1. Record the effects of the information given and provide in journal entry form.
2. Prepare an income statement, statement of retained earnings, and a balance sheet for year ending December 31, 2008.
Financial Data for 2008
1. Sales on account for the year were $221,632.
2. Cash collected from customers on account, $219,514.
3. Purchases of merchandise were $132,500, of which $12,425 had not been paid by the end of the year.
4. Operating expenses of the current year, paid in cash, were $57,394. In addition, $1,575 of such expense were incurred but not paid by the end of the year.
5. Rent paid in cash during the year was $7,800, of which $6000 related to 2008, and the remainder to 2009. This payment is not included in #4 above.
6. Accounts receivables of $1,950 were written off as uncollectible.
7. Beginning accounts payable were paid.
8. A cash dividend of $2,500 was paid to the shareholders during the year.
9. Prepaid rent at 12/31/07 was for January and February of 2008.
10. As a result of the physical inventory, it was determined that inventory on hand at 12/31/2008 was $27,500.
11. Based on an aging of the accounts receivable, it was determined that the allowance for bad debts at 12/31/2008 should be $1,100.
12. Depreciation expenses for the year is $2,700 (classified as an operating expense).
13. The note payable bears simple interest at 8% annually. Interest for 2008 is due January 3, 2009.
14. Income tax expense is 20% of the net income before taxes. These taxes are payable March 15, 2009.
Balance sheet, December 31, 2007
Accounts Receivable 17,320
Less : Allowance for bad debts 700 16,620
Prepaid Rent 1,200
Total Current Assets 50,415
Plant and equipment 62,720
Less: Accumulated Depreciation 33,242 29,478
Total Assets 79,893
Liabilites and Stockholder's Equity
Accounts payable 21,735
Notes payble 30,000
Total Liabilities 51,735
Common Stock 5,000
Retained earnings 23,158 28,158
Total liabilities and stockholder's equity 79,893
The solution determines the effect of information on journal entries.