Question

From the information provided, prepare:

1. Adjusting Entries 2. Adjusted Trial balance 3. Income Statement 4.Classified Balance Sheet 5. Closing Entries 6.Reversing Entries 7. Post-Closing Trial Balance

The trial balance for CJ Company is presented for the year ended December S1, 0 with some additional information you may need. DEBITS CREDITS $52,345 97,775 Cash Accounts Receivable Allowance for Bad Debts Inventory $ 1,475 144,888 15,188 76,250 222,969 Prepaid Expenses Building Accumulated Depreciation Furniture and Fixtures Accumulated Depreciation Equipment Accumulated Depreciation Intangible Assets Accounts Payable 48,406 17,500 41,250 38,750 13,480 66,438 10,156 20,000 37,500 206,250 125,000 53,879 1,690,220 Interest Payable Taxes Payable Short-Term Notes Payable Long-Term Notes Payable Common Stock (no par) Retained Earnings Sales Revenue Cost of Goods Sold Selling Expense Administrative Expense Tax Expense Interest Expense 1,067,085 234,150 158,125 20,000 30,469 25,000 ance Dividends $2318,074 $2,318,074 Additional Information: Assume that all adjusting and correcting entries have been made except for the following items: 1. A sales invoice in the amount of $9,500 and its related cost of goods sold was not recorded in the general ledger as of December 31, 2001, CJ sells its inventory at a 40% markup on cost and uses a perpetual inventory system. CJ Company estimates bad debts such that the ending balance in the allowance for bad debts account is equal to 6% of the ending accounts receivable balance. This is consistent with past experience in credit collections. As of December 31, no accrual for electricity expense had been made. An electricity bill for the warehouse for $5,000 was received January 15, 2002, for electrical consumption from December 10,2001, through January 10, 2002. The bill was paid on January 20,2002, and debited to administrative expenses at that time. 2. 25 3. 4. CJ Company purchased a used delivery van on July 1,2001, for $15,000 cash. This amount was debited to selling expenses in the general ledger. The van has an estimated useful life of three years and no salvage value. 5. A used copy machine was purchased on March 15,1999, for $21,000 and debited to Equip- ment. It has a seven-year estimated useful life and no salvage value. Depreciation ex- pense was not recorded for 2001.

Answer 1

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Adjusting Entries:
Date	Account	Debit	Credit
1	Accounts Receivable	$        9,500
	Sales		$        9,500
	Cost of Goods Sold	$        6,786		9500/140%
	Inventory		$        6,786
2	Bad Debt Expense	$        4,962
	Allowance for Bad Debts		$        4,962
	Unadjusted Balance of Receivable	$     97,775
	Add: From No 1	$        9,500
	Adjusted Balance	$   107,275
	6% Ending Balance	$        6,437
	Already there in Trial	$        1,475
	Bad Deb to be recorded 6437-1475	$        4,962
3	Utilities Expense	$        3,333		5000/30*20
	Utilities Payable		$        3,333
4	Equipment	$     15,000
	Selling Expense		$     15,000
	Depreciation Expense	$        2,500		15000/3*6/12
	Accumulated Depreciation		$        2,500
5	Depreciation Expense	$        3,000		21000/7
	Accumulated Depreciation		$        3,000
Closing Entries:
a	Sales Revenue	$1,699,720
	Income Summary		$1,699,720
b	Income Summary	$1,515,410
	Cost of Goods Sold		$1,073,871
	Selling Expense		$   219,150
	Administrative Expense		$   158,125
	Tax Expense		$     20,000
	Interest Expense		$     30,469
	Utilities Expense		$        3,333
	Depreciation Expense		$        5,500
	Bad Debt Expense		$        4,962
c	Income Summary	$   184,310
	Retained earning		$   184,310
d	Retained earning	$     25,000
	Dividends		$     25,000
Reversal Entries:
e	Utilities Payable	$        3,333
	Utilities Expense		$        3,333

	Unadjusted		Adjustments		Adjusted		Post Closing
Account	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$     52,345				$     52,345		$     52,345
Accounts Receivable	$     97,775		$    9,500		$   107,275		$   107,275
Allowance for Bad Debts		$        1,475		$    4,962		$        6,437		$    6,437
Inventory	$   144,888			$    6,786	$   138,102		$   138,102
Prepaid Expense	$     15,188				$     15,188		$     15,188
Land	$     76,250				$     76,250		$     76,250
Building	$   222,969				$   222,969		$   222,969
Accumulated Depreciation		$     48,406				$     48,406		$ 48,406
Furniture and Fixtures	$     38,750				$     38,750		$     38,750
Accumulated Depreciation		$     17,500				$     17,500		$ 17,500
Equipment	$   121,600		$ 15,000		$   136,600		$   136,600
Accumulated Depreciation		$     41,250		$    5,500		$     46,750		$ 46,750
Intangible Assets	$     13,480				$     13,480		$     13,480
Accounts Payable		$     66,438				$     66,438		$ 66,438
Interest Payable		$     10,156				$     10,156		$ 10,156
Taxes Payable		$     20,000				$     20,000		$ 20,000
Utilities Payable				$    3,333		$        3,333		$    3,333
Short Temr Note Payable		$     37,500				$     37,500		$ 37,500
Long Term Note payable		$   206,250				$   206,250		$206,250
Common Stock		$   125,000				$   125,000		$125,000
Retained earning		$     53,879				$     53,879		$213,189
Sales Revenue		$1,690,220		$    9,500		$1,699,720
Cost of Goods Sold	$1,067,085		$    6,786		$1,073,871
Selling Expense	$   234,150			$ 15,000	$   219,150
Administrative Expense	$   158,125				$   158,125
Tax Expense	$     20,000				$     20,000
Interest Expense	$     30,469				$     30,469
Utilities Expense			$    3,333		$        3,333
Depreciation Expense			$    5,500		$        5,500
Bad Debt Expense			$    4,962		$        4,962
Dividends	$     25,000				$     25,000
Total	$2,318,074	$2,318,074	$ 45,081	$ 45,081	$2,341,369	$2,341,369	$   800,959	$800,959
Income Statement:
Sales Revenue		$1,699,720
Less: Cost of Goods Sold		$1,073,871
Gross Margin		$   625,849
Less: Operating Expense
Selling Expense	$   219,150
Administrative Expense	$   158,125
Utilities Expense	$        3,333
Depreciation Expense	$        5,500
Bad Debt Expense	$        4,962
Total Operating Expense		$   391,070
Net Operating Income		$   234,779
Less: Interest Expense		$     30,469
Income Before Tax		$   204,310
Less: Tax		$     20,000
Net Income		$   184,310
Statement of Retained Earning:
Beginning Balance		$     53,879
Add: Net Income		$   184,310
Less: Dividend		$     25,000
Ending Balancd		$   213,189
Balance Sheet:
Assets
Current Assets:
Cash		$     52,345
Accounts Receivable	$   107,275
Allowance for Bad Debts	$      -6,437	$   100,838
Inventory		$   138,102
Prepaid Expense		$     15,188
Total Current Assets		$   306,473
Land		$     76,250
Building	$   222,969
Accumulated Depreciation	$    -48,406	$   174,563
Furniture and Fixtures	$     38,750
Accumulated Depreciation	$    -17,500	$     21,250
Equipment	$   136,600
Accumulated Depreciation	$    -46,750	$     89,850
Intangible Assets		$     13,480
Total Assets		$   681,866
Liabilities
Current Liabilities:
Accounts Payable		$     66,438
Interest Payable		$     10,156
Taxes Payable		$     20,000
Utilities Payable		$        3,333
Short Temr Note Payable		$     37,500
Total Current Liabilities		$   137,427
Long Term Note payable		$   206,250
Total Liabilities		$   343,677
Stock Holder Equity
Common Stock		$   125,000
Retained earning		$   213,189
Total Stockholder's Equity		$   338,189
Total Liabilities and Equity		$   681,866