Question

First Thing: Save This File as Your Whole Name

After nearly destroying the city of Springfield USA because of many near nuclear melt downs caused by Homer Simpson, Mr. Burns decided to go into selling cookies. On January 2, 2020, Mr. Burn continued his Good Old Fashion Cookies Empire. The company is still a merchandise company and still uses a perpetual inventory system.

1. Prepare all the journal entries on a document. (To be turned in separately)

2. Post all journal entries to the worksheet

3. Post all adjusting journal entries to the worksheet

4. In good form, produce a multi step Income Statement, Statement of Retained

     Earnings, Balance Sheet, and Statement of Cash Flow

Misc Information: Mr. Burns sold off all of his fixed assets from the nuclear power plant. Also, there was an adjustment to the allowance for uncollectible account during your brief respite. Mr. Smithers performed the necessary entries to get the books up to date; this included the reduction of the mortgage payable. However, you will calculate interest expense, bad debt expense, and depreciation expense. These amounts will not be given to you. Good luck and time manage appropriately. ***For any note/mortgage payable, you find interest expense the same way you find interest revenue. ***

Check Figures:

                        Unadjusted Net Loss: ($9,737)

                        Adjusted Net Loss: ($360,991)

Journal Entries:

1. January 2: After returning from exile, Mr. Burns invested $600,000 of personal funds directly in the business (retained earnings) to strengthen his grip on the cookie market. No common stock ownership was given.

2. January 3: In order to keep the IRS off his trail, Mr. Burns transferred money from his personal account into a Cayman Island secret account for $1,000,000.

3. January 3: In order to expand his cookie factory and be able to dump toxic waste without being impeded by the Feds, Mr. Burns bought land for cash for $500,000. The bald children in the park were drawing attention from the Environmental Protection Agency.

4. January 4: After threatening to block out the sun, Mr. Burns was able to collect $115,000 of the 2020 accounts receivable beginning balance.

5. January 5: In order to ease his beginning of the year cash flow crunch, Mr. Burns issued Common Stock (1,500,000 shares at $2.00 per share). The Par Value is $1.00 per share.

6. February 1: In order to keep up with being 104 year old hip evil billionaire, Mr. Burns decided to purchase a new truck. The truck cost $60,000. Mr. Burns put a down payment on the truck of $10,000 and took out a note for the rest (long term). The interest rate of the note is 10%. The truck will depreciated by miles. The expected life of the truck is 100,000 miles.

7. February 20: Mr. Burns sold his delicious cookies to Candy Store on account $300,000. Mr. Burns offered terms 2/20, n40. The cost of merchandise sold was $150,000.

8. February 28: Mr. Burns bought cookie dough (inventory) to keep the cookie assembly line going. Mr. Burns paid cash for the cookie dough $400,000

9. March 1^st. Mr. Burns reclassed the current portion of long term notes payable. Reclass only the portion on the balance sheet as of January 1st, 2020.

10. March 5: Mr. Burns paid for the following expenses that came in: Sales Salary Expense $70,000, Advertising Expense $50,000, and Delivery Expense $40,000. All of the expenses were paid in one transaction.

11. March 6: Mr. Burns collected $30,000 of the 1/1/2020 balance of the note receivable from Mayor Quimby. The interest rate was 15% and the Note was written on July 1^th, 2019

12. March 7: The Candy Store paid Mr. Burns what they owed him on account.

13. March 15: Mr. Burns paid income tax payable owed from last year.

14. April 1: Not liking being accountable to outside shareholders, Mr. Burns decided to buy back some treasury stock. Mr. Burns bought the $1.00 per value shares back (300,000 shares) at $.50 per share.

15. April 4: Because of cockroaches in some of the radioactive cookie dough, Mr. Burns was required to buy additional inventory. He paid $98,000 for the inventory.

16. April 10: Mr. Burns paid for the following expenses: Advertising $100,000, Office Salaries $80,000, Wages $40,000, and Utility $10,000. All expense transactions were settled with one payment transaction.

17. May 01: The Grocery Store bought $400,000 of cookies on account. Mr. Burns was still angry that his casino got shutdown so there were no discount terms. The cost of the inventory was $200,000

18. June 1: Having its own cash flow crunch, The Grocery Store paid Mr. Burns $100,000 and issued a note for $300,000. Against their better judgment, they agreed to the terms of 14%

19.   June 2: Mr. Burns issued a 2:1 Stock Split

20. June 3: Mr. Burns bought back an additional 200,000 shares of Treasury Stock at $.50 per share

21. June 21: The following expenses accrued and are to be paid in a later month: Pension Expense $60,000, Health Insurance Expense $50,000, and Professional Fees $10,000.

22. July 1. Mr. Burns issued $600,000, 10 years (semi annual payments) coupon rate of 10%, market rate of 12%. Mr. Smithers gave this bond the code name Bond #1

23. July 1. Mr. Burns issued $500,000 bond (Bond #2) 10 years (semi-annual payments) coupon rate of 12%, market rate of 10%.

24. September 8: Mr. Burns paid the expenses accrued on June 21. The accrued expenses were paid with one check transaction.

25. October 1: The Grocery Store paid the principle of the note and the interest.

26   October 15: Mr. Burns wrote off the amount sitting in allowance for doubtful account because Abe Simpson refused to pay for the cookies he bought in 2019. Mr. Burns used $50,000 of personal funds to hire a hit squad to go after Abe Simpson.

27. November 1: After being advised by legal counsel and Mr. Smithers that killing off competition was considered murder, Mr. Burns decided to get a patent to keep from his secrets from being used by his rivals. He paid $200,000 for his patent which will be amortized for 15 years.

28. December 1: Mr. Burns bought Cookie Dough and paid for the amount up front to get a bulk discount. The amount paid is $400,000

29. December 8: Mr. Burns bought office supplies on account from Staples for $50,000.

30. December 9 Mr. Burns sold $400,000 of cookies on account to Shelbyville. The cost of sales was $200,000

31. December 25: Mr. Burns paid a cash dividend after being visited by the three ghosts of Christmas to the Shareholder $400,000

32. December 31: Mr. Burns made interest payment on Bond #1. Use effective interest method. The payments are considered to be ordinary annuities

33. December 31: Mr. Burns made interest payment on Bond #2 Use effective interest method. The payments are considered to be ordinary annuities

Adjusting Entries:

At December 31, 2020, Mr. Burns Good Old Fashion Cookies made the following adjusting entries.

A1. Mr. Burns recorded the depreciation for the fixed assets. The truck had 50,000 miles at December 31 and has an expected life of 3 years. Round to the nearest dollar. The other assets used double-declining balance. Use one entry for expense portion.

A2. 75% of Mr. Burns Prepaid Rent Expired, 50% of Prepaid Ins Expired

A3. After Physical Inventory Conducted: Balance in plant supplies at year end: $900. Balance in office supplies at year end: $20,000

A4. Income Taxes accrued $70,000. This is to be paid March 15, 2021

A5. Office Salaries accrued $20,000. Wages accrued $15,000

A6. Mr. Burns uses the balance sheet approach to estimate how money he will lose in uncollectible accounts. Since the city of Springfield is in a serve recession, Mr. Smithers estimated for Mr. Burns that 8% of this year ending accounts receivable will be uncollectible.

A7. Two months of the patent have expired.

A8. Mr. Smithers discovered a sale on account earned by not yet recorded, $60,000. Since this amount was discovered after the estimate for uncollectible account, this amount WILL not be included in adjusting entry A6. There were no discount terms

A9. 70% of the unearned sales revenue was earned in 2020

A10 Physical Inventory count results $448,000. The amount is considered immaterial and can be adjusted to Cost of Goods Sold

Closing Entries:

C1. Close Revenues & Expenses directly to Retained Earnings

C2. Close Cash Dividends to Retained Earnings