Summarized transactions for 2021: a. 1. Sold merchandise on credit, $687,896 . MSU Candy uses a periodic
Question:
Summarized transactions for 2021:
a. 1. Sold merchandise on credit, $687,896 . MSU Candy uses a periodic inventory system.
2. Collected 90% of these current credit sales.
3. Collected 95% of beginning accounts receivable.
4. Wrote off the remaining 5% of beginning accounts receivable.
b. 1. Purchased merchandise on credit, $330,350. MSU Candy uses a periodic inventory system.
2. Paid 85% of these purchases.
3. Paid all of beginning accounts payable.
c. On April 1, 2021, paid $2,87O for a renewal of the insurance policy which will provide coverage for the period 4/1/21 to 4/1/22.
d. Supplies purchased for cash during the year $23,035.
e. On July 1, 2021, received cash consisting of a $3,000 payment of principal on the note receivable plus interest for six months @8.87%.
f. On January 1, 2021, equipment costing $10,000 (with related accumulated depreciation of $3,600) was exchanged for different equipment having a FMV of $7,896. No cash was exchanged and the exchange had commercial substance.
g. Paid $68,960 for salaries and $10,870 for payroll taxes. Both of these amounts include the beginning liabilities for each, respectively.
h. 78.7% of the beginning Unearned Revenue was earned by year-end.
i. Dividends declared in 2020 were paid in January 2021. Dividends of $6,896 were declared in December 2021 and will be paid in January 2022.
Year-end adjusting entries:
a. MSU Candy estimates that 5% of ending accounts receivable will become uncollectible.
b. MSU Candy’s inventory count at 12/31/21 shows $58,960 of merchandise inventory remaining. Make an adjusting journal entry (AJE) to close purchases, adjust Merchandise Inventory to ending balance, and create a Cost of Goods Sold account.
c. Adjust Prepaid Insurance to reflect insurance expired during the year.
d. Supplies on hand at year-end totaled $5,896.
e. Interest on the remaining note receivable was supposed to be received at 12/31/21; however, it did not arrive. Make an AJE to record interest receivable and interest income for second half of the year.
f. Make adjusting entries to record depreciation expense on the building and equipment. MSU Candy uses SL, 20% SV, 40-year life for the building and DDB, No SV, 10-year life on the equipment.
g. Unpaid salaries and payroll taxes at year-end were $13,035 and $3,896 respectively.
h. A bank reconciliation prepared at 12/31/21 showed $10,000 deposits in transit, $7,000 outstanding checks, $687 bank service charges, and $1,896 interest earned.
Optional entries:
ii. 30% tax rate (This exp/payable could just be calculated on IS and BS, but you can journalize it after all other work is done. )
| MSU Candy Company, Inc. | |||||||||||||
| Work Sheet for the Year Ended 12/31/21 | |||||||||||||
| Accounts | 2020 PC Trial Balance | Adjustments | Adjusted Trial Bal. | Income Statement | Balance Sheet | ||||||||
| Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit | ||||
| Cash | 10,000 | ||||||||||||
| Accts/Rec | 28,000 | ||||||||||||
| Allow. for D. Accts. | 2,000 | ||||||||||||
| Notes Rec. | 6,000 | ||||||||||||
| Merch Inv. | 60,000 | ||||||||||||
| Prep. Insurance | 500 | ||||||||||||
| Supplies | 8,000 | ||||||||||||
| Land | 40,000 | ||||||||||||
| Building | 200,000 | ||||||||||||
| AccumDepr-Bldg | 16,000 | ||||||||||||
| Equipment | 80,000 | ||||||||||||
| AccumDepr-Equip | 28,800 | ||||||||||||
| Accts/Pay | 13,000 | ||||||||||||
| Salaries Pay | 5,000 | ||||||||||||
| Payroll Taxes Pay | 2,000 | ||||||||||||
| Unearned Revenue | 3,000 | ||||||||||||
| Dividends Pay | 4,000 | ||||||||||||
| Com Stk-$10 Par | 200,000 | ||||||||||||
| APIC-C/S | 20,000 | ||||||||||||
| Retained Earnings | 138,700 | ||||||||||||
| Totals | 432,500 | 432,500 | |||||||||||
Expert Answer:
Based on the provided information here is a summary of the transactions for 2021 and the yearend adjusting entries Summary of Transactions for 2021 a ... View the full answer
