Question: The trial balance of Pacilio Security Services Inc as of

The trial balance of Pacilio Security Services Inc. as of January 1, 2020, had the following normal balances:
Cash .................. $122,475
Petty cash ................ 100
Accounts receivable ............ 27,400
Allowance for doubtful accounts ....... 4,390
Supplies ................. 165
Prepaid rent ................ 3,000
Merchandise inventory (38 @ $290) ....... 11,020
Equipment .................. 9,000
Van .................... 27,000
Accumulated depreciation .......... 23,050
Sales tax payable ............... 290
Employee income tax payable ......... 500
FICA—Social Security tax payable ....... 600
FICA—Medicare tax payable .......... 150
Warranty payable .............. 312
Unemployment tax payable ........... 630
Interest payable ............... 320
Notes payable ............... 12,000
Common stock ................ 50,000
Retained earnings ............... 107,918
During 2020 Pacilio Security Services experienced the following transactions:
1. Paid the sales tax payable from 2019.
2. Paid the balance of the payroll liabilities due for 2019 (federal income tax, FICA taxes, and unemployment taxes).
3. On January 1, 2020, purchased land and a building for $150,000. The building was appraised at $125,000 and the land at $25,000. Pacilio paid $50,000 cash and financed the balance. The balance was financed with a 10-year installment note. The note had an interest rate of 7 percent and annual payments of $14,238 due on the last day of the year.
4. On January 1, 2020, issued $50,000 of 6 percent, five year bonds. The bonds were issued at 98.
5. Purchase $660 of supplies on account.
6. Purchased 170 alarm systems at a cost of $300. Cash was paid for the purchase.
7. After numerous attempts to collect from customers, wrote off $2,450 of uncollectible accounts receivable.
8. Sold 160 alarm systems for $580 each plus sales tax of 5 percent. All sales were on account. (Be sure to compute cost of goods sold using the FIFO cost flow method.)
9. Billed $120,000 of monitoring services for the year. Credit card sales amounted to $36,000, and the credit card company charged a 4 percent fee. The remaining $84,000 were sales on account. Sales tax is not charged on this service.
10. Replenished the petty cash fund on June 30. The fund had $11 cash and receipts of $65 for yard mowing and $24 for office supplies expense.
11. Collected the amount due from the credit card company.
12. Paid the sales tax collected on $85,000 of the alarm sales.
13. Collected $167,000 of accounts receivable during the year.
14. Paid installers and other employees a total of $82,000 for salaries for the year. Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1.5 percent. Federal income taxes withheld amounted to $9,600. The net amount of salaries was paid in cash.
15. Paid $1,250 in warranty repairs during the year.
16. On September 1, paid the note and interest owed to State Bank.
17. Paid $18,000 of advertising expense during the year.
18. Paid $5,600 of utilities expense for the year.
19. Paid the payroll liabilities, both the amounts withheld from the salaries plus the employer share of Social Security tax and Medicare tax, on $75,000 of the salaries plus $8,600 of the federal income tax that was withheld. (Disregard unemployment taxes in this entry.)
20. Paid the accounts payable.
21. Paid bond interest and amortized the discount.
22. Paid the annual installment on the amortized note.
23. Paid a dividend of $10,000 to the shareholders.
24. There was $210 of supplies on hand at the end of the year.
25. Recognized the expired rent for the office building for the year.
26. Recognized the uncollectible accounts expense for the year using the allowance method. Pacilio now estimates that 1.5 percent of sales on account will not be collected.
27. Recognized depreciation expense on the equipment, van, and building. The equipment has a five-year life and a $2,000 salvage value. The van has a four-year life and a $6,000 salvage value. The building has a 40-year life and a $10,000 salvage value. The company uses double-declining-balance for the van and straight-line for the equipment and the building. The equipment and van were purchased in 2018 and a full year of depreciation was taken for both in 2018.
28. The alarms systems sold in transaction 8 were covered with a one-year warranty. Pacilio estimated that the warranty cost would be 2 percent of alarm sales.
29. The unemployment tax on the three employees has not been paid. Record the accrued unemployment tax on the salaries for the year. The unemployment tax rate is 4.5 percent and gross wages for all employees exceeded $7,000.
30. Recognized the employer Social Security and Medicare payroll tax that has not been paid on $7,000 of salaries expense.

a. Record the above transactions in general journal form. Round all amounts to nearest whole dollar.
b. Post the transactions to the T-accounts.
c. Prepare a trial balance.
d. Prepare an income statement, statement of changes in stockholders’ equity, a classified balance sheet, and statement of cash flows.
e. Close the temporary accounts to retained earnings.
f. Post the closing entries to the T-accounts and prepare an after-closing trial balance.

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  • CreatedOctober 26, 2013
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