Problem Sheet

Listed below are the accounts and their respective balances for Bettys Best Shop

(BBS, Inc.) at December 31, 20X0:

Cash $ 169,000

Accounts Receivable 30,000

Inventory (5 things @ $ 20,000 each) 100,000

Equipment 220,000

Accumulated Depreciation 80,000

Security Deposit 4,000

Accounts Payable 3,000

Taxes Payable 10,000

Wages Payable 12,000

Rent Payable 1,000

Note Payable 150,000

Common Stock (2,000 shares) 70,000

Retained Earnings 197,000

During 20X1 the following transactions occurred:

Paid prior years accounts payable.

Received prior years accounts receivable.

Purchased 10 things at $21,000 each. Paid 60% down and will pay the rest later.

Sold 10 things for $30,000 each with 70% down (cash) and the other 30% will get later.

Paid 20X0 taxes payable.

Paid cash for wages of $60,000.

Paid thirteen months rent, $13,000.

Paid $3,000 for advertising for 20X1.

Sold 500 shares of common stock for $35.00 each on November 1, 20X1.

Paid utility bill for 20X1, $2,000.

Paid interest on note at 5% plus $10,000 on the principal.

Paid a $2,000 dividend to shareholders on December 31, 20X1.

Also, during the year the company paid 50% of the 20X1 taxes. The tax rate is 30%.

The company uses the FIFO inventory system.

At Dec 31, 20X1, the company owed $5,000 in salaries which had not yet been paid.

The equipment originally cost $220,000, had a twenty year life and was expected to be worth $20,000 at the end.

Other adjustments?

Prepare Journal Entries, T-Accounts and financial statements for 20X1.