The following transactions pertain to Abbott Corporation for 2005. 1. Jan 1 Bega

Question

The following transactions pertain to Abbott Corporation for 2005.

1. Jan 1 Began operations when the business acquired $50,000 cash from the issue of common stock.

2. Mar 1 Paid rent for office space for two years, $16,800 cash.

3. Apr 1 Borrowed $40,000 cash from First National Bank. The note issued had an 8 percent annual rate of interest and matured in one year.

4. Apr 14 Purchased $800 of supplies on account.

5. Jun 1 Paid $27,000 cash for a computer system. The computer system had a five-year useful life and no salvage value.

6. Jun 30 Received $24,000 cash in advance for services to be provided over the next year.

7. Jul 5 Paid $600 of the accounts payable from April 14.

8. Aug 1 Billed a customer $9,600 for services provided during July.

9. Aug 8 Completed a job and received $3,200 cash for services rendered.

10. Sep 1 Paid employee salaries of $36,000 cash.

11. Sep 9 Received $8,500 cash from accounts receivable.

12. Oct 5 Billed customers $34,000 for services rendered on account.

13. Nov 2 Paid a $1,000 cash dividend to the stockholders.

Adj. Dec 31 Adjusted records to recognize the services provided on the contract of June 30.

Adj. Dec 31 Recorded the accrued interest on the note to First National Bank. (See April 1.)

Adj. Dec 31 Recorded depreciation on the computer system used in the business. (See June 1.)

Adj. Dec 31 Recorded $2,200 of accrued salaries as of December 31.

Adj. Dec 31 Recorded the rent expense for the year. (See March 1.)

Adj. Dec 31 Physically counted supplies; $100 was on hand at the end of the period.

Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows.

Explanation / Answer

Solution:

Income Statement Sales - 9,600 + 3,200 + 32000 + 24,000/2 56,800 Less: Rent 8,400 Accured interest - 8% * 40,000 * 9/12 2400 Depreciation - 27,000 / 5 5400 Salaries 36,000 Add: Accured Salaries 2,200 Total cost 54,400 Net income 2,400

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