Question

Set forth below is the adjusted trial balance of the Trough Corp. as of 31 March 20X2:

Account		Debit			Credit
Cash	$	24,300
Accounts receivable		70,800
Merchandise inventory		85,730
Prepaid rent		7,900
Equipment		48,300
Accumulated depreciation				$	8,910
Accounts payable					54,960
Note payable					38,700
Accrued interest payable					700
Capital stock					8,750
Retained earnings					125,010
	$	237,030		$	237,030

The following information describes the company’s April transactions and provides the data required for month-end adjustments:

Cash sales were $85,800.

Sales on account were $78,500.

Repaid $9,900 of note payable principal on 1 April.

Operating expenses of $24,750 were paid in cash.

Collected $40,590 in cash from customers on account.

Wrote off $1,980 of accounts receivable as uncollectible. No other accounts receivable are in doubt of collection.

Shareholders invested $19,900 in the business in exchange for 1,000 common shares.

Bought $81,900 of merchandise on account.

Ending merchandise inventory was $53,300.

Paid suppliers $36,900 on account.

Spent $4,900 for advertising to take place in May 20X2.

Paid $14,200 in cash for wages, and still owed $2,400 for wages at month-end.

The rent had previously been paid in advance to 31 July 20X2.

The equipment has a total useful life of 10 years, and salvage of $3,900. These estimates have not changed since the asset was first acquired.

The note payable bears an interest rate of 6% per year, and interest is due on 1 May.

Required:

1. Journalize the April transactions and adjusting journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

2. Prepare a Statement of Comprehensive Income and Statement of Financial Position for the month of April.

Answer 1

1	Journal Entry
	Transactions	Debit	Credit
	Cash	$85,800
	To Sales		$85,800
	(Being cash sales recorded)
	Accounts Receivable	$78,500
	To Sales		$78,500
	(Being credit sales recorded)
	Note Payable	$9,900
	To Cash		$9,900
	(Being repayment of note payable)
	Operating Expenses	$24,750
	To Cash		$24,750
	(Being operating expenses paid)
	Cash	$40,590
	To Accounts receivable		$40,590
	(Being cash received on account from customers)
	Bad Debt Expense	$1,980
	To Uncollectible receivables		$1,980
	(Being write off of accounts receivable as uncollectible)
	Cash	$19,900
	To Capital Stock		$19,900
	(Being additional investment by shareholders)
	Purchases	$81,900
	To Accounts Payable		$81,900
	(Being merchandise purchase on account)
	No Entry
	Accounts Payable	$36,900
	To Cash		$36,900
	(Being amount paid to suppliers)
	Prepaid Advertising	$4,900
	To Cash		$4,900
	(Being prepaid advertising paid)
	Wages Expenses	$16,600
	To Cash		$14,200
	To Wages Payable		$2,400
	(Being wages expenses recorded)
	Rent Expense	1975
	To Prepaid rent		1975
	(7900/4)
	(Being rent expense recorded for April)
	Depreciation	$4,440
	To Accumulated Depreciation		$4,440
	(48300-3900)/10
	(Being depreciation charge to equipment)
	Interest Expense	$144
	To Accrued Interest Payable		$144
	(38700-9900)*6%/12
	(Being interest accrued for April)
	Trough Corp
	INCOME STATEMENT FOR THE MONTH APRIL 20X2
	Sales		$164,300	164300
	Less : Cost of Goods Sold
	Opening Merchandise	$85,730
	Add : Purchases	$81,900
	Less : Closing Merchandise	$53,300	$114,330
	Gross Profit		$49,970
	Less : Wages Expense	$16,600
	Depreciation	$4,440
	Rent Expense	$1,975
	Operating Expenses	$24,750
	Bad Debt Expense	$1,980
	Interest Expense	$144	$49,889
	Net Income		$81
	COGS = 85730+81900-36900
	Trough Corp
	FINANCIAL POSITION AS ON 30TH APRIL 20X2
	Cash			$79,940	(24300+85800-9900-24750+40590+19900-36900-4900-14200)
	Accounts Receivable			$106,730	(70800+78500-40590-1980)
	Merchandise Inventory			$53,300
	Prepaid Rent			$5,925	(7900-1975)
	Prepaid Advertising			$4,900
	Total Current assets			$250,795
	Equipment		48300
	Less : Accumulated Depreciation		13350	$34,950
	Total Assets			$285,745
	Liabilities
	Accounts Payable			$99,960	(54960+81900-36900)
	Note Payable			$28,800	(38700-9900)
	Accrued Interest Payable			$844	(700+144)
	Wages Payable			$2,400
	Total Current Liabilities			$132,004
	Stockholers Equity			$28,650	8750+19900
	Common Stock			$125,091	(125010+81)
	Retained Earnings
	Total Liabilities and Shareholders Equity			$285,745