It's year-end at Smith & Company and you are part of the accounting team. Review the list of outstanding data that has come to your attention.
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It's year-end at Smith & Company and you are part of the accounting team. Review the list of outstanding data

that has come to your attention. Some of these transactions you would have thought should have been recorded, however there was a lot of turnover throughout the year and some transactions just did not get recorded. Conduct the duties required in order for the company to close its book for the year and set-up for next year.

Here is the trial balance as it currently stands.

Smith & Company

Trial Balance

December 31, 2015

Debit Credit

Cash $20500

Accounts receivable 63,200

Supplies  33,950

Prepaid Insurance  2,600

Equipment 38,500

Accumulated depreciation - equipment  $18,800

33500 Accounts payable

22700 Unearned service revenue

11600 Salary payable

24,000 Common shares

40,000 Retained earnings

40,000 Dividends

95,100 Service revenue

Salary expense 25,850

Supplies expense 1,800

Insurance expense 15,700

Depreciation expense - equipment 900

Utilities expense 2,700

Total $245,700 245,700

On September 1, 2015, the company purchased a new photocopier. We paid $5,000 down and executed a promissory note worth $40,000 with annual interest of 10% on any unpaid balance. This note shall mature and be payable, along with accrued interest, on August 31, 2016.

We need to record the year-end interest accrual on December 31, 2015 for the promissory note.

Following are other transactions and events that occurred during the year.

  • On Dec 1, borrowed $100,000 via a note payable bearing interest at 2% per month. This note and all accrued interest is due at the end of March 2016
  •  On Dec 5th, purchased $15,000 of supplies, terms 2/10, n/30. The purchase was initially recorded at the net amount. The balance due was not paid during December.
  •  On Dec 10th, we finally received our estimate for the new cafeteria we wish to install and have approved the construction. The cost is estimated for a total of $75,000.
  •  On Dec 12th, provided services for $40,000 cash. We offer a warranty for our services provided which have a warranty cost to us of approximately 2% of sales.
  •  On Dec 13th paid $11,800 for a one-year term insurance policy. The current policy in place expires December 31st which we need to record as expired this year. 
  •  On Dec 14th, John Smith (one of the owners) withdrew $7,000 cash for personal use.
  •  On Dec 31st, a bill from the utility company has been received but not yet entered or paid, $975.
  •  On Dec 31st, we paid wages to employees for $12,300.
  •  On Dec 31st Supplies on hand at year end were counted, and amount to $36,200.
  • We have previously issued 12,000 shares of $2 par value common stock for $10 per share. We had some stock transactions this year which have not been recorded as follows:
  • Issued 20,000 shares of $80 par value, 4%, cumulative preferred at $85 per share.
  • Declared the full cash dividend on the preferred and $0.08 per share on the outstanding common shares.
  • Paid the previously declared dividends.
  • Reacquired 5,000 common shares for treasury at $11 per share.
  • Sold 5,000 treasury shares at $13 per share.
  • December's rent of $8,000 has not yet been paid.
  • We need to record the depreciation for our equipment which was bought last year and we are using the straight line method. The equipment was expected to have a useful life of 3 years and a salvage value of zero.
  • We are entitled to receive $22,000 of commissions for referred services from Mario Antonelli. This revenue has not yet been recorded, but it is fully expected that Mario will soon be making payment.

Activity 

Below is the receivables list, prepare journal entry to account for what we estimate to be uncollectible. Company policy is to use rates for non-collection at : 1% of receivables up to 30 days, 3% for 31 to 90 days, 10% for 91 to 180 days, and 60% of accounts over 180 days.Accounts Receivable Detail:

Customer Amount Due Date Jim Johnson    $4,200  April 2015 Sarah MacKay 3,700 August 2015 Marilyn Lu 12,450 June 2014 Luke Reiner   22,600 December 2015 John Casey 9,600 November 2015 Bradley Koon  2,150 January 2015 Cindy MacDonald  3,700 November 2014 Larry Wilson 4,800 March 2015 John Smith has asked you to prepare him a memo analyzing the financial statements. He would like you to use some financial ratios to assess the current position of the company. He would like you to also enclose a copy of your newly prepared adjusted trial balance, balance sheet and income statement. In addition, please layout what we still need to do to reset all the accounts for our new year to start.

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