Question

12/31/2019 Year-end Adjustment Data for Bruce and Emmett Corp is as follows:

1. $300,000 in sales on account had not been recorded but were shipped FOB Shipping Point on December 31. The cost of this inventory was $140,000. Bruce and Emmett use a perpetual inventory system.

2. Employees are allowed to carry over up to 10 days of earned vacation days per year up to 40 days. Employees earn an average of $150 per day. A total of 500 earned vacation days will be carried over to 2020. It is probable that the employees will take the vacation days.

3. Accrued wages at December 31, 2019 amount to $50,000.

4. You discover that a product sale was made and recorded in December for $50,000; the product had not yet been shipped. The cost of the product was $24,000.

5. The Prepaid Expense account balance includes the $24,000 cost of a two year insurance policy purchased on April 1, 2019. (Prepaid Expense was debited for $24,000 on April 1, 2019)

6. Depreciation & Amortization expense for the year is $150,000

7. Interest expense accrued on its long-term liabilities is $35,000.

8. A dividend of $40,000 was declared on December 16, to be paid on January 15, 2020

9. It is estimated that 5% of accounts receivable will be uncollectable.

10. Income tax expense is 30% of income before income tax.

INSTRUCTIONS: A. Record the adjusting journal entries

B. Compute the adjusted trial balance amounts

C. Prepare in good form:

a. Multiple Step Income Statement with an other gains and losses section

b. Balance Sheet

c. Retained Earnings Statement

D. Compute the following ratios: Current Ratio, Profit Margin on Sales, Debt to Assets, Earnings per Share, and Book Value per share

E. Record Closing Entries

Credit 25,000 $ 457,500 $ $ $ $ $ $ 1,144,925 80,000 18,000 12,550 50,000 187,500 $ $ 688,500 735,000 157,500 Bruce and Emmett Corporation Unadjusted Balances 12/31/2019 Debit 101 Cash $ 425,000 102 Cash Equivalents $ 38,000 103 Accounts Receivable $ 825,000 104 Allowance for Doubtful Accounts 105 Inventory $ 1,375,000 106 Prepaid expenses $ 122,593 107 Other Current Assets 25,531 121 Equipment $ 487,000 122 Building $ 875,000 123 Land $ 310,000 124 Accumulated Depreciation 125 Investments $ 675,868 131 Goodwill $ 175,000 132 Other Intangible Assets 250,000 201 Accounts Payable 202 Wages Payable 204 Payroll taxes payable 205 Interest Payable 206 Dividends Payable 207 Unearned Revenue 210 Income Tax payable 212 Compensated Absence Payable 221 Long Term Liabilities 301 Common Stock ($10 par) 302 Paid-in Capital Common Stock 310 Dividends $ 50,000 315 Treasury Stock $ 250,000 320 Retained Earnings 401 Product Sales Revenue 402 Service Revenue 403 Sales Returns $ 162,500 404 Sales Discounts $ 269,500 420 Investment Income 421 Gain/Loss on Disposal 501 Cost of Goods Sold $ 5,100,000 601 Office Expenses $ 215,000 602 Bad debts expenses 603 Equipment Repair Expense $ 150,000 604 Advertising Expense $ 168,500 605 Depreciation Expense 607 Legal Fees 205,000 608 Office Wages Expense $ 400,000 609 Accounting Consultants __ $ 100,000 610 Property Taxes 107,831 611 Maintenance Expense 42,500 612 Dues and subscriptions Expense 22,960 613 Telephone Expense 20,199 614 Utilities Expenses $ 78,000 615 Wages Expense 962,000 616 Travel & Entertainment Expense $ 220,000 617 Research & Development $ 290,000 618 Insurance Expense $ 85,000 619 Income Tax Expense 620 Payroll taxes Expense $ 168,488 625 Compensated Absence Expense 695 Interest Expense $ 47,500 699 Miscellaneous Expense 78,846 $ $ $ 369,700 9,280,673 1,542,678 28,290 Totals $ 14,777,816 $ 14,777,816

Answer 1

Requirement a: Prepare adjusting entries as follows

Credit Debit $300,000 Date Account Title and Explanation Dec 31 Accounts Receivable Sales Revenue To record adjustment for sales revenue earned $300.000 $140.000 Cost of Goods Sold Inventory To record adjustment for cost of goods sold $140,000 Compensated Absences Expense (500 x $150) $250,000 Compensated Absences Payable To record adjustment for compensated absence payable $250.000 $50,000 Wages Expense Wages Payable To record adjustment for accrued wages $50.000 $50.000 Sales Revenue Accounts Receivable To reverse sale of product not shipped $50.000 $24.000 Inventory Cost of Goods Sold To reverse cost of goods sold $24.000 $9.000 Insurance Expense (S24.000 x 9 + 24) Prepaid Insurance To record adjustment for insurance expired $9,000 $150,000 Depreciation Expense Accumulated Depreciation To record adjustment for depreciation expense $150.000 $35.000 Interest Expense Interest Payable To record adjustment for accrued interest $35,000 Bad Debt Expense ($1.075,000 x5%) - $25,000 Allowance for Doubtful Accounts To record adjustment for bad debts $28.750 $470.720 Income Tax Expense ($1,569,067 30%) Income Tax Payable To record adjustment for income tax expense $470.720

Requirement b: Prepare the adjusted trial balance (Included in the work sheet)

Requirement c: Income statement, Statement of retained earnings and Balance sheet

BE Corp Income Statement Debit Credit Account Title Cash Cash Equivalents Accounts Receivable Allowance for Doubtful Accounts Inventory Prepaid Expenses Other Current Assets Equipment Building Land Accumulated Depreciation Investments Goodwill Other Intangible Assets Accounts Payable Wages Payable Payroll Taxes Payable Interest Payable Dividends Payable Unearned Revenue Income Tax Payable Compensated Absences Payable Long-term Liabilities Common Stock (S10 Par) Paid-in Capital Common Stock Dividends Treasury Stock Retained Eamings Product Sales Revenue Service Revenue Sales Returns Sales Discounts Investment Income Gain Loss On Disposa Cost of Goods Sold Office Expenses Bad Debts Expenses Equipment Repair Expense Advertising Expense Depreciation Expense Legal Fees Ofice Wage Expense Accounting Consultants Property Taxes Maintenance Expense Dues and Subscriptions Expense Telephone Expense Utilities Expense Wages Expense Travel & Entertainment Expense Research & Development Insurance Expense Income Tax Expense Payroll Taxes Expense Compensated Absences Expense Interest Expense Miscellaneous Expense For the Year Ended December 31, 2019 Unadjusted Trial Balance Adjustments Adjusted Trial Balance Debit Credit Debit Credit Debit Credit $425,000 $425,000 $38,000 $38,000 $825.000 $300,000 $50,000 $1.075.000 $25,000 $28.750 $53.750 S1,375,000 $24,000 $140,000 $1,259,000 $122.593 $9,000 $113,593 $25.531 $25.531 S487.000 S487.000 $875,000 $875,000 $310.000 $310.000 $457,500 $150,000 $607,500 $675.868 S675,868 $175,000 $175.000 $250,000 $250,000 $1,144.925 $1.144.925 $80,000 $50,000 $130,000 $18,000 $18,000 $12.550 $35,000 $47,550 $50,000 $50,000 $187,500 S187,500 $470,720 $470.720 $250.000 $250.000 $688,500 $688,500 $735,000 $735.000 $157,500 $157,500 $50,000 $50.000 $250.000 $250.000 $369.700 $369.700 $9,280,673 $50,000 $300,000 $9,530,673 $1,542.678 $1.542.678 $162,500 $162.500 $269,500 $269,500 $28,290 $28,290 Balance Sheet Debit Credit $425,000 $38,000 $1.075,000 $53.750 $1,259,000 $113,593 $25.531 $487.000 $875,000 $310,000 $607,500 S675,868 $175,000 $250,000 $1,144.925 $130,000 $18,000 $47,550 $50,000 $187,500 $470.720 $250,000 S688,500 $735.000 $157.500 $50,000 $250.000 $369,700 $9.530,6731 $1,542,678 $162,500 $269,500 $28,290 $140.000 $24,000 S5.100.000 $215,000 $28.750 $150.000 $168.500 $150,000 S205,000 $400.000 $100,000 $107,831 $42,500 $22.960 $20.199 $78,000 $962.000 $220.000 $290,000 $85,000 $5,216.000 | $215,000 $28.750 $150.000 $168.500 $150,000 $205,000 $400,000 $100,000 $107,831 $42.500 $22.960 $20.199 $78,000 $1,012.000 S220.000 $290.000 $94.000 S470,720 $168.488 $250,000 $82,500 $78.846 $16.012.286 $5,216.000 $215,000 $28.750 $150.000 $168.500 $150,000 $205,000 $400,000 $100,000 $107,831 $42.500 $22.960 $20,199 $78,000 $1,012.000 $220.000 $290.000 $94.000 $470.720 $168,488 $250.000 $82,500 $78.846 $10.003,294 $1,098 347 $11,101.641 $50,000 $9,000 $470.720 $168.488 $250,000 $35,000 $47,500 $78.846 $14.777.816 Total $14,777,816 $1,507,470 $1,507,470 $16.012,286 $11,101.641 $6.008.992 Income Totals $4.910.645 $1,098,347 $6,008,992 $11,101.641 $6,008.992

Amount Amount $9,098,673 $1,542.678 $10.641.351 $5,216,000 $5,425,351 BE Corp Income Statement For the Year Ended December 31.2019 Particulars Amount Revenues Product Sales revenue $9,530,673 Deduct: Sales returns (S162,500) Deduct: Sales discounts ($269,500) Net product sales revenue Service Revenue Total Revenue Cost of goods sold Gross profit Operating expenses: Office Expenses Bad Debts Expenses Equipment Repair Expense Advertising Expense Depreciation Expense Legal Fees Office Wage Expense Accounting Consultants Property Taxes Maintenance Expense Dues and Subscriptions Expense Telephone Expense Utilities Expense Wages Expense Travel & Entertainment Expense Research & Development Insurance Expense Payroll Taxes Expense Compensated Absences Expense Miscellaneous Expense Total operating expenses Income from operations Other income (Expense) Interest Expense Investment income Income before income tax Income Tax Expense Net income $215.000 $28.750 $150.000 $168.500 $150.000 S205,000 $400.000 $100,000 $107.831 $42.500 $22.960 $20.199 $78,000 $1,012.000 $220.000 $290,000 $94.000 $168.488 $250.000 $78,846 $3.802.074 $1,623,277 (582,500) $28,290 ($54,210) $1,569,067 $470.720 $1,098.347

Particulars	Amount
Retained earnings - Beginning balance	$369,700
Add: Net income	$1,098,347
	$1,468,047
Deduct: Cash dividends paid	$50,000
Retained earnings - Ending balance	$1,418,047

BE Corp
Balance Sheet
At December 31, 2019
Assets	Amount	Amount	Amount
Current assets:
Cash		$425,000
Cash Equivalents		$38,000
Accounts Receivable	$1,075,000
Deduct: Allowance for uncollectible accounts	($53,750)	$1,021,250
Inventory		$1,259,000
Prepaid Expenses		$113,593
Other Current Assets		$25,531
Total Current Assets			$2,882,374
Investment			$675,868
Property, Plant, an Equipment:
Land		$310,000
Equipment	$487,000
Building	$875,000
Less: Accumulated Depreciation	($607,500)	$754,500	$1,064,500
Intangible Assets:
Goodwill		$175,000
Other Intangible Assets		$250,000	$425,000
Total Assets			$5,047,742
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable		$1,144,925
Wages Payable		$130,000
Payroll Taxes Payable		$18,000
Interest Payable		$47,550
Dividends Payable		$50,000
Unearned Revenue		$187,500
Income Tax Payable		$470,720
Compensated Absences Payable		$250,000
Total Current Liabilities			$2,298,695
Long-term Liabilities:			$688,500
Total liabilities			$2,987,195
Shareholders' Equity:
Common stock		$735,000
Paid-in Capital Common Stock		$157,500
Retained earnings		$1,418,047
Treasury stock		($250,000)
Total Stockholders' Equity			$2,060,547
Total Liabilities and Stockholders' Equity			$5,047,742

Requirement e: Closing entries

Credit Date Account Title and Explanation Dec 31 Product Sales Revenue Service Revenue Investment Income Income Summary To close revenues to income summary Debit $9,530,673 $1,542,678 $28,290 $11.101.641 $10,003,294 Income Summary Sales Returns Sales Discounts Cost of Goods Sold Office Expenses Bad Debts Expenses Equipment Repair Expense Advertising Expense Depreciation Expense Legal Fees Office Wage Expense Accounting Consultants Property Taxes Maintenance Expense Dues and Subscriptions Expense Telephone Expense Utilities Expense Wages Expense Travel & Entertainment Expense Research & Development Insurance Expense Income Tax Expense Payroll Taxes Expense Compensated Absences Expense Interest Expense Miscellaneous Expense To close expenses to income summary $162,500 $269,500 $5,216,000 $215,000 $28.750 $150.000 $168.500 $150.000 $205,000 $400.000 $100,000 $107.831 $42.500 $22.960 $20.199 $78,000 $1,012.000 $220.000 $290.000 $94.000 $470.720 $168.488 $250.000 $82,500 $78,846 $1,098,347 Income Summary Retained Earnings To close income summary to retained earnings $1,098,347 $50.000 Retained Earnings Dividends To close dividends to retained earnings $50,000