Thefollowingselectedaccountbalances(pre-adjusted)aretakenfromtheledgerbookofABCcompanyatDecmber312012:
Cash$2000
accountsreceivable$13000
Allowanceforuncollectibleaccounts$3200(creditbalance)
InventoryDec312012$22000
Long-terminvestments$30000
Buildings(atcost)$45000
Accumulateddepreciationforbuildings$26000(creditbalance)
Otherassets$12800
Accountspayable$8000
Taxespayable$4400
Loanspayable$15000
Capitalstock$40000
RetainedEarningsDec312012$28000
RetainedEarningsJan12012$???
Dividends2012$???
Salesrevenues$98000
Costofgoodssold$42000
Sellingexpense$6000
Wagesandsalaryexpense$12500
Uncollectibleaccountsexpense$400
Miscellaneousgeneralandadministrativeexpenses$11000
Officesuppliesexpense$5400
Insuranceexpense$4800
Interestrevenue$800
Interestexpense$2200
Additionalinformation(tobeusedforadjustingentries)
atheallowanceforuncollectibleaccountsshouldbeincreasedto$3800
baccruedwagesandsalary(notpaid)attheendof2012were$450
cbuildingsaredepreciatedattherateof4%(ofcost)peryear(depreciationisrecognizedattheendofeachyear)
daccruedsellingexpense(notpaid)attheendof2012was$600
eprepaid(unexpired)insurancepremiumattheendoftheyearwas$420(wheninsurancepremiumsarepaidthecompanychargesthemtotheinsuranceexpenseaccount)
faccruedinterestonloansnotpaidattheendof2012was$188
gearnedinterestonlong-terminvestmentnotreceivedasoftheendof2012was$1000
hofficesuppliesunusedasoftheendof2012were$350(whenofficesuppliesarepurchasedthecompanychargestheamountofthesuppliestotheofficesuppliesexpensesaccount)
Required:
1preparethenecessaryadjustingentriesforeachoftheadditionalinformationitemsabove
2computetheadjustedbalanceofeachbalancesheetaccountintheadjustingentriesabove.Noticethatallowanceforuncollectiblesandaccumulateddepreciationarereportedonthebalancesheet.
3computethepre-taxincomeofthecompanyfor2012(afterconsideringtheadjustingentriesabove)
IncomeandREStatement:
DebtCredit
NetSales
Less:Costofsales
Grossprofit
SellingandAdmiExpenses
Incomefromoperation
Otherrevenuesandgains
Interestrevenue
Gainsonsaleofinvestment
Otherexpensesandlosses
Write-offofGW
IncomefromCont.Oper.beforetax
Incometaxes
IncomefromCont.Oper.aftertax
DiscontinuedOperations
Lossonoperations
Lossondosposalofnetassests
Incomebeforeextraorditems
Extraord.Loss
Netincome
Earningpershare:
IFCOaftertax($0.16)
Discontuedoperation
Extraord.loss
Netincome($0.16)
RetainedEarningsStatement:
REatbeg.
Add:Netincome
Less:Dividends
REatend
IFCObeforetax(inerror)
dep.error
IFCObeforetax(errorcorrec.)
lossonsaleofsecs.
gainonlifeinsurancecoverage104000
IFCObeforetax
Incometax(30%)
IncomebeforeDOandExOdltems
lossonDO
extraordloss
Netincome$489050
Nipershare$4.075
