KLINGER CORPORATION
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Balance Sheet
December 31, 2013
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Cash
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$ 24,600
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Accounts payable
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$ 25,600
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Accounts receivable
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45,500
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Common stock ($10 par)
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80,000
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Allowance for doubtful accounts
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(1,500)
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Retained earnings
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127,400
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$233,000
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Supplies
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4,400
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Land
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40,000
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Buildings
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142,000
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Accumulated depreciation—buildings
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(22,000)
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$233,000
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During 2014, the following transactions occurred.
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1. ;
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On January 1, 2014, Klinger issued 1,200 shares of $40 par, 7% preferred stock for $49,200.
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2. ;
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On January 1, 2014, Klinger also issued 900 shares of the $10 par value common stock for $21,000.
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3. ;
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On February 1, 2014, Klinger performed services for $320,000 on account.
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4. ;
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On April 1, 2014, Klinger collected fees of $36,000 in advance for services to be performed from April 1, 2014 to March 31, 2015.
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5. ;
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On May 1, 2014, Klinger collected $276,000 from customers on account.
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6. ;
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On June 1, 2014, Klinger bought $35,100 of supplies on account.
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7. ;
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On July 1, 2014, Klinger paid $32,200 on accounts payable.
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8. ;
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On August 1, 2014, Klinger reacquired 400 shares of its common stock on June 1, 2014, for $28 per share.
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9. ;
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On September 1, 2014, Klinger paid other operating expenses of $188,200.
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10. ;
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On December 31, 2014, Klinger declared the annual preferred stock dividend and a $1.20 per share dividend on the outstanding common stock, all payable on January 15, 2015.
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11. ;
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On December 31, 2014, an account receivable of $1,700 which originated in 2013 is written off as uncollectible.
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Adjustment data:
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1. ;
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A count of supplies indicates that $5,900 of supplies remain unused at year-end. (Hint: You may want to use the T-account to determine ending balance.)
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2. ;
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Recorded earned revenue from item 4 above. (Hint: Pay attention to the date.)
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3. ;
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The allowance for doubtful accounts should have a balance of $3,500 at year end. (Hint: Don’t forget the beginning balance in the account.)
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4. ;
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Depreciation is recorded on the building on a straight-line basis based on a 30-year life and a salvage value of $10,000.
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5. ;
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The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)
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Instructions
1. ; Prepare journal entries for the transactions listed above.
2. ; Enter the 2013 year-end balances in the ledger accounts and post the journal entries to the ledger accounts.
3. ; Prepare a trial balance on December 31, 2014.
4. ; Journalize adjusting entries based on adjustment data.
5. ; Prepare an adjusted trial balance at December 31, 2014.
6. ; Prepare an income statement, retained earnings statement, and statement of cash flow (using indirect method) for the year ending December 31, 2014, and a classified balance sheet as of December 31, 2014.