1 answer

P5-6A The trial balance of People’s Choice Wholesale Company contained the following accounts shown at December...

Question:

P5-6A The trial balance of People’s Choice Wholesale Company contained the following
accounts shown at December 31, the end of the company’s fiscal year.

PEOPLE’S CHOICE WHOLESALE COMPANY
Trial Balance
December 31, 2017

Debit

Credit

Cash $ 31,400
Accounts Receivable 37,600
Inventory 70,000
Land 92,000
Buildings 200,000
Accumulated Depreciation—Buildings $ 60,000
Equipment 83,500
Accumulated Depreciation—Equipment 40,500
Notes Payable 54,700
Accounts Payable 17,500
Common Stock 160,000
Retained Earnings 67,200
Dividends 10,000
Sales Revenue 922,100
Sales Discounts 6,000
Cost of Goods Sold 709,900
Salaries and Wages Expense 51,300
Utilities Expense 11,400
Maintenance and Repairs Expense 8,900
Advertising Expense 5,200
Insurance Expense 4,800
$1,322,000 $1,322,000

Adjustment data:
1. Depreciation is $8,000 on buildings and $7,000 on equipment. (Both are operating
expenses.)
2. Interest of $4,500 is due and unpaid on notes payable at December 31.
3. Income tax due and unpaid at December 31 is $24,000.
Other data: $15,000 of the notes payable are payable next year.

Instructions
(a) Journalize the adjusting entries.
(b) Create T-accounts for all accounts used in part (a). Enter the trial balance amounts
into the T-accounts and post the adjusting entries.
(c) Prepare an adjusted trial balance.
(d) Prepare a multiple-step income statement and a retained earnings statement for the
year, and a classified balance sheet at December 31, 2017.


Answers

Journal Entries
Date Particulars Debit($) Credit($)
1 Depreciation Expenses 15000
Accumulated Depreciation—Buildings 8000
Accumulated Depreciation—Equipment 7000
Both are operatingexpenses
2 Interest Expense 4500
Notes Payable 4500
unpaid on notes payable at December 31
3 Income tax Expenses 24000
Income tax Payable 24000
Income tax due and unpaid
3 Interest Expense 15000
Notes Payable 15000
notes payable are payable next year
Depreciation Expenses
Date Debit($) Credit($) Balance($)
1 15000 15000
Accumulated Depreciation—Buildings
Date Debit($) Credit($) Balance($)
opening Balance 60000 -60000
1 8000 -68000
Accumulated Depreciation—Equipment
Date Debit($) Credit($) Balance($)
opening Balance 40500 -40500
1 7000 -47500
Interest Expense
Date Debit($) Credit($) Balance($)
2 4500 4500
3 15000 19500
Notes Payable
Date Debit($) Credit($) Balance($)
opening Balance 54700 -54700
2 4500 -59200
3 15000 -74200
Income tax Expenses
Date Debit($) Credit($) Balance($)
3 24000 24000
Income tax Payable
Date Debit($) Credit($) Balance($)
3 24000 -24000
Adjusted Trail Balance
Particulars Debit($) Credit($)
Cash $31,400
Accounts Receivable 37,600
Inventory 70,000
Land 92,000
Buildings 200,000
Accumulated Depreciation—Buildings $68,000
Equipment 83,500
Accumulated Depreciation—Equipment 47,500
Notes Payable 74,200
Accounts Payable 17,500
Common Stock 160,000
Retained Earnings 67,200
Income tax Payable 24,000
Dividends 10,000
Sales Revenue 922,100
Sales Discounts 6,000
Cost of Goods Sold 709,900
Salaries and Wages Expense 51,300
Utilities Expense 11,400
Maintenance and Repairs Expense 8,900
Advertising Expense 5,200
Insurance Expense 4,800
Depreciation Expenses 15,000
Interest Expense 19,500
Income tax Expenses 24,000
$1,380,500 $1,380,500
Income Statement
Particulars Amount($) Amount($)
Revenues
Sales Revenue 922100
Less: Sales Discounts -6000
Cost of Goods Sold -709900
Gross Profit on Sale 206200
Less: Expenses
Salaries and Wages Expense 51,300
Utilities Expense 11,400
Maintenance and Repairs Expense 8,900
Advertising Expense 5,200
Insurance Expense 4,800
Depreciation Expenses 15,000
Interest Expense 19,500
Income tax Expenses 24,000
140100
Net income 66100
Retained Earnings Statement
Particulars Amount($) Amount($)
Retained Earnings Jan 1, 20xx 67200
Net income 66100
Less: Dividends 10000
Retained Earnings 56100
Retained earnings Dec31, 20xx 123300
Stockholders Equity
Particulars Amount($) Amount($)
Common stock 160000
Retained Earnings 123300
Total Stockholders Equity 283300 0
Balance Sheet
Assets Amount($) Liabulities Amount($)
Cash 31400 Notes Payable 74200
Accounts Receivable 37600 Accounts Payable 17500
Inventory 70000 Income tax Payable 24000
Land 92000 Stockholders Equity 283300
Buildings                                                        200000
Accumulated Depreciation-Buildings 68000 132000
Equipment                                                      83500
Accumulated Depreciatio-Equipment 47500 36000
399000 399000
.

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