Margie Company needs your help to record and summarize its accounting transactions for 2011 and to prepare its financial statements for that year. Margie Company provided you with the following Balance Sheet for 2010:
Assets:
Cash
$ 57,000
Accounts Receivable
83,000
Merchandise Inventory (net of discounts)
167,000
Prepaid Rent
3,500
Supplies
3,300
Prepaid Insurance
6,000
Land
55,000
Building
150,000
Accumulated Depreciation – Bldg
-20,000
130,000
Equipment
80,000
Accumulated Depreciation – Equip
-29,000
51,000
Patent
20,000
Total Assets:
$ 575,800
Liabilities & Stockholders’ Equity
Accounts Payable (all for merchandise inventory)
$ 88,000
Wages Payable
11,000
Income Taxes Payable
6,800
Notes Payable, 7% (due in 6 months)
45,000
Bonds Payable, 8% (Matures in 2014) (Interest payments due each 12/31)
80,000
Common Stock –No Par
305,000
Retained Earnings
40,000
Total Liabilities & Stockholders’ Equity:
$ 575,800
The following summary events occurred in 2011:
a. Cash sales totaled $140,000.
b. Credit sales totaled $420,000
c. Credit card sales totaled $280,000. (The credit card company charges Margie Company 4% on sales and transfers the net amount directly to Margie’s bank account.)
d. Purchases of merchandise inventory on account totaled $470,000, terms 2/10,N/30. Margie records all purchases at net and takes advantages of all discounts.
e. Cost of merchandise sold totaled $502,000
f. Salaries paid to employees totaled $85,000.
g. Utilities paid during the year totaled $79,000
h. Rent paid for special equipment that can only be leased totaled $ 60,000.
i. Supplies purchased during the year totaled $12,400
j. Equipment which had cost $15,000 and had accumulated depreciation of $6,000 was sold for $7,300.
k. Borrowed $33,000 on a six month, 9% note on November 1
l. Issued an additional 10,000 shares of Common Stock for a total of $57,000 cash
m. New equipment costing $23,000 was purchased on August 1. Maggie paid $4,000 down and issued a 1 year, 7.5% note for the balance
n. New equipment costing $ 120,000 was purchased on Nov. 12 for $ 120,000, $ 90,000 was paid in cash and 4,800 shares of Common Stock was issued for the equipment.
o. Payment to vendors for merchandise totaled $483,000.
p. Collections of Accounts Receivable totaled $ 411,000
q. Declared and paid dividends of $11,800 during the year
r. The income taxes due at the beginning of the year were paid.
s. The insurance policy in effect at the beginning of 2011 expired on 4/1/ 11. At that time, a new one year policy costing $ 26,250was purchased
Additional end of year information:
a. Salaries earned by employees but unpaid as of year-end totaled $7,500.
b. Supplies on hand at year-end totaled $3,950.
c. Depreciation expense on the equipment for the year was determined to be $7,500
d. Depreciation expense on the building for the year was determined to be $ 15,800
e. The marginal income tax rate is 22 %. The taxes are to be paid in March of 2012.
f. Prepaid rent as of year-end totaled $5,000.
Required:
1. Prepare the journal entries for the year, based on the summary data provided.
2. Prepare the year-end adjusting entries based on the additional end of year information. For each, determine if it is an accrual or a deferral and explain your answer.
3. Prepare in good form for 2011:
a. Income Statement
b. Statement of Retained Earnings
c. Classified Balance Sheet.