Question

>Save On DT Ch 9 Student Assign Ch 9 Recording liabilities US Edition at Aug 29_18 (1) (1) - Protected Home Insert Draw Page Layout Formulas Data Review View Help "ROTECTED VIEW Be careful--files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. ✓ fx A B E F G H Before you begin, print out all the pages in this workbook. The unadjusted trial balance of Morgan Manufacturing Corp. at December 31, 2019 is shown on the "Trial Bal" page (see tab below). Refer also to the additional year-end information for the company shown on the "Adjusting Entries" page (see tab below). Required: 1 Prepare year-end adjusting entries. General ledger account numbers are not necessary. Show your calculations below each adjusting entry. 2 Post the adjusting entries to the trial balance and prepare an adjusted trial balance. 3 Using the amounts from the adjusted trial balance, complete the financial statements for the year ended December 31, 2019.

Answer 1

Solution ;

1. Adjusting journal entries   

Date	Particulars	Debit	Credit
a	Accounts receivable	5400
	To Sales		5000
	To Tax payable (500*8%)		400
	(To record sales made on account )
b	Warrenty expense	271100
	To Estimated warrenty liability		271100
	( Record warrenty expense )
	Cal : Total sales for the year after making the adjustment -
	in a point a    13605000
	Provision for warrenty expene for the year @2%               272100
	less . Warrenty expenses already booked                        1000
	Balance to be booked                                                271100
c	Salary expense	10000
	FICA Soc.sec.exp (10000*4%)	400
	FICA medical exp (10000*2%)	200
	Co Health in exp ( 10000*4%)	400
	To Employee Inc. Tax pay (10000*12%)		1200
	To FICA Soc. sec.pay (10000*4%)*2		800
	To FICA Medicare payable (10000*2%)*2		400
	To Co. Health insurance payable (10000*4%)*2		800
	To Salaries payable (bal.fig)		7800
	( To record suppliers expense )
d	Professional fees	90,000
	To Professional fees payable		90,000
	( To record audit fees dues )
e	Rent revenue	40,000
	To Unearned revenue		40,000
	( January month rent received in advance )
f	Trade accounts payable	40,000
	To Notes payable		40,000
	( Trade payable converted into notes payable)
	Interest and bank charges (40000*3%*9/12)	900
	To Interest payable		900
	( Accrued interest for 3 months )
g	Lawsuit damage expense	30,000
	To Estimated current liabilities		30,000
	(Possible estimated lawsuit damages)
h	Mortgage payable [163200-(163200*8%)]	32640
	To Interest on long term debt		32640
	( Correct treatment of long term debt )
i	Corp. Tax Rec [489600- (3847440*10%)]	104856
	To Corp.inc.tax expenses		104856
	(Income tax adjustment)

2.   Trial balance at December 31 , 2019

     Accounts       Unadjusted TB       Adjustments       Adjusted TB

	Debit	Credit	Debit	Credit	Debit	Credit
Cash in bank	74000				74000
Accounts receivable	760,000		5400		765400
Parts inventory	210,000				210,000
Corps.income tax receivable			104856		104856
Land	10000,000				10000,000
Building	79,00,000				79,00,000
Accumulated depreciation-Building		1580,000				1580,000
Trade accounts payable		140,000	40,000			100,000
Interest payable				900		900
Professional fees payable				90,000		90,000
Estimated current liabilities				30,000		30,000
Estimated warranty liability	136,000			271100		135100
Salaries payable				7800		7800
Employees inc.taxes pay				1200		1200
FICA soc.sec.pay				800		800
FICA medicare payable				400		400
Co.Health insurance payable				800		800
Crop income tax payable						-
Sales tax payable		1000		400		1400
Notes payable				40,000		40,000
Unearned rent revenue				40,000		40,000
Morgage payable		1632000	32640			1599360
Common stock $1 per sh		9000,000				9000,000
Retained earnings		2963800				2963800
Rent revenue		520,000	40,000			480,000
Sales ,net		13600,000		5000		13605000
Cost of goods sold	8704,000				8704,000
Bad debt expense	3000				3000
Co.Health ins.expense	18400		400		18800
Delivery expense	300,000				300,000
Dep.expense-Building	1000				1000
FICA.Soc.sec exp	18400		400		18800
FICA medicare exp	9200		200		9400
Interest and bank charges	50,000		900		50,900
Interest on long term debt	163200			32640	130560
Law suit damages expense			30,000		30,000
Office supplies expense	99000				99,000
Professional fees	40,000		90,000		130,000
Salaries expense	460,000		10,000		470,000
Warranty expense	1000		271100		272100
Corp income tax exp	489600			104856	384744
Total	29436800	29436800	625896	625896	29676560	29676560

3.                Morgan Manufacturing Corp

             Income statement

                For the year ended December 31 , 2019

Particulars	2019	2018
Sales , net	136,05,000	12756,800
less. Cost of goods sold	(8704,000)	(9017,334)
Gross profit	4901,000	3739,466
Less . Operating expenses
Salaries and benefits	517,000	532510
Delivery	300,000	282,000
Office suppliers	99,000	99,000
Warranty	272100	247520
Total selling	1188100	1161030
General and administrative
Bad debt	3000	2790
Depreciation	1000	940
Lawsuit damages	30,000
Professional fees	130,000	143,000
Total general and administrative	164,000	146,730
Total operating expenses	1352100	1307760
Income from operations	3548900	2431696
Other income
Rent revenue	480,000	499,200
Income before interest and income taxes	4028900	2930896
Interest expenses	181460	177243
Income before income taxes	3847440	2753653
Income taxes (10%)	384744	275365
Net income	3462,696	2478,288

4. Morgan manufacturing Corp.

                     Statement of changes in equity

                   For the year ended December 31 , 2019

		2019		2018
	Common stock	Retained earnings	Total equity	Total equity
Balance at january 1	90,00,000	2963800	11963800	9485512
Add.Net income		3462,696	3462,696	2478288
	90,00,000	6426496	15426496	11963800