Account balances taken from the ledger of High Flying Logistics

Account balances taken from the ledger of High Flying Logistics Co. on December 31, 2011,

follow:

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,000

Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,000

Allowance for Bad Debts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,000

Long-Term Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,500

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,300

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,500

Accumulated Depreciation—Buildings . . . . . . . . . . . . . . . . . . . . 32,560

Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,800

Mortgage Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,500

Capital Stock, $5 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000

Retained Earnings, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . 26,950

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,540

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431,000

Sales Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,560

Sales Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,440

Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,420

Selling Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,300

Office Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,200

Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000

Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,100

Taxes—Real Estate and Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,800

Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750

Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,300

Information relating to adjustments on December 31, 2011, follows:

(a) Allowance for Bad Debts is to be increased by $2,200.

(b) Buildings have a salvage value of $7,500. They are being depreciated at the rate of 10% per year.

(c) Accrued selling expenses are $9,300.

(d) There are supplies of $850 on hand.

(e) Prepaid insurance relating to 2012 totals $3,800.

(f) Total interest revenue earned in 2011 is $1,900.

(g) Accrued real estate and payroll taxes are $3,550.

(h) Accrued interest on the mortgage is $1,980.

(i) Income tax is estimated to be 40% of income.


Instructions:

Prepare a work sheet showing the net income and balance sheet totals for the year ending December 31, 2011.


Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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