View the step-by-step solution to:

General Information Introduction Jones Widget Company (JWC) incorporated at the beginning of 2014. Below is the post closing trial balance as of...

Jones Widget Company (JWC) incorporated at the beginning of 2014.  Below is the post closing trial balance as of 12/31/14.

Account Title

Balance

Cash

10,700

Accounts Receivable

12,300

Allowance for Doubtful Account

(685)

Inventory

12,300

Prepaid Rent

1,500

Equipment

25,000

Accumulated Depreciation-Equipment

(2,400)

Total assets

58,715

Sales Tax payable

800

FICA Taxes Payable

600

FIT (i.e., Federal Income) Taxes Payable

500

Wages Payable

1,600

Unearned Revenue

6,500

Interest Payable

440

Notes Payable

22,000

Common Stock

23,100

Retained Earning

3,175

Total liabilities + stockholders’ equity

58,715





Additional Information:

JWC establishes a policy that it will sell inventory at $130 per unit. Sales taxes are 5%. 
JWC will use the FIFO method and record COGS on a perpetual basis.

Employee wages are $4,000 per month, the federal income taxes (FIT) withheld are $500 and the FICA taxes are $300 per month payable on the first (1st) and sixteenth (16th) of the month.

The Beginning inventory of $12,300 consists of 200 units.

The Prepaid Rent balance is for the month of January.

The equipment was purchased on July 1, 2014. It has a residual value of $1,000 and an expected life of five years. It is being depreciated using the straight line method.

Unearned Revenue is for 50 units ordered by two customers in late December. One order will be filled in January, the remainder in early February.

The Notes payable represents a $22,000 bank loan received on November 1 at 12% annual interest.

State unemployment taxes amount to $200 and Federal unemployment taxes amount to $250 per month.

Common stock includes 4,260 shares at $5 par value.

Round all transactions to the nearest dollar.


Below are transactions for January 2015

Jan 1:    A $100,000 6% six year bond is issued at 105.074. The market rate at issue of the bond is 5%.

Jan 1:    A truck (record as Truck) is purchased for $10,000 cash. It is estimated the truck will be used for 50,000 miles and will have no salvage value. The truck will be depreciated using the units-of-production method.

Jan 2:    Machinery (record as Furniture) is purchased for $120,000 cash. The machinery will be used for 8 years, has a salvage value of $8,000, and will be depreciated using the double-declining balance method.

Jan 3:    Paid December 31 payroll (“wages payable”) on Jan 1.

Jan 4:    Payroll taxes withheld (FIT payable & FICA payable) during December are remitted to the IRS.

Jan 5:    A $500 customer account is written off as uncollectible.

Jan 6:    Sales on account of 180 units of inventory occurred during January.

Jan 8:    Sales taxes collected in December 2014 are remitted to the local tax collector.

Jan 10:  An additional 70 units of inventory were purchased on account for $4,410.

Jan 11:  Sold 50 units of merchandise inventory for cash totaling $6,825, which includes 5% sales taxes.

Jan 12:  The equipment purchased in 2014 for $25,000 is sold for $24,500. No additional depreciation is recorded for January.

Jan 14:  Having sold the equipment, JWC paid off the equipment loan received on November 1 in full.  The amount paid was $22,550, which included interest through Jan 14.

Jan 15:  A portion of the advance order from December (30 units) is delivered. There is no sales tax on this order.

Jan 16:  (a) Paid employee payroll (in cash).

Jan 16:  (b) Record the employer’s payroll tax expense.

Jan 17:  Collections from sales on account totaled $5,000.

Jan 18:  JWC issued 2,500 shares of $3.60 par value common stock for cash at $8 per share.

Jan 19:  JWC issued 300 shares of $12 par-value preferred stock for cash at $102 per share.

Jan 21:  JWC Purchased 4,000 shares of its common stock for the treasury at a cost of $16,000.

Jan 25:  JWC issued a second bond with a face value of $250,000, a stated rate of 10% (used to calculate interest payments), with a maturity of 4 years. At the time of issuance, the market rate (used to calculate the present values) for bonds of similar characteristics was 12%.

Jan 28:  Declared and paid a $0.50 per share cash dividend on 2,400 shares of $5 par value.

Jan 30:  Purchased a small company and recorded goodwill for $150,000. (Indefinite life – no record of amortization expense)


Below are transactions requiring adjusting entries for January 2015

AJE 1: Record depreciation expense for the truck (Truck) purchased on Jan 1 using the units-of-activity method. During January, the truck is driven 800 miles.

AJE 2: Record the depreciation expense for the machinery (Furniture) purchased on Jan 1.

AJE 3: Record January rent expired.

AJE 4: Accrue January 28 payroll, which will be paid on February 1 and the related payroll tax expense.

AJE 5: Record the accrual of interest expense on the bonds issued on Jan 1.

AJE 6: Record the accrual of interest expense on the bonds issued on Jan 25.

AJE 7: Record the accrual of bad debt expense assuming that $941 is the estimate of uncollectible receivables from the aging schedule.

AJE 8: Record the accrual of income tax expense assuming that the tax rate is 25% of income before taxes.


Special Note:

The chart of accounts for JWC, Inc. includes the following

  • CASH
  • ACCOUNTS RECEIVABLE
  • ALLOWANCE FOR DOUBTFUL ACCOUTNS
  • INVENTORY
  • PREPAID RENT
  • EQUIPMENT
  • ACCUMMULATED DEPRECIATION_EQUIPMENT
  • TRUCK
  • ACCUMMULATED DEPRECIATION_TRUCK
  • FURNITURE
  • ACCUMMULATED DEPRECIATION_ FURNITURE
  • GOODWILL
  • ACCOUNTS PAYABLE
  • SALES TAX PAYABLE
  • WAGES PAYABLE
  • FICA TAX PAYABLE
  • FIT TAX PAYABLE
  • UNEARNED REVENUE
  • INTEREST PAYABLE
  • INCOME TAX PAYABLE
  • STATE UNEMPLOYMENT TAX PAYABLE
  • FEDERAL UNEMPLOYMENT TAX PAYABLE
  • NOTES PAYABLE
  • BONDS PAYABLE
  • PREMIUM ON BONDS PAYABLE
  • DISCOUNT ON BONDS PAYABLE
  • DIVIDENDS
  • COMMON STOCK
  • APIC-CS
  • PREFERRED STOCK
  • APIC-PS
  • TREASURY STOCK
  • RETAINED EARNINGS
  • SALES REVENUE
  • COGS
  • WAGES EXPENSE
  •  RENT EXPENSE
  • PAYROLL TAX EXPENSE
  • DEPRECIATION EXPENSE
  • BAD DEBT EXPENSE
  • GAIN ON DISPOSAL
  • INTEREST EXPENSE
  • INCOME TAX EXPENSE


REQUIRED 1: Prepare the debit section of the adjusted trial balance.

JWC, Inc.

Trial balance

For the period January 1 – January 31, 2014

ACCOUNT NAME

DEBIT AMOUNT

ACCOUNT NAME

CREDIT AMOUNT

Total debit = $487,191

Total credit = $487,191


REQUIRED 2: Prepare the income statement using the multiple-step format.

JWC, Inc.

(Multiple-step) Income Statement

For the period January 1 – January 31, 2014

SALES REVENUE

Less:

GROSS PROFIT

LESS: OPERATING EXPENSES

Total Operating Expenses

OPERATING INCOME

ADD: Other Revenues & Gains

          

LESS: Other Expenses & Losses

INCOME BEFORE TAXES

NET INCOME

REQUIRED 3: Prepare the Statement of Retained Earnings.

JWC, Inc.

Statement of Retained Earnings

For the period January 1 – January 31, 2015

RETAINED EARNINGS, BEGINNING OF PERIOD

ADD:  

LESS: 

RETAINED EARNINGS, END OF PERIOD

REQUIRED 4: Prepare a classified balance sheet.

JWC, Inc.

Classified Balance Sheet

as of January 31, 2015

ASSETS (13 pts)

LIABILITIES (13 pts)

CURRENT ASSETS (CL)

CURRENT LIABILITIES (CL)

Total CA

Total CL

PLANT ASSETS (PPE)

LONG-TERM LIABILITIES (LT)

Total LT

Total PPE

TOTAL LIABILITIES

INTANGIBLE ASSETS (IA)

                       STOCKHOLDERS’ EQUITY (SE)  

Total IA

Total SE

TOTAL ASSETS (the correct value is = $416,256)

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

General Information Introduction Jones Widget Company (JWC) incorporated at the beginning of 2014. Below is the post closing trial balance as of 12/31/14. Additional Information: JWC establishes a policy that it will sell inventory at $130 per unit. Sales taxes are 5%. JWC will use the FIFO method and record COGS on a perpetual basis. Employee wages are $4,000 per month, the federal income taxes (FIT) withheld are $500 and the FICA taxes are $300 per month payable on the first (1 st ) and sixteenth (16 th ) of the month. The Beginning inventory of $12,300 consists of 200 units. The Prepaid Rent balance is for the month of January. The equipment was purchased on July 1, 2014. It has a residual value of $1,000 and an expected life of five years. It is being depreciated using the straight line method. Unearned Revenue is for 50 units ordered by two customers in late December. One order will be filled in January, the remainder in early February. The Notes payable represents a $22,000 bank loan received on November 1 at 12% annual interest. State unemployment taxes amount to $200 and Federal unemployment taxes amount to $250 per month . Common stock includes 4,260 shares at $5 par value. Round all transactions to the nearest dollar. Account Title Balance Cash 10,700 Accounts Receivable 12,300 Allowance for Doubtful Account (685) Inventory 12,300 Prepaid Rent 1,500 Equipment 25,000 Accumulated Depreciation-Equipment (2,400) Total assets 58,715 Sales Tax payable 800 FICA Taxes Payable 600 FIT (i.e., Federal Income) Taxes Payable 500 Wages Payable 1,600 Unearned Revenue 6,500 Interest Payable 440 Notes Payable 22,000 Common Stock 23,100 Retained Earning 3,175 Total liabilities + stockholders’ equity 58,715
Background image of page 1
Below are transactions for January 2015 Jan 1: A $100,000 6% six year bond is issued at 105.074. The market rate at issue of the bond is 5%. Jan 1: A truck ( record as Truck ) is purchased for $10,000 cash. It is estimated the truck will be used for 50,000 miles and will have no salvage value. The truck will be depreciated using the units-of- production method . Jan 2: Machinery ( record as Furniture ) is purchased for $120,000 cash. The machinery will be used for 8 years, has a salvage value of $8,000, and will be depreciated using the double-declining balance method . Jan 3: Paid December 31 payroll (“wages payable”) on Jan 1. Jan 4: Payroll taxes withheld (FIT payable & FICA payable) during December are remitted to the IRS. Jan 5: A $500 customer account is written off as uncollectible. Jan 6: Sales on account of 180 units of inventory occurred during January. Jan 8: Sales taxes collected in December 2014 are remitted to the local tax collector. Jan 10: An additional 70 units of inventory were purchased on account for $4,410. Jan 11: Sold 50 units of merchandise inventory for cash totaling $6,825, which includes 5% sales taxes. Jan 12: The equipment purchased in 2014 for $25,000 is sold for $24,500. No additional depreciation is recorded for January. Jan 14: Having sold the equipment, JWC paid off the equipment loan received on November 1 in full. The amount paid was $22,550, which included interest through Jan 14. Jan 15: A portion of the advance order from December (30 units) is delivered. There is no sales tax on this order. Jan 16: (a) Paid employee payroll ( in cash ). Jan 16: (b) Record the employer’s payroll tax expense. Jan 17: Collections from sales on account totaled $5,000. Jan 18: JWC issued 2,500 shares of $3.60 par value common stock for cash at $8 per share. Jan 19: JWC issued 300 shares of $12 par-value preferred stock for cash at $102 per share. Jan 21: JWC Purchased 4,000 shares of its common stock for the treasury at a cost of $16,000. Jan 25: JWC issued a second bond with a face value of $250,000, a stated rate of 10% (used to calculate interest payments) , with a maturity of 4 years. At the time of issuance, the market rate ( used to calculate the present values ) for bonds of similar characteristics was 12%. Jan 28: Declared and paid a $0.50 per share cash dividend on 2,400 shares of $5 par value. Jan 30: Purchased a small company and recorded goodwill for $150,000. (Indefinite life – no record of amortization expense )
Background image of page 2
Show entire document

Top Answer

Please post in advanced... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online