unit. 5 Sold 4,300 units of inventory on account for $0.80 per unit. (It sold 2,900 of the $0.60 units and 1,400 of the $0.68.) 7 Granted the December 5 customer $240 credit for 300 units of inventory returned costing $210. These units were returned to inventory. 17 Purchased 2,200 units of inventory for cash at $0.90 each. 22 Sold 2,100 units of inventory on account for $0.93 per unit. (It sold 2,100 of the $0.68 units.) Adjustment data: 1. Accrued salaries and wages payable $420. 2. Depreciation on equipment $210 per month. 3. Income tax expense was $220, to be paid next year. Prepare a classified balance sheet at December 31, 2017. (List current assets in order of liquidity.)

Answer 1

Shamrock Inc. Balance sheet At December 31, 2017 Assets Current assets: Cash Accounts receivable Inventory Total current assets Property, plant, and equipment: Equipment Less: Accumulated depreciation Total assets 3,250 8,743 2,462 14,455 20,300 -1,700 18,600 33,055 220 Liabilities and stockholders' equity Liabilities: Accounts payable 5,912 Salaries and wages payable 420 Income tax payable Total current liabilities Stockholders' equity: Common stock 9,500 Retained earnings (16,610+393) 17,003 Total liabilities and stockholder's equity 6,552 26,503 33,055

Workings:

Journal:

Credit Date Dec. 3 Account title Inventory Accounts payabale (3,900x$0.68) Debit 2,652 2,652 Dec. 5 3,440 Accounts receivable Sales revenue (4,300x$0.80) 3,440 2,692 Cost of goods sold Inventory (2,900x$0.60)+1,400x$0.68) 2,692 Dec. 7 240 Sales return and allowances Accounts receivable 240 210 Inventory Cost of goods sold Dec. 17 1,980 Inventory Cash (2,200x$0.90) 1,980 Dec. 22 1,953 Accounts receivable Sales revenue (2,100x$0.93) 1,953 1,428 Cost of goods sold Inventory (2,100x$0.68) 1,428

Adjusting entries:

Credit Date Dec. 31 Account title Salaries and wages expense Salaries and wages payable Debit 420 420 Dec. 31 210 Depreciation expense Accumulated dep. - Equipment 210 Dec. 31 220 Income tax expense Income taxes payable 220

T-accounts:

5 Dec. 1 Dec. 31 Cash ,230 Dec. 171,980 3,250 240 Dec. 1 Dec. 5 Dec. 22 Dec. 31 Accounts receivable 3,590 Dec. 7 1 3,440 1,953 8,743 2 ,692 1,428 Dec. 1 Dec. 3 Dec. 7 Dec. 17 Dec. 31 Inventory 1,740 Dec. 5 2,652 Dec. 22 210 1,980 2,462 1 Dec. 1 Dec. 31 Dec. 312 Equipment 20,300 20,300 Accounts payable Dec. 1 Dec. 3 Dec. 31 3,260 2,652 5,912

Accumulated depreciation Equipment Dec. 1 1 ,490 Dec. 31 2 10 Dec. 31 1,700 Salaries and wages payable Dec. 31 Dec. 31 420 4 20 Common stock Dec. 1 Dec. 1 9 9 ,500 ,500 Income taxes payable Dec. 31 Dec. 31 220 2 20 Retained earnings Dec. 1 Dec. 31 | 16,610 16,610 3 Sales revenue Dec. 5 Dec. 22 Dec. 31 ,440 1,953 5,393

Salaries and wages expense Dec. 31 420 Dec. 31 420 Dec. 5 Dec. 22 Dec. 31 Cost of goods sold 2 ,692 Dec. 7 1,428 3,910 Sales return and allowances Dec. 7 240 Dec. 7 240 | Dec. 31 Dec. 31 Depreciation expense 2 10 210 Dec. 31 Dec. 31 Income tax expense 220 220

Income statement Sales revenue Less: Sales returna and allowances Net sales Less: Cost of goods sold Gross profit Less: Operating expenses Salaries and wages expense Depreciation expense 5,393 -240 5,153 -3,910 1,243 420 210 630 613 Income before income tax Less: Income tax expense Net profit -220 393