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Sharp Co. for year-end 2007: accounting cycle problem

The following information relates to Sharp Co. for year-end 2007.
1. The allowance for bad debts should be 6% of accounts receivables.
2. A physical count of supplies at year-end showed $3,200 on hand.
3. The note receivable came from a customer on October 1. It was a six month note at 6% interest.
4. On September 1 the company paid $12,000 for years rent on the office building.
5. The useful life of the equipment is 10 years and the company uses the straight line method.
6. Accrued wages at year-end amounted to $900.
7. The note payable was taken out on June 1. It is a two year note at 8%.
8. On October 1 the company received $6,000 for a customer for future work. As of year-end 2/3 of the amount has been earned.
9. A count of year-end inventory showed $90,000 on hand.
10. The investment in stock is long term and the year end value was equal to the cost of the investment.
11. The land is held for future use.
12. The company purchased a one year insurance policy on May 1 and recorded it in Prepaid Insurance.
13. The company is 100,000 shares of common stock outstanding.
Required:
1. Prepare the adjusted trial balance.
2. Prepare an income statement, statement of retained earnings and a classified balance sheet.

Unadjusted Trial balance:
Cash: 36,000
Accounts Receivable: 80,000
Allowance for Bad Debts 2,000
Supplies 3,000
Inventory 110,000
Note Rec 40,000
Interest Rec
Prepaid Rent
Prepaid Insur 2,400
Investments 10,000
Equipment 120,000
land 20,000
Accum. Depr. 40,000
Accts Pay 38,000
Wages Pay.
Notes Pay. 60,000
Interest Pay.
Unearned Rev. 6,000

common stock: 100,000
retained earns. 35,500
dividends 4,000
sales 348,000
interest rev.
cost of goods 140,000
wage expense 42,000
rent expense 12,000
deprec. expense
interest exp
supplies ex 1,1,00
insurance exp 6,000
bad debt exp 3,000
totals 629,500 629,500

Solution Summary

Your tutorial is in Excel and sets up an unadjusted trial balance, adjusting entries, the adjusted trial balance and the required financial statements. This is now a template for similar problems.

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