Question

On 1/1 ABC issued 100,000 shares of 2.00 par stock for $2,000,000 in cash. On 3/1 ABC Prepaid a year’s worth of rent. The rent is $3,000 per month. During the year - ABC purchased the following inventory items in the following order: 20,000 units at $1.00/per unit. 30,000 units at $1.50/unit. 50,000 units at $1.75/unit; and 30,000 units at $2.00/unit. These purchases were made on account. On 4/1 ABC purchased equipment for $100,000 signing a 5% note. Interest only is due each January 1 and the loan face is due in 3 years. ABC purchased $30,000 supplies with cash. ABC sold inventory over the year. ABC uses the periodic LIFO method. ABC sold 72,000 units at a price of $20.00/unit. On December 15, we received $50,000 in cash; and signed an agreement to deliver the inventory in January of next year. By year-end 60% of the accounts payable was paid down. $840,000 of the receivable has been received. At year-end the appropriate depreciation is $10,000. Supplies count revealed that there is only $2,000 of supplies still on hand. Salaries paid during the year is $30 000. Salaries incurred but not yet paid equals $5,000. We use a percent of receivable method for estimating bad debt. We estimate that 1% of the receivable is non-collectible. ABC wrote off $1,000 of the receivable at year-end. The tax rate is 21%. We will not immediately pay the tax but accrue it as a current liability Prepare all JEs (closing entries), income statement and balance sheet (classified) in good form.

Answer 1