Question

The trial balance of Pacilio Security Services Inc. as of January 1, 2021, had the following normal balances:
Cash ..................... $113,718
Petty cash ................... 100
Accounts receivable ............... 39,390
Allowance for doubtful accounts .......... 4,662
Supplies .................... 210
Merchandise inventory (48 @ $300) ......... 14,400
Equipment ................... 9,000
Van ....................... 27,000
Building .................... 125,000
Accumulated depreciation ............. 28,075
Land ...................... 25,000
Sales tax payable ................. 390
Employee income tax payable ........... 1,000
FICA—Social Security tax payable ......... 840
FICA—Medicare tax payable ............ 210
Warranty payable ................. 918
Unemployment tax payable ............. 945
Notes payable—Building ............. 92,762
Bonds payable .................. 50,000
Discount on bonds payable ............. 800
Common stock ................. 50,000
Retained earnings ................ 124,816
During 2021, Pacilio Security Services experienced the following transactions:
1. Paid the sales tax payable from 2020.
2. Paid the balance of the payroll liabilities due for 2020 (federal income tax, FICA taxes, and unemployment taxes).
3. Issued 5,000 additional shares of the $5 par value common stock for $8 per share and
1,000 shares of $50 stated value, 5 percent cumulative preferred stock for $52 per share.
4. Purchased $500 of supplies on account.
5. Purchased 190 alarm systems at a cost of $310. Cash was paid for the purchase.
6. After numerous attempts to collect from customers, wrote off $3,670 of uncollectible accounts receivable.
7. Sold 210 alarm systems for $600 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.)
8. Billed $125,000 of monitoring services for the year. Credit card sales amounted to $58,000, and the credit card company charged a 4 percent fee. The remaining $67,000 were sales on account. Sales tax is not charged on this service.
9. Replenished the petty cash fund on June 30. The fund had $10 cash and receipts of $75 for yard mowing and $15 for office supplies expense.
10. Collected the amount due from the credit card company.
11. Paid the sales tax collected on $105,000 of the alarm sales.
12. Collected $198,000 of accounts receivable during the year.
13. Paid installers and other employees a total of $96,000 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 $10,600. No employee exceeded $110,000 in total wages. The net salaries were paid in cash.
14. On October 1, declared a dividend on the preferred stock and a $1 per share dividend on the common stock to be paid to shareholders of record on October 15, payable on November 1, 2021.
15. Paid $1,625 in warranty repairs during the year.
16. On November 1, 2021, paid the dividends that had been previously declared.
17. Paid $18,500 of advertising expense during the year.
18. Paid $6,100 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 $88,000 of the salaries plus $9,200 of the federal income tax that was withheld.
20. Paid the accounts payable.
21. Paid bond interest and amortized the discount. The bond was issued in 2020 and pays interest at 6%.
22. Paid the annual installment of $14,238 on the amortized note. The interest rate for the note is 7%.
Adjustments
23. There was $190 of supplies on hand at the end of the year.
24. Recognized the uncollectible accounts expense for the year using the allowance method.
Pacilio now estimates that 1 percent of sales on account will not be collected.
25. Recognized depreciation expense on the equipment, van, and building. The equipment, purchased in 2018, 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 straight-line for the equipment and the building. The van is fully depreciated.
26. The alarms systems sold in transaction 7 were covered with a one-year warranty. Pacilio estimated that the warranty cost would be 2 percent of alarm sales.
27. 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 three employees exceeded $7,000.
28. Recognized the employer Social Security and Medicard payroll tax that has not been paid on $8,000 of salaries expense.

Required
a. Record the above transactions in general journal form. Round all amounts to the nearest whole dollar.
b. Post the transactions to the T-accounts.
c. Prepare a trial balance.
d. Prepare an income statement, a balance sheet, and a statement of cash flows.
e. Close the temporary accounts to retained earnings.
f. Post the closing entries to the T-accounts and prepare a post-closing trial balance.



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  • CreatedOctober 12, 2013
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