Question

Prepare a post-closing trial balance

Northeast Company

January 1, 2017,

Balance Sheet

Cash 20,000

Accounts receivable 110,000

Less: Allowance for doubtful accounts (2,000)

Inventory (500 units @ $20 each) 10,000

Equipment 9,000

Less: Accumulated depreciation (2,000) -----------------

Total assets 145,000

Accounts payable 20,000

Long-term notes payable (5% interest, due in 2019) 100,000

Capital stock 10,000

Retained earnings 15,000 -------------------

145,000

Transactions or events:

The company collected 98,000 of the accounts receivable in cash.

The company wrote off one $1,000 accounts receivable from J. Jones

On Jan. 1, the company bought a car for $30,000 on notes payable at 6%

The company paid 19,000 of its accounts payable in cash

The company bought 900 units of inventory for $21 each in cash

The company bought a 1 year insurance policy for $2400 on October 1

The company paid rent for the months January through December of $18,000

On July 1, the company bought rights to a patent for $20,000 The patent has ten more years of useful life

On Dec 1, the company paid dividends for $1,000 to it’s shareholders.

On Dec. 1, the company bought another 200 units of inventory for $22 on account

On Dec. 15, the company sold 1,300 units for $30 each. 1000 were sold for cash, and 300 on account. [The company accounts for its inventory on the FIFO basis, so the first items bought are assumed to be the first ones sold.]

The company decided to recorded depreciation on the equipment. The equipment is one year old. It had a cost of $9,000, salvage value of $1,000, and an expected useful life of 4 years. Use straight line to depreciate it

The company recorded depreciation on the car, using the straight line method, assuming it had a five year life, and salvage value of $6,000.

The company made the appropriate adjustment to reflect the fact the insurance policy only had nine more months left of effectiveness.

The company accrued the interest that had been built up on the long-term notes. The money had been borrowed on January 1, 2017. No payments of interest or principal were due until some time in 2018.

The company made the appropriate entry to record amortization on the patent on December 31.

On December 31, the company made an adjustment for the rent for December 2017.

The company recorded bad debt expense of 6% of the accounts receivable.

Answer 1

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To cash nventor .To cash 30000 Cash ccount Tecetvabler To Sale 39000 De pre daHon 4%00 Το ιαγ ις) To Insusance exp ene S00 O nteres epenue To Interest 9 CC Amottyatton of potent TD patent 18) S000 To ent payabl Bad debts 6 6O To Accoun Tecetvablel accoun urna

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A ccumulated deprectaton Openng balante ooo Deprediahon lostng balance 0oo 4000 Account paubles Opentng balomceàoo00 a000 closina balante ooo ao000 & 0000 Long term, notes paubles L5% Interest). Opentna balance 100000 closina balanceI0000 O captta s bode na balance opentn 10000 closina balance lo00o o pentna balanie IS006 Dtvfdend 4000 Closne b alanee S000 Cav 4 800 30000 cumuated Depse ctan on

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To Yen 36000 Retat earntnas To divtdend looo ost of Sale 20 800 86800 6) Paoft and los account 26 800 To coSt of Sale ao and los 6 800 Paofft and oss account 8) Sooo Sooo To fnterest expense looo accoun patent psoft and lo% 10) 66 0 accounl 66o To bad dlebt -Arsuser cannot be moe than sooo characker cut out ast ansuei So