Question

ACR7 On December 1, 2022, Ravenwood Company had the following account balances. Debit Credit Cash $18,200 Accumulated Depreciation- Equipment Accounts Payable Common Stock Notes Receivable 2,000 S3.000 Accounts Receivable 7,500 6,100 Inventory Prepaid Insurance Equipment 16,000 50,000 1,600 Retained Earningp 14,200 28,000 $73300 $73,300 During December, the company completed the following transactions Received $3,600 cash from customers in payment of account (no discount allowed) Purchased merchandise on account from Greene Co. $12,000, terms 1/10, n/30 Sold merchandise on account $16,000, terms 2/10, n/30. The cost of the merchandise Dec. 7 12 17 sold was $10,000 Paid salaries $2,200 19 Paid Greene Co, in full, less discount 22 Received collections in full, less discounts, from customers billed on December 17. 26 Received $2,700 cash from customers in payment of account (no discount allowed) 31 Adjustment data: 1. Depreciation $200 per month. 2. Insurance expired $400. 3. Income tax expense was $425, It was unpaid at December 31. Expand Your Critical Thinking 00nonimAool Instructions a. Journalize the December transactions. (Assume a perpetual inventory system.) b. Enter the December 1 balances in the ledger T-accounts and post the December transactions, Use Cost of Goods Sold, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Sales Revenue, Sales Discounts, Income Taxes Payable, and Income Tax Expense. c. The statement from Lyon County Bank on December 31 showed a balance of $25,930. A comparison. of the bank statement with the Cash account revealed the following facts. 1. The bank collected the $2,000 note receivable for Ravenwood Company on December 15 through electronic funds transfer. 2. The December 31 receipts were deposited in a night deposit vault on December 31. These deposits were recorded by the bank in January 3. Checks outstanding on December 31 totaled $1,210. 4. On December 31, the bank statement showed a NSF charge of $680 for a check received by the company from M. Lawrence, a customer, on account. Prepare a bank reconciliation as of December 31 based on the available informatiion, (Hint The cash balance per books is $26,100. This can be proven by finding the balance in the Cash account from parts (a) and (b).) d. Journalize the adjusting entries resulting from the bank reconciliation and adjustment data. e. Post the adjusting entries to the ledger T-accounts. f. Prepare an adjusted trial balance Prepare an income statement for December and a classified balance sheet at December 31. Totals & Net income Total assets

Answer 1

	a. Journal entries
Date	Account Title	Debit	Credit
7-Dec	Cash	3600
	Accounts Receivable		3600
12-Dec	Inventory	12000
	Accounts payable		12000
17-Dec	Accounts Receivable	16000
	Sales revenue		16000
	COGS	10000
	Inventory		10000
19-Dec	Salaries expense	2200
	Cash		2200
22-Dec	Accounts payable	12000
	Inventory(12000*1%)		120
	Cash		11880
26-Dec	Cash	15680
	Sales discounts(16000*2%)	320
	Accounts Receivable		16000
31-Dec	Cash	2700
	Accounts Receivable		2700
1	Depreciation expense	200
	Acc.Depn.-Eqpt.		200
2	Insurance expense	400
	Prepaid Insurance		400
3	Income tax expense	425
	Income tax payable		425
d.	Bank reconciliation adj. entries
	Cash	2000
	Note receivable		2000
	Miscellaneous expense	680
	Cash		680
		78205	78205

c.Bank Reconciliation Statement as at Dec 31
Balance as per bank statement	25930
Add: Dec 31 deposit	2700
Less: Checks O/s	-1210
Adjusted balance as per bank	27420
Balance as per cash a/c	26100
Add: Note receivable collected by bank	2000
Less: NSF charge	-680
Adjusted balance as cash a/c	27420

f.Adjusted Trial Balance
Cash	27420
Accounts Receivable	1200
Inventory	17880
Prepaid Insurance	1200
Equipment	28000
Acc.Depn.-Eqpt.		3200
Accounts payable		6100
Income tax payable		425
Common stock		50000
Retained Earnings		14200
Sales revenue		16000
Sales discounts	320
COGS	10000
Depreciation expense	200
Insurance expense	400
Salaries expense	2200
Miscellaneous expense	680
Income tax expense	425
Totals	89925	89925

g.Income Statement
Sales revenue	16000
Less:Sales discounts	320
Net sales		15680
Less: COGS		10000
Gross profit		5680
Less: Operating expenses:
Depreciation expense	200
Insurance expense	400
Salaries expense	2200
Miscellaneous expense	680	3480
Income before tax		2200
Less:Income tax expense		425
Net Income		1775

Classified Balance Sheet
Current assets
Cash	27420
Accounts Receivable	1200
Inventory	17880
Prepaid Insurance	1200
Total current assets		47700
Fixed assets
Equipment	28000
Less:Acc.Depn.-Eqpt.	-3200	24800
Total assets		72500
Liabilities &Owners' Equity
Current Liabilities
Accounts payable	6100
Income tax payable	425
Total Current Liabilities		6525
Owners' Equity
Common stock	50000
Retained Earnings(14200+1775)	15975
Total Owners' Equity		65975
Total Liabilities &Owners' Equity		72500

	LEDGER ACCOUNTS			Net Ledger Bal.
Date	Account Title	Debit	Credit	Debit	Credit
	Beginning balance		3000
1	Acc.Depn.-Eqpt.		200		3200
	Beginning balance		6100
12-Dec	Accounts payable		12000
22-Dec	Accounts payable	12000			6100
	Beginning balance	7500
7-Dec	Accounts Receivable		3600
17-Dec	Accounts Receivable	16000
26-Dec	Accounts Receivable		16000
31-Dec	Accounts Receivable		2700	1200
	Beginning balance	18200
7-Dec	Cash	3600
19-Dec	Cash		2200
22-Dec	Cash		11880
26-Dec	Cash	15680
31-Dec	Cash	2700
d.	Cash	2000
d.	Cash		680	27420
17-Dec	COGS	10000		10000
	Common stock		50000		50000
1	Depreciation expense	200		200
	Equipment	28000		28000
3	Income tax expense	425		425
3	Income tax payable		425		425
2	Insurance expense	400		400

	Beginning balance	16000
12-Dec	Inventory	12000
17-Dec	Inventory		10000
22-Dec	Inventory(12000*1%)		120	17880
d.	Miscellaneous expense	680		680
	Beginning balance	2000
d.	Note receivable		2000	0
	Beginning balance	1600
2	Prepaid Insurance		400	1200

	Retained Earnings		14200		14200
19-Dec	Salaries expense	2200		2200
26-Dec	Sales discounts(16000*2%)	320		320
17-Dec	Sales revenue		16000		16000
		151505	151505	89925	89925