Pinkerton Corporation’s trial balance at December 31, 2011, is presented below. All 2011 transactions have been recorded except for the items described after the trial balance.
|
Debit |
Credit |
|
|
Cash |
$ 28,000 |
|
|
Accounts Receivable |
36,800 |
|
|
Notes Receivable |
10,000 |
|
|
Interest Receivable |
–0– |
|
|
Merchandise Inventory |
36,200 |
|
|
Prepaid Insurance |
3,600 |
|
|
Land |
20,000 |
|
|
Building |
150,000 |
|
|
Equipment |
60,000 |
|
|
Patent |
9,000 |
|
|
Allowance for Doubtful Accounts |
$ 500 |
|
|
Accumulated Depreciation—Building |
50,000 |
|
|
Accumulated Depreciation—Equipment |
24,000 |
|
|
Accounts Payable |
27,300 |
|
|
Salaries Payable |
–0– |
|
|
Unearned Rent |
6,000 |
|
|
Notes Payable (short-term) |
11,000 |
|
|
Interest Payable |
–0– |
|
|
Notes Payable (long-term) |
35,000 |
|
|
Common Stock |
50,000 |
|
|
Retained Earnings |
63,600 |
|
|
Dividends |
12,000 |
|
|
Sales |
900,000 |
|
|
Interest Revenue |
–0– |
|
|
Rent Revenue |
–0– |
|
|
Gain on Disposal |
–0– |
|
|
Bad Debts Expense |
–0– |
|
|
Cost of Goods Sold |
630,000 |
|
|
Depreciation Expense—Buildings |
–0– |
|
|
Depreciation Expense—Equipment |
–0– |
|
|
Insurance Expense |
–0– |
|
|
Interest Expense |
–0– |
|
|
Other Operating Expenses |
61,800 |
|
|
Amortization Expense—Patents |
–0– |
|
|
Salaries Expense |
110,000 |
|
|
Total |
$1,167,400 |
$1,167,400 |
Unrecorded transactions
1. On May 1, 2011, Pinkerton purchased equipment for $16,000 plus sales taxes of $800 (all paid in cash).
2. On July 1, 2011, Pinkerton sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on this equipment at January 1, 2011, was $1,800; 2011 depreciation prior to the sale of equipment was $450.
3. On December 31, 2011, Pinkerton sold for $5,000 on account inventory that cost $3,500.
4. Pinkerton estimates that uncollectible accounts receivable at year-end are $4,000.
5. The note receivable is a one-year, 8% note dated April 1, 2011. No interest has been recorded.
6. The balance in prepaid insurance represents payment of a $3,600, 6-month premium on September 1, 2011.
7. The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000.
8. The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.
9. The equipment purchased on May 1, 2011, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,800.
10. The patent was acquired on January 1, 2011, and has a useful life of 9 years from that date.
11. Unpaid salaries at December 31, 2011, total $2,200.
12. The unearned rent of $6,000 was received on December 1, 2011, for 3 months’ rent.
13. Both the short-term and long-term notes payable are dated January 1, 2011, and carry a 10% interest rate. All interest is payable in the next 12 months.
14. Income tax expense was $15,000. It was unpaid at December 31.
Instructions
a. Prepare journal entries for the transactions listed above.
b. Prepare an updated December 31, 2011, trial balance.
c. Prepare a 2011 income statement and a 2011 retained earnings statement.
d. Prepare a December 31, 2011, balance sheet.