Construction Resources Ltd. (CRL), a calendar-year firm, began operations as a retailer in January 20X5. Information about
Question:
Construction Resources Ltd. (CRL), a calendar-year firm, began operations as a retailer in January 20X5.
Information about transaction and adjustments in 20X5:
1. Investors contributed $500,000 in exchange for 70,000 shares of no-par common shares.
2. CRL obtained a 6%, $500,000 bank loan on 1 February. This loan is evidenced by a signed promissory note calling for interest payments every 1 February. The note is due in full on 31 January 20X9.
3. A rental contract for production and office facilities was signed on 1 February, which required $12,00 immediate payment covering both the first month's rent and a $7,000 deposit refundable in three years or upon termination of the contract, whichever occurs first. Monthly rent is $5,000. As an added incentive to pay rent in advance, CRL accepted an offer to maintain rent at $5,000 per month for the first three years if CRL paid the 2nd through the 13th (March 20X5 through February 20X6) month's rent immediately. In all, CRL paid $72,000 for rent on 1 February. CRL intends to occupy the facilities for at least three years.
4. Equipment costing $350,000 was purchased for cash in early February. It has an estimated residual value of $35,000 and a six-year useful life. CRL uses the straight-line method of depreciation. A full year of depreciation is recorded in the year of acquisition.
5. CRL recognized various cash operating expenses for the year, including the following:
Wages | $310,00 |
Utilities | $47,000 |
Selling | $92,000 |
General and administrative | $198,000 |
6. Total merchandise inventory purchases for the year, on account, amounted to $4,815,000.
7. All suppliers were paid for except for $90,000 outstanding at year-end.
8. All sales are made on credit and totaled $5,900,000 in 20X5; $4,925,000 was collected on account during the year. CRL estimates that 0.5% of total sales will be uncollectible and has written off $12,000 of accounts. The inventory sold had a cost of $4,447,000.
9. CRL declared a cash dividend of $114,000, payable in January 20X6.
10. Income tax expense is $342,000. All taxes for a fiscal year are payable in April of the following year.
REQUIRED:
Perform the 10 accounting cycle steps for CRL for 20X5. Worksheets, special journals, and subsidiary ledgers are not required. Prepare journal entries in summary (for the year) form. Post to T-accounts. CRL uses the expedient recording system and records reversing entries, whenever appropriate. CRL uses a perpetual inventory system.
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker