Preparation of Work Sheet
Account balances taken from the ledger of Royal Distributing Co. on December 31, 2008, follow:
|
Cash |
$ 35,000 |
|
Accounts Receivable |
91,000 |
|
Allowance for Bad Debts |
1,800 |
|
Inventory |
92,000 |
|
Long Term Investments |
27,500 |
|
Land |
53,400 |
|
Buildings |
112,500 |
|
Accumulated Depreciation—Buildings |
26,780 |
|
Accounts Payable |
47,300 |
|
Mortgage Payable |
99,500 |
|
Capital Stock, $5 par |
175,000 |
|
Retained Earnings, December 31, 2007 |
14,840 |
|
Dividends |
9,670 |
|
Sales |
359,000 |
|
Sales Returns |
12,890 |
|
Sales Discounts |
7,540 |
|
Cost of Goods Sold |
158,520 |
|
Selling Expenses |
62,350 |
|
Office Expenses |
38,900 |
|
Insurance Expense |
14,000 |
|
Supplies Expense |
4,800 |
|
Taxes—Real Estate and Payroll |
$ 9,500 |
|
Interest Revenue |
550 |
|
Interest Expense |
3,200 |
Information relating to adjustments on December 31, 2008, follows:
(a) Allowance for Bad Debts is to be increased by $2,000.
(b) Buildings have a salvage value of $7,500. They are being depreciated at the rate of 10% per year.
(c) Accrued selling expenses are $8,600.
(d) There are supplies of $1,250 on hand.
(e) Prepaid insurance relating to 2009 totals $4,000.
(f) Total interest revenue earned in 2008 is $1,400.
(g) Accrued real estate and payroll taxes are $2,340.
(h) Accrued interest on the mortgage is $1,780.
(i) Income tax is estimated to be 40% of income.
Instructions: Prepare a work sheet showing the net income and balance sheet totals for the year ending December 31, 2008.