accounting problem los lobos case study 495161

12-31-2007

12-31-2006

Cash

$ 35,000

$ 32,000

Accounts receivable

33,000

30,000

Allowance for doubtful accounts

(1,300)

(1,100)

Inventory

31,000

47,000

Property, plant, & equipment

100,000

95,000

Accumulated depreciation

(16,500)

(15,000)

Trade accounts payable

(25,000)

(15,500)

Income taxes payable

(21,000)

(29,100)

Deferred income taxes

(5,300)

(4,600)

8% callable bonds payable

(45,000)

(20,000)

Unamortized bond discount

4,500

5,000

Common stock

(50,000)

(40,000)

Additional paid-in capital

(9,100)

(7,500)

Retained earnings

(25,200)

(64,600)

Sales

(558,300)

(778,700)

Cost of goods sold

250,000

380,000

Selling expenses

141,500

172,000

General and administrative expenses

137,000

151,300

Interest expense

4,300

2,600

Income tax expense

20,400

61,200

$ –

$ –

Additional information:

1.

Los Lobos purchased $5,000 in equipment during 2007.

2.

Los Lobos allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses.

3.

Bad debt expense for 2007 was $5,000, and write-offs of uncollectible accounts totaled $4,800.

4.

$12,000 of the debt is current portion.

Cash Sales

$72,600

Collections on Receivables

477,900

Purchases

(219,500)

Purchase of Equipment

(5,000)

Wages

(150,700)

Payments to Suppliers

(126,300)

Tax Payments

(27,800)

Borrowing

30,000

Repayment of Debt

(5,000)

Interest Payments

(3,800)

Sale of Stock

11,600

Dividends

(51,000)