Exercise: Paulson Corporation's unadjusted trial balance at December 1, 2012, is presented below. Debit Credit Cash $
Posted: Mon Apr 25, 2022 7:32 am
Exercise: Paulson Corporation's unadjusted trial balance at December 1, 2012, is presented below.
Debit
Credit
Cash
$ 22,000
Accounts Receivable
36,800
Notes Receivable
10,000
Interest Receivable
–0–
Inventory
36,200
Prepaid Insurance
3,600
Land
20,000
Buildings
150,000
Equipment
60,000
Patent
9,000
Allowance for Doubtful Accounts
$ 500
Accumulated Depreciation—Buildings
50,000
Accumulated Depreciation—Equipment
24,000
Accounts Payable
27,300
Salaries and Wages Payable
–0–
Notes Payable (due April 30, 2013)
11,000
Interest Payable
–0–
Notes Payable (due in 2018)
35,000
Common Stock
50,000
Retained Earnings
63,600
Dividends
12,000
Sales Revenue
900,000
Interest Revenue
–0–
Gain on Disposal of Plant Assets
–0–
Bad Debts Expense
–0–
Cost of Goods Sold
630,000
Depreciation Expense
–0–
Insurance Expense
–0–
Interest Expense
–0–
Other Operating Expenses
61,800
Amortization Expense
–0–
Salaries and Wages Expense
110,000
Total
$1,161,400
$1,161,400
The following transactions occurred during December.
Dec. 2
Paulson purchased equipment for $16,000, plus sales taxes of $800 (all paid in cash).
2
Paulson sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on this equipment at January 1, 2012, was $1,800; 2012 depreciation prior to the sale of equipment was $450.
15
Paulson sold for $5,000 on account inventory that cost $3,500. Assume a perpetual system.
23
Salaries and wages of $6,600 were paid.
Adjustment data:
1.
Paulson estimates that uncollectible accounts receivable at year-end are $4,000.
2.
The note receivable is a one-year, 8% note dated April 1, 2012. No interest has been recorded.
3.
The balance in prepaid insurance represents payment of a $3,600, 6-month premium on September 1, 2012.
4.
The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000.
5.
The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.
6.
The equipment purchased on December 2, 2012, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,800.
7.
The patent was acquired on January 1, 2012, and has a useful life of 9 years from that date.
8.
Unpaid salaries at December 31, 2012, total $2,200.
9.
Both the short-term and long-term notes payable are dated January 1, 2012, and carry a 10% interest rate. All interest is payable in the next 12 months.
10.
Income tax expense was $15,000. It was unpaid at December 31.
Requirements:
Prepare journal entries for the transactions listed above and adjusting entries.
Debit
Credit
Cash
$ 22,000
Accounts Receivable
36,800
Notes Receivable
10,000
Interest Receivable
–0–
Inventory
36,200
Prepaid Insurance
3,600
Land
20,000
Buildings
150,000
Equipment
60,000
Patent
9,000
Allowance for Doubtful Accounts
$ 500
Accumulated Depreciation—Buildings
50,000
Accumulated Depreciation—Equipment
24,000
Accounts Payable
27,300
Salaries and Wages Payable
–0–
Notes Payable (due April 30, 2013)
11,000
Interest Payable
–0–
Notes Payable (due in 2018)
35,000
Common Stock
50,000
Retained Earnings
63,600
Dividends
12,000
Sales Revenue
900,000
Interest Revenue
–0–
Gain on Disposal of Plant Assets
–0–
Bad Debts Expense
–0–
Cost of Goods Sold
630,000
Depreciation Expense
–0–
Insurance Expense
–0–
Interest Expense
–0–
Other Operating Expenses
61,800
Amortization Expense
–0–
Salaries and Wages Expense
110,000
Total
$1,161,400
$1,161,400
The following transactions occurred during December.
Dec. 2
Paulson purchased equipment for $16,000, plus sales taxes of $800 (all paid in cash).
2
Paulson sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on this equipment at January 1, 2012, was $1,800; 2012 depreciation prior to the sale of equipment was $450.
15
Paulson sold for $5,000 on account inventory that cost $3,500. Assume a perpetual system.
23
Salaries and wages of $6,600 were paid.
Adjustment data:
1.
Paulson estimates that uncollectible accounts receivable at year-end are $4,000.
2.
The note receivable is a one-year, 8% note dated April 1, 2012. No interest has been recorded.
3.
The balance in prepaid insurance represents payment of a $3,600, 6-month premium on September 1, 2012.
4.
The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000.
5.
The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.
6.
The equipment purchased on December 2, 2012, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,800.
7.
The patent was acquired on January 1, 2012, and has a useful life of 9 years from that date.
8.
Unpaid salaries at December 31, 2012, total $2,200.
9.
Both the short-term and long-term notes payable are dated January 1, 2012, and carry a 10% interest rate. All interest is payable in the next 12 months.
10.
Income tax expense was $15,000. It was unpaid at December 31.
Requirements:
Prepare journal entries for the transactions listed above and adjusting entries.