Question

Bruin Corporation has been authorized to issue 5,000 shares of 12 percent noncumulative, nonparticipating preferred stock with a par value of $100 per share and 200,000 shares of common stock with a par value of $10 per share. As of December 31, 2019, 2,600 shares of preferred stock and 19,000 shares of common stock had been issued. A condensed trial balance as of December 31, 2019, is provided below.

Bruin Corporation
Trial Balance (Condensed)
December 31, 2019
Account Name	Debit		Credit
Cash	48,470
Accounts Receivable	150,800
Allowance for Doubtful Accounts			3,000
Income Tax Refund Receivable
Inventory	101,000
Land	110,000
Buildings	348,000
Accumulated Depreciation—Buildings			43,500
Equipment	270,000
Accumulated Depreciation—Equipment			27,000
Accounts Payable			149,720
Dividends Payable—Preferred			31,200
Dividends Payable—Common			17,100
Accrued Expenses Payable
Income Tax Payable
Preferred Stock, 12%			260,000
Paid-in Capital in Excess of Par Value—Preferred			26,000
Common Stock			190,000
Retained Earnings			123,000
Sales (Net)			1,150,550
Purchases	700,000
Selling Expenses Control	164,800
General Expenses Control	78,700
Amortization of Organization Costs
Income Tax Expense	49,300
Income Summary
Totals	2,021,070		2,021,070

Additional information:

1. Ending merchandise inventory is $115,000. Close the beginning inventory and set up the ending inventory.
2. Depreciation of buildings is $14,500 ($11,000 is selling expense; $3,500 is general expense).
3. Depreciation of equipment is $27,000 ($18,000 is selling expense; $9,000 is general expense).
4. Accrued expenses are $10,000 ($7,000 is selling expense; $3,000 is general expense).
5. The balance in Allowance for Doubtful Accounts is adequate.
6. The $49,300 balance in Income Tax Expense represents the quarterly tax deposits. Adjust the Income Tax Expense account using the following procedure:

(1) Extend the adjusted income and expense items to the Income Statement columns of the worksheet and compute the net income before taxes.

(2) Assuming that taxable income is the same as net income before income taxes, use Table 1 to compute the federal income tax. Round the computed tax to the nearest whole dollar. Ignore state and local income taxes.

Required:

1. 1. & 3. Complete the worksheet. Enter the values of Selling Expenses control account and General Expenses control account individually.

2. Prepare the general journal entries from the above transactions as of December 31, 2019.

4. Prepare a condensed income statement for the year.
5. Prepare a balance sheet as of December 31, 2019. The balance of Retained Earnings on January 1, 2019, was $171,300. All dividends for the year were declared on December 5, 2019, and are payable January 4, 2020.
6. Journalize the closing entries on December 31.

Analyze:
Assume that dividends were declared in equal amounts over the four quarters of 2019. What percentage of Bruin Corporation’s annual income before tax was spent on dividends to stockholders?

Answer 1

1.

Selling Expense Control A/c Dr. 11000

General Expense Control A/c Dr. 1500

To Accumulated Depriciation - Building A/c 14500

( Being Depreciation on Building Charged and Bifurcated)

Selling Expense Control A/c Dr. 18000

General Expense Control A/c Dr. 9000

To Accumulated Depreciation - Equipment A/c 27000

( Being Depreciation on equipment Charged and Bifurcated)

Selling Expense Control A/c Dr. 7000

General Expense Control A/c Dr. 3000

To Accrued expense A/c 10000

( Being Accrued expense booked)

Condensed Income Statement

Particular	Amount
Sales	1150550
Consumption	686000
Selling expense control	200800
General Expense Control	94200
Net Income Before Tax	169550
Tax @ 21 % ( As per fedral tax rate of US)	35595
Income after tax	133955

* Consumption = opening inventory + Purchase during the year - Closing Inventory

= 101000+ 700000 -115000 =686000

Balance Sheet as on 31st December , 2019

Asset	Amount
Land	110000
Building ( 348000 -43500 -14500)	290000
Equipment ( 270000 -27000-27000)	216000
Accounts Receivable ( 150800 -3000)	147800
Cash	48470
Inventory	115000
Advance Tax ( 49300 -35595)	13705
Total	940975
Equity and Liablity	Amount
Preferred Stock	260000
Paid in Capital in Excess of Par Value	26000
Common Stock	190000
Retained Earning (123000 + 133955)	256955
Account Payable	149720
Accrued Expense	10000
Dividend Payable - Preferred	31200
Dividend Payable - Common	17100
Total	940975

Percentage of dividend to EBT = Dividend / EBT = 48300/169550 = 28.5 %