Question

Madson Corporation’s balance sheet at December 31, 2013, is presented below.



During January 2014, the following transactions occurred. Madson uses the perpetual inventory method.
Jan. 1 Madson accepted a 4-month, 8% note from Matheny Company in payment of Matheny’s $1,200 account.
3 Madson wrote off as uncollectible the accounts of Payton Corporation ($450) and Cruz Company ($280).
8 Madson purchased $17,200 of inventory on account.
11 Madson sold for $25,000 on account inventory that cost $17,500.
15 Madson sold inventory that cost $700 to Rich Jenson for $1,000. Jenson charged this amount on his Visa First Bank card. The service fee charged Madson by First Bank is 3%.
17 Madson collected $22,900 from customers on account.
21 Madson paid $16,300 on accounts payable.
24 Madson received payment in full ($280) from Cruz Company on the account written off on January 3.
27 Madson purchased advertising supplies for $1,400 cash.
31 Madson paid other operating expenses, $3,218.
Adjustment data:
1. Interest is recorded for the month on the note from January 1.
2. Bad debts are expected to be 6% of the January 31, 2014, accounts receivable.
3. A count of advertising supplies on January 31, 2014, reveals that $560 remains unused.
4. The income tax rate is 30%. (Hint: Prepare the income statement up to “Income before taxes” and multiply by 30% to compute the amount; round to whole dollars.)

Instructions
(You may want to set up T-accounts to determine ending balances.)
(a) Prepare journal entries for the transactions listed above and adjusting entries. (Include entries for cost of goods sold using the perpetual inventory system.)
(b) Prepare an adjusted trial balance at January 31, 2014.
(c) Prepare an income statement and a retained earnings statement for the month ending January 31, 2014, and a classified balance sheet as of January 31,2014.


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  • CreatedApril 07, 2014
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