Best Solutions is a retail merchandiser selling computer equipment. Best uses the gross method of accounting...

 

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Best Solutions is a retail merchandiser selling computer equipment. Best uses the gross method of accounting for inventory purchases and sales, a perpetual inventory system with LIFO inventory valuation, and the allowance method for accounting for uncollectible accounts. Depreciation is recorded annually. Best uses straight-line depreciation for plant assets and the half-month convention for depreciation. Best has three salaried employees who are paid monthly. Best offers credit terms of 2/10, n/30 and FOB shipping point. Best's fiscal year begins February 1 and ends the following January 31. The federal income tax rate for Best is 40%. Transactions for February through December have been recorded and are reflected in the ledger balances. The transactions listed below occurred in January of the current year. No adjustments, including depreciation, have been made for the current year. Requirement 1: Journalize the January 2024 transactions and post to the ledger. Jan 1 Borrowed $12,000 at 5% interest on a 9-month note from Hamilton Bank. Principal plus interest will be repaid on October 1 of the current year. 7 Purchased $5,800 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7. 8 Paid shipping costs of $100 for the January 7 merchandise purchase. 9 Sold merchandise totaling $3,000 to Gomez Co. The merchandise had a cost of $1,800. 11 Purchased $600 of supplies for cash. 14 Gomez returned $500 of merchandise purchased on Jan 9. The cost of the returned merchandise was $300. 19 Gomez paid the amount due from the January 9 purchase. 21 Paid the amount due to Kansas Corp. 24 Best sold a delivery truck for $23,000. The truck had been purchased on July 1, 2022 at a cost $42,000. The company initially estimated the truck to have a useful life of 5 years and a salvage value of $3,000. 27 Best purchased 2,000 shares of Target stock at a price of $70 per share plus a brokerage fee of $50. 30 Issued 8%, 10-year bonds with a face value of $40,000 for $45,437. Interest is payable semi-monthly on January 31 and July 31. 31 Payroll is prepared for the month of January. Paychecks will be issued February 7. Annual salary information is as follows: Bryant, $36,000; Lennox, $40,000; Larkin, $26,000. Each employee voluntarily contributes 3% of their salary to a non-retirement savings plan. Bryant contributes $25 per paycheck to United Way. A rate of 18% is used to calculate federal income tax. (round your answers to the nearest whole dollar). The ceiling for FICA SS is $137,700 and for SUTA/FUTA is $7,000. Requirement 2: Prepare adjusting journal entries using the information below. Add ledger accounts as necessary. a) A physical inventory reveals a balance of $300 of supplies. b) The company estimates that 2% of net sales will be uncollectible. c) Interest on the Hamilton Bank note is accrued. d) Depreciation for the building purchased on February 1, 2015 is recorded. The building has an estimated salvage (residual) value of $22,000. e) After preparing the income statement, accrue income tax payable and close net income to retained earnings Requirement 3: Prepare an adjusted trial balance. Requirement 4: Prepare a multistep income statement and classified balance sheet. Requirement 5: Answer the following questions in the space provided below. 1) What is the estimated life of the building? 2) When the bonds mature, what amount of cash will be necessary to repay the bonds? Submission: Submit your hard copy work in class no later than Monday, March 11, 2024. 101: Cash 106: Accounts Receivable Date Jan 1 Debit Credit Balance Date 589.000 Jan 1 Debit Credit Balance 200,000 Date Jan 1 101: Merchandise Inventory Debit Credit 101: Allowance for Doubtful Accounts Debit Credit Balance Balance Date 172,000 Jan 1 23,000 126: Supplies Investments Date Debit Credit Balance Date Debit Credit Balance Jan 1 2,500 Jan 1 377,000 Truck Building Date Debit Credit Balance Date Debit Credit Balance Jan 1 42,000 Jan 1 760,000 Accum Dep Truck Land Date Debit Jan 1 Credit Balance Date Debit Credit Balance 12.350 Jan 1 340,000 Date Jan 1 Accum Dep Building Debit Credit Accounts Payable Balance Date 196.800 Jan 1 Debit Credit Balance 110,175 Common Stock Retained Earnings Date Debit Credit Balance Date Debit Credit Balance Jan 1 350,000 Jan 1 160,875 Sales Sales Returns Date Debit Credit Jan 1 Balance 2,980,000 Date Debit Credit Jan 1 Balance 36,000 Sales Discounts Salaries Expense Date Debit Credit Balance Date Debit Credit Balance Jan 1 10,800 Jan 1 93,500 Date Jan 1 Date Jan 1 Cost of Goods Sold Debit Credit Dep. Exp.-Computer Truck Debit Credit Balance 1,080,000 Date Jan 1 Balance Date Jan 1 Payroll Tax Expense Debit Credit Balance 7,160 Dep. Exp.-Computer Building Debit Credit Balance Advertising Expenses Date Debit Credit Balance Date Debit Utilities Expense Credit Balance Jan 1 73,400 Jan 1 49,840 Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Best Solutions is a retail merchandiser selling computer equipment. Best uses the gross method of accounting for inventory purchases and sales, a perpetual inventory system with LIFO inventory valuation, and the allowance method for accounting for uncollectible accounts. Depreciation is recorded annually. Best uses straight-line depreciation for plant assets and the half-month convention for depreciation. Best has three salaried employees who are paid monthly. Best offers credit terms of 2/10, n/30 and FOB shipping point. Best's fiscal year begins February 1 and ends the following January 31. The federal income tax rate for Best is 40%. Transactions for February through December have been recorded and are reflected in the ledger balances. The transactions listed below occurred in January of the current year. No adjustments, including depreciation, have been made for the current year. Requirement 1: Journalize the January 2024 transactions and post to the ledger. Jan 1 Borrowed $12,000 at 5% interest on a 9-month note from Hamilton Bank. Principal plus interest will be repaid on October 1 of the current year. 7 Purchased $5,800 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7. 8 Paid shipping costs of $100 for the January 7 merchandise purchase. 9 Sold merchandise totaling $3,000 to Gomez Co. The merchandise had a cost of $1,800. 11 Purchased $600 of supplies for cash. 14 Gomez returned $500 of merchandise purchased on Jan 9. The cost of the returned merchandise was $300. 19 Gomez paid the amount due from the January 9 purchase. 21 Paid the amount due to Kansas Corp. 24 Best sold a delivery truck for $23,000. The truck had been purchased on July 1, 2022 at a cost $42,000. The company initially estimated the truck to have a useful life of 5 years and a salvage value of $3,000. 27 Best purchased 2,000 shares of Target stock at a price of $70 per share plus a brokerage fee of $50. 30 Issued 8%, 10-year bonds with a face value of $40,000 for $45,437. Interest is payable semi-monthly on January 31 and July 31. 31 Payroll is prepared for the month of January. Paychecks will be issued February 7. Annual salary information is as follows: Bryant, $36,000; Lennox, $40,000; Larkin, $26,000. Each employee voluntarily contributes 3% of their salary to a non-retirement savings plan. Bryant contributes $25 per paycheck to United Way. A rate of 18% is used to calculate federal income tax. (round your answers to the nearest whole dollar). The ceiling for FICA SS is $137,700 and for SUTA/FUTA is $7,000. Requirement 2: Prepare adjusting journal entries using the information below. Add ledger accounts as necessary. a) A physical inventory reveals a balance of $300 of supplies. b) The company estimates that 2% of net sales will be uncollectible. c) Interest on the Hamilton Bank note is accrued. d) Depreciation for the building purchased on February 1, 2015 is recorded. The building has an estimated salvage (residual) value of $22,000. e) After preparing the income statement, accrue income tax payable and close net income to retained earnings Requirement 3: Prepare an adjusted trial balance. Requirement 4: Prepare a multistep income statement and classified balance sheet. Requirement 5: Answer the following questions in the space provided below. 1) What is the estimated life of the building? 2) When the bonds mature, what amount of cash will be necessary to repay the bonds? Submission: Submit your hard copy work in class no later than Monday, March 11, 2024. 101: Cash 106: Accounts Receivable Date Jan 1 Debit Credit Balance Date 589.000 Jan 1 Debit Credit Balance 200,000 Date Jan 1 101: Merchandise Inventory Debit Credit 101: Allowance for Doubtful Accounts Debit Credit Balance Balance Date 172,000 Jan 1 23,000 126: Supplies Investments Date Debit Credit Balance Date Debit Credit Balance Jan 1 2,500 Jan 1 377,000 Truck Building Date Debit Credit Balance Date Debit Credit Balance Jan 1 42,000 Jan 1 760,000 Accum Dep Truck Land Date Debit Jan 1 Credit Balance Date Debit Credit Balance 12.350 Jan 1 340,000 Date Jan 1 Accum Dep Building Debit Credit Accounts Payable Balance Date 196.800 Jan 1 Debit Credit Balance 110,175 Common Stock Retained Earnings Date Debit Credit Balance Date Debit Credit Balance Jan 1 350,000 Jan 1 160,875 Sales Sales Returns Date Debit Credit Jan 1 Balance 2,980,000 Date Debit Credit Jan 1 Balance 36,000 Sales Discounts Salaries Expense Date Debit Credit Balance Date Debit Credit Balance Jan 1 10,800 Jan 1 93,500 Date Jan 1 Date Jan 1 Cost of Goods Sold Debit Credit Dep. Exp.-Computer Truck Debit Credit Balance 1,080,000 Date Jan 1 Balance Date Jan 1 Payroll Tax Expense Debit Credit Balance 7,160 Dep. Exp.-Computer Building Debit Credit Balance Advertising Expenses Date Debit Credit Balance Date Debit Utilities Expense Credit Balance Jan 1 73,400 Jan 1 49,840 Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance