Question

Facts: During January and February 2015, Stackhouse, Connelly, and Teagarden Enterprises (SCT Enterprises) participated in the following transactions: Jan 1 Inventory on hand includes 500 widgets at a cost of $10 each (no journal entry is necessary, but you should make a note that these are the items that comprise the beginning inventory balance). 2 Purchased two new delivery trucks for $75,000 by signing a five-year note payable. The note carries a 5% interest rate and is due in equal monthly installments of principal and interest. Payments are due on the 2nd of each month. Note: you need to determine the amount of each monthly payment. 3 Paid employees $15,000 for wages earned in December. 7 Purchased 11,000 widgets at a cost of $11 each on account. 11 Paid various utility bills of $1,800 for the month of January. 13 Sold 3,000 widgets on account for $60,000. 14 Paid employees $15,000 wages for the first half of the month. 19 Paid $75,000 to suppliers for previous inventory purchases. 20 Delivered 300 widgets to the customer who prepaid in December. 26 Collected $90,000 on account from customers. Feb 1 Paid employees $15,000 for wages due from January. 2 Made required payment on truck notes. 8 Purchased 20,000 widgets at a cost of $9 each on account. 11 Paid various utility bills of $2,100 for the month of February. 14 Sold 5,000 widgets to a customer for cash of $100,000. 15 Paid employees $15,000 wages for the first half of the month. 21 Learned that a customer has declared bankruptcy and determined that the $1,000 owed by the customer to SCT should be written-off. 23 Purchased 10,000 widgets at a cost of $8 each on account. 24 Sold 13,000 units on account for $325,000. 28 Collected $20,000 on account from customers. Required (round all computations to the nearest whole dollar): 1. Prepare entries to record the above transactions. a. The perpetual LIFO inventory method is used. b. No adjustments have been made to the 12/31/2014 ending balances (e.g. the ending balances from 2014 are the starting point for this part of the case). Hint: SCT Enterprises was the company in the review problem at the beginning of the semester. c. Transactions from December may have an impact on January and February (e.g. review the facts from the prior portion of the case). d. Round all amounts to the nearest whole dollar. 2. Prepare an unadjusted trial balance. 3. Prepare adjusting entries for January and February (prepare one set of AJEs for both months at once), considering: a. Depreciation on the equipment is $36,000 per year. b. Depreciation on the delivery trucks is $7,500 each per year. Assume SCT’s policy is to report one full month of depreciation in the month of acquisition. c. Interest expense for both months. d. Rent expense e. Unpaid wages; assume employees earned wages evenly throughout each month. f. Bad debt expense assuming SCT estimates that 5% of accounts receivable are uncollectible. g. Insurance expense h. Last year, SCT owed (and accrued) no taxes because of available tax credits. Current earnings place SCT in the 30% tax bracket, but management believes the firm will actually pay an effective tax rate of 34% considering expected earnings for the full year. 4. Prepare an adjusted trial balance. 5. Prepare the four basic financial statements for the two months ending 2/28/2015. You should prepare a multiple-step income statement, classified balance sheet, and the statement of cash flows using the indirect method to prepare the operating section. Assume 10,000 shares of common stock have been issued and remain outstanding.

Answer 1

Given the snfasmabion. Pesase the onal enlsies iven tsansactions Date asticolass Jan-2 Delivesy 2015 To 5% notes payable A/C eing: Del ive bucks on 5%notes 75000 Paid an-3cwaqes payable Alc Dr Sooo To Cash Alc S000 feeing: ωages paid] r 1,21,000 To Accoont payable Alc 1,21,000 Inventasy Accourt paid Zm-' utility Expenses Ale Or 1godo To cash Ale eeing Paid ilily ExpensesJ goo dan-18 Accounts Receivable Ale DY G, ooo To 6ales 60,000 [Being:Account čeceivej Jam-13 Cost of oods sold Alc 38,000 To Inventosy Alc [Being Cosl of seod as eld

(2 m ooges Expenses Alc To cash Alc seing: wages espenses as paid 15,000 Dr 75,00o account payable Aloc Jan-lq 75,000 lo Cash Alc seeng, cAccoont paid by ca an-20Un casned Revene Alc 500 0 To Sales A lc evenue ωακ sold Ds 330o n.90 Cost of gods Sold A 3,300 To Inventosy Alc Leny: Cast of gooswa5 Sold」 Jan-2b CaS a0,000 70,000 e Being : Account Kece,"ve d by cash Feb.-I 2015 ωages Payable A/c To Cash Alc 5000 Cas OY 313 esesl payable Ac 5% Notes payable Ale To Cash Alc 1,415 Being: Inteses! paid on 5% notes

ών | 1,80,000 Feb-8 Invenlosų Alc 80,000 To Accovnts payable Alc Being Accovnt paio Feb- ility Espense Alc Oy 2,l00 2,loo To cash Alc Being: ility espanses aas pa y cash reb-I4 Cest of goaods sold Alc 5,000 To Inverkosu А/С Beinq i Cost of qcods cwas ol unges espense Ale 45,000 To Cash Alc [aeing s espenses n paid 15,000 reb-2 Bad debts Expenses Alclooo To Accounts seceiva ble Ale eeing: coont secived Tnentoryg Alc 1 000 Feb-23 D 80,000 To Acounts payable Alk го,соо Deing Accoonts payable Feb-24 Cost of goods sold Alc 102000 07,000 To InVentosg Alc ?eing cost oF goods cas sold

Feb Accoont seceivable Alc Фу! 305000 24 To sales Alc 325000 [Being Account eceivable was gold Feb-28 Cash Alc To Account seceivable Alc fseing: eonl seceived by cash 20,0od